**U.S.SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**Form 10-QSB**

 

**(MarkOne)**

 
| **ý** | **Quarterly Report under Section 13 or 15(d) of the  Securities Exchange Act of 1934**                                                                                                                                                                                                                                                         |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                                                                                                                                                                                                                                                                |
|       | **For  the quarterly period ended June 30, 2004.**                                                                                                                                                                                                                                                                                             |
|       |                                                                                                                                                                                                                                                                                                                                                |
| **o**      | **Transition Report under Section 13 or 15(d)of the  Exchange Act For the Transition Period from                    to                        ** |

 

**CommissionFile Number: 000-26073**

 

**Immediatek,Inc.**

(Exact name ofsmall business issuer as specified in its charter)

 
| **Nevada**                                                                    |   | **86-0881193**                     |   |
|-------------------------------------------------------------------------------|--------|------------------------------------|--------|
| (State  or other jurisdiction  of incorporation)                              |   | (I.R.S.  Employer  Identification) |   |
|                                                                          |   |                               |   |
| **2435  N. Central Expressway Suite 1610, Richardson, TX**                    |   | **75080**                          |   |
| (Address  of principal executive offices)                                     |   | (Zip  Code)                        |   |
|                                                                          |   |                               |   |
| Registrant’s  telephone number, including area code: **(972)  852-2876** |

 

Check whether the issuer(1) filed all reports required to be filed by Section 13 or 15(d) of theExchange Act of 1934 during the past 12 months (or such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. 

 

Yes ýNo o

 

APPLICABLE ONLY TOISSUERS INVOLVED IN BANKRUPTCY

PROCEEDING DURINGTHE PRECEDING FIVE YEARS

 

Check whether theRegistrant filed all documents and reports required to be filed by Section 12,13 or 15(d) of the Exchange Act after the distribution of securities under aplan confirmed by a court.

 

Yes oNo o

 

APPLICABLE ONLY TOCORPORATE ISSUERS

 

Common Stock, $0.001 parvalue per share, 500,000,000 shares authorized, as of June 30, 2004, theissuer had 27,941,755 shares of common stock outstanding. Traditional SmallBusiness Disclosure Format (check one)

 

Yes oNo ý

 

 

----

 
| PART I.    | FINANCIAL INFORMATION                                           |                                                 |
|------------|-----------------------------------------------------------------|------------------------------------------------------|
|       |                                                            |                                                 |   |
| Item 1.    |                                                            | Financial Statements                                 |   |
|       |                                                            | Balance Sheet (unaudited)                            |   |
|       |                                                            | Statements  of Operations (unaudited)                |   |
|       |                                                            | Statements  of Cash Flows (unaudited)                |   |
|       |                                                            | Notes to Financial Statements                        |   |
|       |                                                            |                                                 |   |
| Item 2.    | Management’s  Discussion and Analysis of Plan of Operation |                                                 |
|       |                                                            |                                                 |   |
| Item 3.    |                                                            | Controls and Procedures                              |   |
|       |                                                            |                                                 |   |
| PART II.   | OTHER INFORMATION                                               |                                                 |
|       |                                                            |                                                 |   |
| Item 1.    |                                                            | Legal Proceedings                                    |   |
|       |                                                            |                                                 |   |
| Item 2.    |                                                            | Changes in  Securities and Use of Proceeds           |   |
|       |                                                            |                                                 |   |
| Item 3.    |                                                            | Defaults upon Senior  Securities                     |   |
|       |                                                            |                                                 |   |
| Item 4.    |                                                            | Submission  of Matters to a Vote of Security Holders |   |
|       |                                                            |                                                 |   |
| Item 5.    |                                                            | Other Information                                    |   |
|       |                                                            |                                                 |   |
| Item 6.    |                                                            | Exhibits and Reports  on Form 8-K                    |   |
|       |                                                            |                                                 |   |
| Signatures |                                                            |

 

----

 

PARTI. FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS AND EXHIBITS

 

Immediatek, Inc

Balance Sheet

(unaudited)

 
|                                                                                                      |   | **June 30,  2004** |      |
|-----------------------------------------------------------------------------------------------------------|--------|-------------------------|-----------|
|                                                                                                      |   |                    |      |
| Assets                                                                                                    |   |                    |      |
|                                                                                                      |   |                    |      |
| Current  assets                                                                                           |   |                    |      |
| Cash  and cash equivalents                                                                                |   | $                       | 277,684   |   |
| Prepaid  expenses                                                                                         |   | 12,104                  |      |
| Total  current assets                                                                                     |   | 289,788                 |      |
|                                                                                                      |   |                    |      |
| Fixed  assets, net                                                                                        |   | 325,636                 |      |
| Total  fixed assets                                                                                       |   | 325,636                 |      |
|                                                                                                      |   |                    |      |
| Other  assets                                                                                             |   |                    |      |
| Intellectual  property                                                                                    |   | 68,701                  |      |
| Goodwill                                                                                                  |   | 324,142                 |      |
| Deposits  held                                                                                            |   | 13,760                  |      |
| Total  other assets                                                                                       |   | 406,603                 |      |
| Total  assets                                                                                             |   | $                       | 1,022,027 |   |
|                                                                                                      |   |                    |      |
| Liabilities and Stockholders’ (deficit)                                                              |   |                    |      |
|                                                                                                      |   |                    |      |
| Current  liabilities                                                                                      |   |                    |      |
| Accounts  payable                                                                                         |   | $                       | 102,262   |   |
| Accrued  liabilities                                                                                      |   | 91,337                  |      |
| Notes  payable                                                                                            |   | 200,000                 |      |
| Total  current liabilities                                                                                |   | 393,599                 |      |
|                                                                                                      |   |                    |      |
| Stockholders’  (deficit)                                                                             |   |                    |      |
|                                                                                                      |   |                    |      |
| Common  stock, $0.001 par value, 500,000,000 shares authorized, 27,941,755 shares  issued and outstanding |   | 27,942                  |      |
| Additional  paid-in-capital                                                                               |   | 5,196,756               |      |
| Accumulated  (deficit)                                                                                    |   | (4,596,270              | )         |
|                                                                                                      |   | 628,428                 |      |
|                                                                                                      |   | $                       | 1,022,027 |   |

 

The accompanying notesare an integral part of these financial statements.

 

2

----

 

Immediatek, Inc

Statements of Operations

(unaudited)

 
|                                                                            |   | **Three  months ended  June 30,** |     | **Six months  ended  June 30,** |   |
|---------------------------------------------------------------------------------|--------|----------------------------------------|----------|--------------------------------------|--------|
|                                                                            |   | **2004**                               |     | **2003**                             |   | **2004** |   | **2003** |   |
|                                                                            |   |                                   |     |                                 |   |   |   |   |   |
| Revenue                                                                         |   | $                                      | 614,756  |                                 | $      | 31,048 |   | $ | 622,689 |   | $ | 40,013 |   |
| Cost  of sales                                                                  |   | 374,050                                |     | 716                                  |   | 374,050 |   | 716 |   |
|                                                                            |   |                                   |     |                                 |   |   |   |   |   |
| Gross  profit                                                                   |   | 240,706                                |     | 30,332                               |   | 248,639 |   | 39,297 |   |
|                                                                            |   |                                   |     |                                 |   |   |   |   |   |
| Expenses:                                                                       |   |                                   |     |                                 |   |   |   |   |   |
| General  and administrative                                                     |   | 356,962                                |     | 13,175                               |   | 465,746 |   | 80,386 |   |
| General  and administrative - related party                                     |   | 37,263                                 |     | —                               |   | 37,263 |   | — |   |
| Depreciation                                                                    |   | 28,561                                 |     | 42                                   |   | 29,295 |   | 42 |   |
| Direct  costs                                                                   |   | 99,884                                 |     | —                               |   | 102,884 |   | — |   |
| Consulting  fees                                                                |   | 110,146                                |     | —                               |   | 110,146 |   | — |   |
| Compensation  expenses - related party                                          |   | —                                 |     | —                               |   | — |   | 2,335,080 |   |
| Interest                                                                        |   | 2,500                                  |     | —                               |   | 2,500 |   | — |   |
| Marketing                                                                       |   | 21,623                                 |     | —                               |   | 79,741 |   | — |   |
| Networking  and infrastructure                                                  |   | 1,752                                  |     | —                               |   | 3,505 |   | — |   |
| Research  and development                                                       |   | 105                                    |     | 7,875                                |   | 50,105 |   | 7,875 |   |
| Salaries  and wages                                                             |   | 183,142                                |     | —                               |   | 202,042 |   | — |   |
| Officers  salaries                                                              |   | 20,326                                 |     | 28,510                               |   | 70,576 |   | 34,502 |   |
| Total  expenses                                                                 |   | 862,265                                |     | 49,602                               |   | 1,153,804 |   | 2,526,285 |   |
|                                                                            |   |                                   |     |                                 |   |   |   |   |   |
| Net  (loss) from operations                                                     |   | (621,559                               | )        | (19,270                              | )      | (905,165 | ) | (2,486,988 | ) |
|                                                                            |   |                                   |     |                                 |   |   |   |   |   |
| Other  (income):                                                                |   | —                                 |     | (437                                 | )      | (30 | ) | (437 | ) |
|                                                                            |   |                                   |     |                                 |   |   |   |   |   |
| Net  (loss)                                                                     |   | $                                      | (621,559 | )                                    | $      | (18,833 | ) | $ | (905,135 | ) | $ | (2,486,551 | ) |
|                                                                            |   |                                   |     |                                 |   |   |   |   |   |
| Weighted  average number of Common shares outstanding - basic and fully diluted |   | 26,804,028                             |     | 1,722,600                            |   | 12,343,603 |   | 11,139,299 |   |
|                                                                            |   |                                   |     |                                 |   |   |   |   |   |
| Net  (loss per share - basic and fully diluted                                  |   | $                                      | (0.02    | )                                    | $      | (0.01 | ) | $ | (0.07 | ) | $ | (0.22 | ) |

 

The accompanying notesare an integral part of these financial statements.

 

3

----

 

Immediatek, Inc.

Statements of Cash Flow

(unaudited)

 
|                                                                            |   | **Six months  ended June 30,** |     |
|---------------------------------------------------------------------------------|--------|-------------------------------------|----------|
|                                                                            |   | **2004**                            |     | **2003** |   |
|                                                                            |   |                                |     |   |   |
| Cash  flows from operating activities                                           |   |                                |     |   |   |
| Net  (loss)                                                                     |   | $                                   | (905,135 | ) | (2,486,551 | ) |
| Adjustment  to reconcile net (loss) to net cash (used) by operating activities: |   |                                |     |   |   |
| Depreciation                                                                    |   | 29,295                              |     | 42 |   |
| Shares  issued for services                                                     |   | 110,146                             |     | 68,400 |   |
| Shares  issued as compensation - related                                        |   | —                              |     | 2,335,080 |   |
| Changes  in operating assets and liabilities:                                   |   |                                |     |   |   |
| (increase)  decrease in accounts receivable                                     |   | 1,647                               |     | (1,205 | ) |
| (Increase)  decrease in prepaid expenses                                        |   | 8,324                               |     | (1,845 | ) |
| (Increase)  in other assets                                                     |   | (2,660                              | )        |   |   |
| Increase  (decrease) in accounts payable                                        |   | (8,665                              | )        | (8,689 | ) |
| Increase  (decrease) in accrued liabilities                                     |   | 78,701                              |     |   |   |
| Net  cash (used) by operating activities                                        |   | (688,347                            | )        | (94,768 | ) |
|                                                                            |   |                                |     |   |   |
| Cash flows from  investing activities                                           |   |                                |     |   |   |
| Cash  received from DiscLive acquisition                                        |   | 20,662                              |     | — |   |
| Purchase  of fixed assets                                                       |   | (30,616                             | )        | (1,529 | ) |
| Net  cash (used) by investing activities                                        |   | (9,954                              | )        | (1,529 | ) |
|                                                                            |   |                                |     |   |   |
| Cash flows from  financing activities                                           |   |                                |     |   |   |
| Common  stock issuances                                                         |   | 857,423                             |     | — |   |
| Payments  on notes payable                                                      |   | —                              |     | (3,692 | ) |
| Proceeds  from notes payable                                                    |   | —                              |     | 122,500 |   |
| Net  cash provided by financing activities                                      |   | 857,423                             |     | 118,808 |   |
|                                                                            |   |                                |     |   |   |
| Net  increase (decrease) in cash and equivalents                                |   | 159,122                             |     | 22,511 |   |
| Cash  and equivalents - beginning                                               |   | 118,562                             |     | 4,845 |   |
| Cash  and equivalents - ending                                                  |   | $                                   | 277,684  |   | $ | 27,356 |   |
|                                                                            |   |                                |     |   |   |
| Supplemental  disclosures:                                                      |   |                                |     |   |   |
| Interest  paid                                                                  |   | $                                   | 2,500    |   | $ | — |   |
| Income  taxes paid                                                              |   | $                                   | —   |   | $ | — |   |

 

The accompanying notesare an integral part of these financial statements.

 

4

----

 

Immediatek, Inc.

Notes

 

Note1 - Basis of Presentation

 

The consolidated interim financial statements included herein,presented in accordance with United States generally accepted accountingprinciples and stated in US dollars, have been prepared by the Company, withoutaudit, pursuant to the rules and regulations of the Securities and ExchangeCommission. Certain information and footnote disclosures normally included infinancial statements prepared in accordance with generally accepted accountingprinciples have been condensed or omitted pursuant to such rules andregulations, although the Company believes that the disclosures are adequate tomake the information presented not misleading.

 

Thesestatements reflect all adjustments, consisting of normal recurring adjustments,which, in the opinion of management, are necessary for fair presentation of theinformation contained therein. It is suggested that these consolidated interimfinancial statements be read in conjunction with the financial statements ofthe Company for the year ended December 31, 2003 and notes theretoincluded in the Company’s 10-KSB annual report. The Company follows the sameaccounting policies in the preparation of interim reports.

 

Resultsof operations for the interim periods are not indicative of annual results.

 

Note 2 - Material BusinessCombination

 

OnApril 9, 2004, the Company completed the purchase of DiscLive, Inc. aprivately held company that secures contracts with various music artists torecord live concert performances, by acquiring all of the outstanding capitalstock for a total purchase price of $600,000. DiscLive, Inc.’s results ofoperations have been included in the consolidated financial statements sincethe date of acquisition

 

Theaggregate purchase price consisted of 1,666,667 shares of the Company’s commonstock valued at $600,000. The value of the 1,666,667 common shares issued wasdetermined based on the average market price of the Company’s common shares atthe time of acquisition. The company allocated $324,142 of the acquisitionprice to goodwill and the balance of $275,858 to assets and liabilities.

 

Thefollowing (unaudited) pro forma consolidated results of operations have beenprepared as if the acquisition of DiscLive, Inc. had occurred atJanuary 1, 2003:

 

5

----

 
|                                          |   | **Six months  ended  June 30,** |    |
|-----------------------------------------------|--------|--------------------------------------|---------|
|                                          |   | **2004**                             |    | **2003** |   |
|                                          |   |                                 |    |   |   |
| Revenue,  net                                 |   | $                                    | 707,873 |   | $ | 42,231 |   |
|                                          |   |                                 |    |   |   |
| Expenses:                                     |   |                                 |    |   |   |
| General  and administrative                   |   | 1,220,520                            |    | 288,916 |   |
| General  and administrative - related party   |   | 37,263                               |    | 0 |   |
| Depreciation  expense                         |   | 42,980                               |    | 42 |   |
| Compensation  - related party                 |   | 0                                    |    | 2,335,080 |   |
| Total  expenses:                              |   | 1,300,763                            |    | 2,624,038 |   |
|                                          |   |                                 |    |   |   |
| Other  income:                                |   | (30                                  | )       | (204 | ) |
|                                          |   |                                 |    |   |   |
| Net  income:                                  |   | (592,890                             | )       | (2,581603 | ) |
|                                          |   |                                 |    |   |   |
| Net  income per share-basic and fully diluted |   | (.08                                 | )       | (.24 | ) |
|                                               |        |                                      |         |  |  |  |  |

 

Thepro forma information is presented for informational purposes only and is notnecessarily indicative of the results of operations that actually would havebeen achieved had the acquisition been consummated as of that time, nor is itintended to be a projection of future results.

 

Note 3 - Goodwill

 

Managementperiodically reviews the carrying value of acquired intangible assets todetermine whether impairment may exist. The Company considers relevant cashflow and profitability information, including estimated future operatingresults in assessing whether the carrying value of the intangible can berecovered. If the Company determines that the carrying value will not berecovered from undiscounted future cash flows of the acquired business, theCompany considers such carrying value as impaired and reduces them by a chargeto operations in the amount of the impairment.

 

Note 4 - Going concern

 

The Company’sfinancial statements are prepared using the generally accepted accountingprinciples applicable to a going concern, which contemplates the realization ofassets and liquidation of liabilities in the normal course of business.However, the Company has not generated significant revenues. In order to obtainthe necessary capital, the Company has raised funds via private placementoffering. If the securities’ offering does not provide sufficient capital, someof the shareholders of the Company have agreed to provide sufficient funds as aloan over the next twelve-month period. However, the Company is dependent uponits ability to secure equity and/or debt financing and there are no assurancesthat the Company will be successful, without sufficient financing it would beunlikely for the Company to continue as a going concern.

 

6

----

 

Note 5 - Fixedassets

 

The Companypurchased $11,518 worth of fixed assets during the three months endedJune 30, 2004. Depreciation expense totaled $42,980 and $42 for the sixmonths ended June 30, 2004 and 2003, respectively.

 

Note 6 - Subscriptionspayable

 

During the threemonths ended June 30, 2004, the Company issued 1,017,667 shares of commonstock to nine individual investors for all outstanding subscriptions.

 

As ofJune 30, 2004 no other subscriptions have been issued.

 

Note 7 - Stockholders’equity

 

The Company is authorizedto issue 500,000,000 shares of $0.001 par value common stock.

 

On April 9, 2004,the Company acquired all the outstanding shares of DiscLive, Inc., a Delawarecorporation, in exchange for 1,666,667 shares of the Company’s $0.001 par valuecommon stock.

 

OnMay 20, 2004, the company issued 63,333 shares of its $0.001 par value commonstock to a certain note holder who elected to convert their notes totaling$9,500 into Company equity.

 

OnMay 20, 2004, the company issued 10,000 shares of its $0.001 par value commonstock to a company to acquire equipment valued at $3,000.

 

OnMay 20, 2004,the Company issued 200,153 shares of its $0.001 par value commonstock to an individual for consulting services valued at $60,046, the fairmarket value of the underlying shares.

 

OnMay 20, 2004,the Company issued 50,000 shares of its $0.001 par value commonstock to an individual for consulting services valued at $15,000, the fairmarket value of the underlying shares.

 

OnMay 20, 2004, the Company issued 10,417 shares of its $0.001 par value commonstock to an individual who for cash in the amount of $1,563.

 

OnMay 20, 2004, the Company issued 1,668,201 shares of its $0.001 par valuecommon stock for cash in the amount of $500,460.

 

OnMay 20, 2004, the Company issued 1,017,666 shares of its $0.001 par valuecommon stock pursuant to outstanding subscription agreements.

 

OnJune 25, 2004, the Company issued 130,000 shares of its $0.001 par valuecommon stock for consulting services valued at $35,100, the fair market valueof the underlying shares.

 

Therewere no other issuances of common stock during the three months endedJune 30, 2003.

 

7

----

 

Note 8 - Related partytransactions

 

During the threemonths ending June 30, 2004, the Company paid additional compensation toofficers in the amount of $37,263.

 

During the threemonths ended June 30, 2004, a shareholder of the Company elected toconvert $9,500 of his loan to 9,950 shares of the Company’s $0.001 par valuecommon stock. The Company owed $200,000 in convertible debt to a shareholder asof June 30, 2004.

 

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLANOF OPERATIONS

 

Immediatek was formerlynamed ModernGroove Entertainment, Inc. On November 23, 2002, ModernGrooveEntertainment, Inc., a Nevada corporation, an OTCBB-listed company, enteredinto a merger agreement with Immediatek, Inc., a private company dulyincorporated in accordance with the laws of the State of Texas. Immediatek, aprivately owned company, was founded in 2001 by Zach Bair. On December 9,2002, ModernGroove Entertainment, Inc. changed its name to Immediatek, Inc.(ITEK)

 

On February 27,2003, Immediatek, Inc. announced that it was acquiring key assets from Zach Bairand Paul Marin, individually. These assets represent, breakthrough technologyenabling Internet music fans to download standard MP3 files directly to theirCD burners while simultaneously protecting the artists’ copyrights. Acquisitionof these assets, include: the CD burning software, agreements with over 330independent labels, 1,200 artists, and 30,000 music tracks for itswww.TwoBigToes.com website and core NetBurn (tm) technology

 

In April 2004 weacquired all the issued and outstanding shares of DiscLive, Inc. and issued1,666,667 shares of our common stock to the stockholders of DiscLive in a shareexchange. DiscLive is a company, which records live concerts, manufactures andsells CD recordings of the event within minutes of the concert’s ending. Managementdoes not believe the company will generate any significant profit in the nearfuture, as developmental and marketing and administrative costs will mostlikely exceed any anticipated revenues

 

Forward-LookingStatements

 

This quarterly report on Form10-QSB includes “forward-looking statements” within the meaning ofSection 27A of the Securities Act of 1933, as amended (the “SecuritiesAct”), and Section 21E of the Securities Exchange Act of 1934, as amended,which can be identified by the use of forward-looking terminology such as,“may,” “expect,” “could,” “plan,” “seek,” “anticipate,” “estimate,” or“continue” or the negative thereof or other variations thereon or comparableterminology.

 

These forward-lookingstatements are subject to various risks and uncertainties that could causeactual results to differ materially from those referred to in theforward-looking statements and are made pursuant to the “safe-harbor”provisions of the Private Securities Litigation Reform Act of 1995. These 

 

8

----

 

statements are made basedon management’s current expectations or beliefs as well as assumptions made by,and information currently available to, management.

 

A variety of factors could cause actual results to differ materiallyfrom those anticipated in the Company’s forward-looking statements, includingthe following factors: changes from anticipated levels of sales, access tocapital, future national or regional economic and competitive conditions,changes in relationships with customers, difficulties in developing andmarketing new products, marketing existing products, customer acceptance ofexisting and new products, validity of patents, technological change,dependence on key personnel, availability of key component parts, dependence onthird party manufacturers, vendors, contractors, product liability, casualty toor other disruption of the production facilities, delays and disruptions in theshipment of the Company’s product, and the ability of the Company to meet itsstated business goals. For a detailed discussion of these and other cautionarystatements and factors that could cause actual results to differ from theCompany’s forward-looking statements, please refer to the Company’s filingswith the Securities and Exchange Commission, especially Item 1. Description ofBusiness” (including the “Risk Factors” section of Item 1) and “Item 6.Management’s Discussion and Analysis or Plan of Operation” of the Company’s2003 Annual Report on Form 10-KSB.

 

Readers are cautioned notto place undue reliance on these forward-looking statements, which reflectmanagement’s analysis only as of the date hereof. The Company does notundertake any obligation to publicly revise these forward-looking statements toreflect events or circumstances that arise after the date hereof. Readersshould carefully review the risk factors described in other documents theCompany files from time to time with the Securities and Exchange Commission.

 

Going Concern

 

The Company experienced operatinglosses for the period ended June 30, 2004. The financial statements havebeen prepared assuming the Company will continue to operate as a going concern,which contemplates the realization of assets and the settlement of liabilitiesin the normal course of business. No adjustment has been made to the recordedamount of assets or the recorded amount or classification of liabilities whichwould be required if the Company were unable to continue its operations. (SeeFinancial Footnote 3.)

 

Plan of Operation

 

Management does notbelieve that the Company will be able to generate significant profit during thecoming year, unless the company can expand its customer base for its NetBurnproducts and it can operate its new wholly owned subsidiary, DiscLive, Inc. ata profit. NetBurn is a patent-pending digital delivery system which allows weband NetBurn Station users to download and burn fully licensed music tracks byutilizing a simple “single-click” interface, while at the same time protectingthe copyright holders who own the material. DiscLive is a company, whichrecords live concerts, manufactures and sells CD recordings of the event withinminutes of the concert’s ending. Management does not believe the company willgenerate any significant profit in the near future, as developmental andmarketing and administrative costs will most likely exceed any anticipatedrevenues.

 

9

----

 

Results of Operations

 

During the six monthsended June 30, 2004, the Company generated $622,689 in revenues. Thiscompares to $40,013 in revenues for the same period last year. In its mostrecent six month operating period ended June 30, 2004, the Companyexperienced a net loss of $905,135 versus a net loss of $2,486,988 for the sameperiod last year. The bulk of this loss came from general and administrativeexpenses of $465,746; and Salaries and wages of $272,618. During the first sixmonths, the Company continued to seek new strategies for marketing its businessplan.

 

The major components toexpenses faced by the Company in its day-to-day operations includes developingsoftware, databases, marketing its internet site, auditor fees, legal fees, andgeneral administrative expenses. If the Company becomes profitable, the companywill access salaries and adding additional personnel to the payroll. Managementintends to continue to minimize costs until such a time, in its discretion, itbelieves expansion would be prudent. One element in making this determinationis positive cash flow on a quarterly basis. If or when the company issuccessful in achieving this quarterly positive cash flow, it is likely thatthe company will consider expanding its personnel, which will increase costs.

 

Liquidity and CapitalResources

 

The Company is authorizedto issue five hundred million (500,000,000) shares of its $0.001 par valuecommon stock.

 

During the first sixmonths, the Company sold 2,926,617 shares of its $0.001 par value common stockto eleven accredited investors for the sum of $857,423.

 

The Company could berequired to secure additional financing to fully implement its entire businessplan. There are no guarantees that such financing will be available to theCompany, or if available, will be on terms and conditions satisfactory tomanagement.

 

The Company owed $200,000in convertible debt to a shareholder; the note bears an interest rate of 5% perannum and is due January 31, 2005. Additionally, the Company has and mayin the future invest in short-term investments from time to time. There can beno assurance that these investments will result in profit or loss.

 

Since inception, we haveutilized the proceeds from a number of private sales of our equity securities,the exercise of options and warrants to meet our working capital requirements.

 

Our operations generatedlosses in 2003 and continue to generate losses in 2004. Our cash increased$159,122 during the six months ended June 30, 2004 with operatingactivities using $688,347 of cash. We funded operations primarily through cashon hand from borrowings and equity offerings over the last couple of years. Noassurance can be given that such activities will continue to be available toprovide funding to us. Our business plan for 2004 is predicated principallyupon the successful marketing of our music software products and sales ofconcert CD’s from our new wholly owned subsidiary, DiscLive, Inc. We anticipatethat our existing working capital resources and revenues from operations willnot be adequate to satisfy our funding requirements in 2004.

 

10

----

 

Our working capitalrequirements will depend upon many factors, including the extent and timing ofour product sales, our operating results, the status of competitive products,and actual expenditures and revenues compared to our business plan. We arecurrently experiencing declining liquidity, losses from operations and negativecash flows, which make it difficult for us to meet our current cashrequirements, including payments to vendors, and may jeopardize our ability tocontinue as a going concern. We intend to address our liquidity problems bycontrolling costs, seeking additional funding (through capital raisingtransactions and business alliances) and maintaining focus on revenues andcollections.

 

If our losses continue,we will have to obtain funds to meet our cash requirements through businessalliances, such as strategic or financial transactions with third parties, thesale of securities or other financing arrangements, or we may be required tocurtail our operations, seek a merger partner, or seek protection under federalbankruptcy laws. Any of the foregoing may be on terms that are unfavorable tous or disadvantageous to existing stockholders. In addition, no assurance maybe given that we will be successful in raising additional funds or enteringinto business alliances.

 

The Company could berequired to secure additional financing to fully implement its entire businessplan. There are no guarantees that such financing will be available to theCompany, or if available, will be on terms and conditions satisfactory tomanagement.

 

The Company does not haveany preliminary agreements or understandings between the company and itsstockholders/officers and directors with respect to loans or financing tooperate the company. The Company currently has no arrangements or commitmentsfor accounts and accounts receivable financing. There can be no assurance thatany such financing can be obtained or, if obtained, that it will be onreasonable terms.

 

The Company could berequired to secure additional financing to fully implement its entire businessplan. There are no guarantees that such financing will be available to theCompany, or, if available, will be on terms and conditions satisfactory tomanagement.

 

Our auditors haveincluded an explanatory paragraph in their audit opinion with respect to ourconsolidated financial statements at December 31, 2003. The paragraphstates that our recurring losses from operations and resulting continueddependence on access to external financing raise substantial doubts about ourability to continue as a going concern. Furthermore, the factors leading to andthe existence of the explanatory paragraph may adversely affect ourrelationship with customers and suppliers and have an adverse effect on ourability to obtain financing.

 

Our business plan for2004 is predicated principally upon the successful marketing of our softwareproducts. We anticipate that our existing working capital resources andrevenues from operations may not be adequate to satisfy our fundingrequirements through 2004.

 

If our losses continue,we will have to obtain funds to meet our cash requirements through businessalliances, such as strategic or financial transactions with third parties, thesale of securities or other financing arrangements, or we may be required tocurtail our operations, seek a merger partner, or seek protection under federalbankruptcy laws. Any of the foregoing may be on terms that are unfavorable tous or disadvantageous to existing

 

11

----

 

stockholders. Inaddition, no assurance may be given that we will be successful in raisingadditional funds or entering into business alliances.

 

Employees

 

The Company currently hasnine full time employees and three part time employees. The Company has nomaterial commitments for capital expenditures nor does it foresee the need forsuch expenditures over the next year.

 

Market For Company’sCommon Stock

 

Market Information

 

On September 14, 1999,the Company’s common stock was initially cleared for trading on the OTCBulletin Board system under the symbol BRRT. The Company subsequently changedits name to ModernGroove Entertainment, Inc., and its trading symbol to: MODG.On January 7, 2003, the Company changed its name to Immediatek, Inc. andits trading symbol to IMDK. On February 25, 2003, the Company initiated a1 for 250 reverse stock split and changed it trading symbol to ITEK. A verylimited market exists for the trading of the Company’s common stock.

 

As of June 30, 2004there were approximately 4,119,199 warrants to purchase the Company’s commonstock. The following chart reflects the number of warrants, exercise price andexpiration date for the warrants outstanding 

 
| **# of  Warrants** |   | **Exercise  Price** |   | **Expiration** |                    |
|--------------------|--------|---------------------|--------|----------------|-------------------------|
| 3,002,302          |   | $                   | 0.20   |           | March 22,  2007    |   |
| 300,230            |   | $                   | 0.20   |           | March 22,  2007    |   |
| 200,000            |   | $                   | 1.00   |           | March 20,  2005    |   |
| 166,667            |   | $                   | 0.30   |           | February 19,  2006 |   |
| 450,000            |   | $                   | 0.65   |           | April 14,  2006    |   |

 

The Warrants may not besold or transferred without complying with Rule 144 in the absence of aneffective registration or other compliance under the Securities Act. There iscurrently no Common Stock, which is subject to outstanding options to purchase,or securities convertible into, the Company’s common stock.

 

Other than affiliates,there is currently no common stock of the Company which could be sold underRule 144 under the Securities Act of 1933 as amended.

 

Dividends

 

Holders of common stockare entitled to receive such dividends as the board of directors may from timeto time declare out of funds legally available for the payment of dividends. Nodividends have been paid on our common stock, and we do not anticipate payingany dividends on our common stock in the foreseeable future.

 

Item 3.Controls and Procedures

 

Within the 90 days priorto the date of this report, we carried out an

 

12

----

 

evaluation, under thesupervision and with the participation of our management, including our ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of thedesign and operation of our disclosure controls and procedures pursuant toSecurities Exchange Act Rule 13a-14. Based upon that evaluation, our ChiefExecutive Officer and Chief Financial Officer concluded that our disclosurecontrols and procedures are effective in timely alerting them to materialinformation relating to us (including our consolidated subsidiaries) requiredto be included in our periodic SEC filings. There have been no significantchanges in our internal controls or in other factors that could significantlyaffect internal controls subsequent to the date of their evaluation, includingany corrective actions with regard to significant deficiencies and materialweaknesses.

 

PART II OTHER INFORMATION

 

ITEM 1.  Legal Proceedings

 

There are currently nomaterial legal proceedings pending.

 

ITEM 2.  Changes in Securities and Use of Proceeds

 

We have initiated aRegulation D, Rule 506 private placement whereby the company is offering up to2,000,000 shares of its common stock at $0.30 per share for a total offering ofup to $600,000. As of June 30, 2004 we have sold 2,926,617 shares for thesum of $305,300.

 

ITEM 3.  Defaults upon Senior Securities

 

None.

 

ITEM 4.  Submission of Matters to a Vote of SecurityHolders

 

During the quarter endedJune 30, 2004, no matters were submitted to the Company’s securityholders.

 

ITEM 5.  Other Information

 

OnApril 9, 2004 Immediatek, Inc. entered into an Acquisition Agreement toacquire all of the issued and outstanding capital stock of DiscLive, Inc., aDelaware corporation. In exchange for the DiscLive capital stock we gave eachof the DiscLive stockholders their pro rata share of 1,666,667 shares of ourcommon stock. The agreement provides that delivery of the Immediatek commonstock and DiscLive capital stock will be delayed for a period of six (6) monthsto provide for adjustments or an unwinding if certain circumstances, asdescribed in the agreement, occur or fail to occur. Upon completion of thetransaction DiscLive will become a wholly owned subsidiary of Immediatek.

 

DiscLiveprovides a service to concert goers whereby DiscLive contracts with an artistor recording company, records a live concert and then offers for sale limitedaddition recordings of the concert within minutes after the concert has ended.

 

Wehave recently completed a round of exempt financing including certain venturecapital purchases of our common stock and completion of a Regulation D, Rule506 private placement offering. The largest single investment was by JessMorgan & Co., Inc. in the amount of approximately $600,000 which resultedin the issuance to Jess Morgan of approximately 2,000,000 shares of our common

 

13

----

 

stock.Our financing activities have raised a total of approximately $1,095,860 andresulted in our issuance of 3,652,866 shares of our common stock and 2,566,667warrants. The warrants expire at various times with an average exercise priceof $0.27 per share.

 

ITEM 6.  Exhibits and Reports on Form 8-K

 

(a)          Exhibits

 
| **Exhibit  Number** |   | **Title of Document**                                                                                                |
|---------------------|--------|----------------------------------------------------------------------------------------------------------------------|
|                |   |                                                                                                                 |
| 31.1                |   | Chief Executive  Officer-Section 302 Certification pursuant to Section 302  Sarbanes-Oxley Act.            |
| 31.2                |   | Chief Financial Officer  Section 302 Certification pursuant to Section 302 Sarbanes-Oxley  Act             |
| 32.1                |   | Chief Executive  Officer-Section 906 Certification pursuant to Section 902  Sarbane-Oxley Act.             |
| 32.2                |   | Chief Financial Officer  Section 906 Certification pursuant to Section 902 of the  Sarbanes–Oxley Act |

 

(b)         Reports on Form 8-K

 

1. Report on Form 8Kfiled with the Commission on April 20, 2004 concerning items 2, 5 and 7.

 

14

----

 

SIGNATURES

 

In accordance withSection 12 of the Securities Exchange Act of 1934, the registrant causedthis registration statement to be signed on its behalf by the undersigned,thereunto duly authorized.

 
|                       |   | Immediatek, Inc.        |   |   |
|----------------------------|--------|-------------------------|--------|--------|
|                       |   | (Registrant)            |   |
|                       |   |                    |   |
| Dated: July 27,  2004 | By:    | /s/ Zach Bair           |   |
|                       |   | Zach Bair               |   |
|                       |   | Chairman of the Board   |   |
|                       |   | President, Secretary    |   |
|                       |   | Chief Executive Officer |   |

 

In accordance with theExchange Act, this report has been signed below by the following persons onbehalf of the Registrant and in the capacities and on the

 

15

----

 

dates indicated.

 
|                      |   | IMMEDIATEK, INC.        |   |
|---------------------------|--------|-------------------------|--------|
|                      |   |                    |   |
|                      |   |                    |   |
| Date: July 27,  2004 | By:    | /s/ Zach Bair           |   |
|                      |   | Zach Bair               |   |
|                      |   | Chief Executive Officer |   |
|                      |   |                    |   |

 

16

----