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

**Washington,D.C. 20549**

 

**Form 10-QSB**

 

**(Mark One)**

** **

| **ý** | **Quarterly  Report under Section 13 or 15(d) of the Securities Exchange Act of 1934**                                                                      |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                                                                             |
|       | **For the quarterly period ended  September 30, 2003.**                                                                                                     |
|       |                                                                                                                                                             |
| **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 of small business issuer as specified in itscharter)

 

| **Nevada**                                                 |   | **86-0881193**                    |
|------------------------------------------------------------|--------|-----------------------------------|
| (State or other  jurisdiction  of incorporation)           |   | (I.R.S. Employer  Identification) |
|                                                       |   |                              |
| **2435  N. Central Expressway Suite 1600, Richardson, TX** |   | **75080**                         |
| (Address of principal  executive offices)                  |   | (Zip Code)                        |

 

Registrant’s telephonenumber, including area code:  **(214) 712-7336**

 

Check whether the issuer (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act of 1934during the past 12 months (or such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. 

 

Yes  ý  No  o

 

APPLICABLE ONLY TOISSUERS INVOLVED IN BANKRUPTCYPROCEEDING DURING THE PRECEDING FIVE YEARS

 

Check whether the Registrant filed all documents andreports required to be filed by Section 12, 13 or 15(d) of the ExchangeAct after the distribution of securities under a plan confirmed by a court. 

 

Yes  o  No  o

 

APPLICABLE ONLY TOCORPORATE ISSUERS

 

Common Stock, $0.001 par value per share, 500,000,000shares authorized, as of April 30, 2003, the issuer had 20,379,997 sharesof common stock outstanding. 

 

Traditional Small Business Disclosure Format (checkone)

 

Yes  o  No  ý

 

 

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| 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 |                                                            |

 

2

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PART I. FINANCIAL INFORMATION

 

ITEM 1.                             FINANCIALSTATEMENTS AND EXHIBITS

 

**Immediatek,Inc**

**(formerly ModernGroove Entertainment, Inc.)**

**(a Development Stage Company)**

**BalanceSheet**

 
|                                                                                                      |                                       | **September 30,  2003** |   |
|-----------------------------------------------------------------------------------------------------------|--------------------------------------------|------------------------------|--------|
| **Assets**                                                                                                |                                       |                         |   |
|                                                                                                      |                                       |                         |   |
| Current assets:                                                                                           |                                       |                         |   |
| Cash and equivalents                                                                                      |                                       | $                            | 37,876 |   |
| Accounts receivable                                                                                       |                                       | 1,647                        |   |
| Prepaid expenses                                                                                          |                                       | 7,605                        |   |
| Total current assets                                                                                      |                                       | 47,128                       |   |
|                                                                                                      |                                       |                         |   |
| Fixed assets, net                                                                                         |                                       | 4,045                        |   |
| Intellectual property                                                                                     |                                       | 18,101                       |   |
|                                                                                                      |                                       | $                            | 69,274 |   |
|                                                                                                      |                                       |                         |   |
| **Liabilities and Stockholders’ (Deficit)**                                                          |                                       |                         |   |
|                                                                                                      |                                       |                         |   |
| Current liabilities:                                                                                      |                                       |                         |   |
| Accounts payable                                                                                          |         | $                            | 96,731 |   |
| Notes payable                                                                                             |                                       | 70,000                       |   |
| Subscriptions payable                                                                                     |                                       | 42,000                       |   |
| Shareholder loan                                                                                          |                                       | 7,500                        |   |
| Total current liabilities                                                                                 |                                       | 216,231                      |   |
|                                                                                                      |                                       |                         |   |
| Stockholders’ (deficit):                                                                             |                                       |                         |   |
| Common stock, $0.001 par value, 500,000,000 shares authorized,  21,334,163 shares issued  and outstanding |                                       | 21,334                       |   |
| Additional paid-in capital                                                                                |                                       | 2,986,231                    |   |
| (Deficit) accumulated during development stage                                                            |                                       | (3,154,522                   | )      |
|                                                                                                      |                                       | (146,957                     | )      |
|                                                                                                      |                                       |                         |   |
|                                                                                                      |                                       | $                            | 69,274 |   |

 

The accompanying notesare an integral part of these financial statements.

 

3

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**Immediatek, Inc.**

**(formerly ModernGroove Entertainment, Inc.)**

**(a Development Stage Company)**

**Statementsof Operations**

 
|                                                                            |   | **Three months ended  September 30,** |     | **Nine months  ended  September 30,  2003** |   | **March 1, 2002  (inception) to  September 30,  2002** |   | **March 1, 2002  (inception) to  September 30,  2003** |       |
|---------------------------------------------------------------------------------|--------|--------------------------------------------|----------|--------------------------------------------------|--------|------------------------------------------------------------------|--------|------------------------------------------------------------------|------------|
| **2003**                                                                        |   | **2002**                                   |     |
|                                                                            |   |                                       |     |                                             |   |                                                             |   |                                                             |       |   |   |
| Revenue                                                                         |   | $                                          | 20,874   |                                             | $      | 25,834                                                           |   | $                                                                | 60,887     |   | $ | 52,346 |   | $ | 130,616 |   |
| Cost of goods sold                                                              |   | —                                     |     | —                                           |   | 716                                                              |   | —                                                           |       | 716 |   |
|                                                                            |   |                                       |     |                                             |   |                                                             |   |                                                             |       |   |   |
| Gross profit                                                                    |   | 20,874                                     |     | 25,834                                           |   | 60,171                                                           |   | 52,346                                                           |       | 129,900 |   |
|                                                                            |   |                                       |     |                                             |   |                                                             |   |                                                             |       |   |   |
| Expenses:                                                                       |   |                                       |     |                                             |   |                                                             |   |                                                             |       |   |   |
| General and administrative expenses                                             |   | 53,274                                     |     | 3,682                                            |   | 136,561                                                          |   | 13,445                                                           |       | 198,968 |   |
| Depreciation                                                                    |   | 42                                         |     | —                                           |   | 84                                                               |   | —                                                           |       | 84 |   |
| Consulting fees                                                                 |   | 10,000                                     |     | —                                           |   | 78,400                                                           |   | —                                                           |       | 482,152 |   |
| Consulting fees - related party                                                 |   | —                                     |     | —                                           |   | —                                                           |   | —                                                           |       | 16,408 |   |
| Compensation expenses - related party                                           |   | —                                     |     | —                                           |   | 2,335,080                                                        |   | —                                                           |       | 2,335,080 |   |
| Professional fees                                                               |   | 48,178                                     |     | —                                           |   | 48,178                                                           |   | 350                                                              |       | 48,178 |   |
| Research and development                                                        |   | 3,872                                      |     | —                                           |   | 11,747                                                           |   | —                                                           |       | 11,747 |   |
| Salaries and wages                                                              |   | 10,280                                     |     | 68,277                                           |   | 10,280                                                           |   | 81,896                                                           |       | 65,523 |   |
| Sales and marketing                                                             |   | 2,058                                      |     | —                                           |   | 2,058                                                            |   | —                                                           |       | 2,058 |   |
| Officer salaries                                                                |   | 37,113                                     |     | —                                           |   | 71,615                                                           |   | —                                                           |       | 124,940 |   |
| Total expenses                                                                  |   | 164,817                                    |     | 71,959                                           |   | 2,694,003                                                        |   | 95,691                                                           |       | 3,285,138 |   |
|                                                                            |   |                                       |     |                                             |   |                                                             |   |                                                             |       |   |   |
| Net (loss) from operations                                                      |   | (143,943                                   | )        | (46,125                                          | )      | (2,633,832                                                       | )      | (43,345                                                          | )          | (3,155,238 | ) |
| Other expenses:                                                                 |   |                                       |     |                                             |   |                                                             |   |                                                             |       |   |   |
| Other                                                                           |   | —                                     |     | (162                                             | )      | (437                                                             | )      | (162                                                             | )          | (437 | ) |
|                                                                            |   |                                       |     |                                             |   |                                                             |   |                                                             |       |   |   |
| Net (loss)                                                                      |   | $                                          | (143,943 | )                                                | $      | (46,287                                                          | )      | $                                                                | (2,633,395 | ) | $ | (43,507 | ) | $ | (3,154,522 | ) |
|                                                                            |   |                                       |     |                                             |   |                                                             |   |                                                             |       |   |   |
| Weighted average number of common shares outstanding - basic and fully  diluted |   | 20,857,080                                 |     | 1,722,600                                        |   | 11,616,382                                                       |   | 1,722,600                                                        |       |   |   |
|                                                                            |   |                                       |     |                                             |   |                                                             |   |                                                             |       |   |   |
| Net (loss) per share - basic and fully diluted                                  |   | $                                          | (0.01    | )                                                | $      | (0.03                                                            | )      | $                                                                | (0.23      | ) | $ | (0.03 | ) |   |   |

 

The accompanying notesare an integral part of these financial statements.

 

4

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**Immediatek, Inc.**

**(formerly ModernGroove Entertainment, Inc.)**

**(a Development Stage Company)**

**Statementsof Cash Flow**

 
|                                                                             |   | **Nine  months  ended  September 30,  2003** |       | **March 1,  2002  (Inception) to  September 30,  2002** | ** ** | **March 1,  2002  (Inception) to  September 30,  2003** | ** ** |
|----------------------------------------------------------------------------------|--------|---------------------------------------------------|------------|-------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
|                                                                             |   |                                              |       |                                                              |       |                                                              |       |
| **Cash flows from operating activities**                                         |   |                                              |       |                                                              |       |                                                              |       |
| Net (loss)                                                                       |   | $                                                 | (2,633,395 | )                                                                 | $          | (43,507                                                           | )          | $ | (3,154,522 | ) |
| Depreciation                                                                     |   | 84                                                |       | —                                                            |       | 84                                                                |       |
| Shares issued for services                                                       |   | 78,400                                            |       | —                                                            |       | 482,152                                                           |       |
| Shares issued for services - related party                                       |   | —                                            |       | —                                                            |       | 16,408                                                            |       |
| Shares issued as compensation to related parties                                 |   | 2,335,080                                         |       | —                                                            |       | 2,335,080                                                         |       |
| Adjustments to reconcile net (loss) to net cash (used) by operating  activities: |   |                                              |       |                                                              |       |                                                              |       |
| (Increase) decrease in accounts receivable                                       |   | (1,205                                            | )          | (14,732                                                           | )          | (1,647                                                            | )          |
| (Increase) in prepaid expenses                                                   |   | (7,605                                            | )          | —                                                            |       | (7,605                                                            | )          |
| Increase (decrease) in accounts payable                                          |   | 46,092                                            |       | 52,153                                                            |       | 96,731                                                            |       |
| Net cash (used) by operating activities                                          |   | (182,549                                          | )          | (6,086                                                            | )          | (233,319                                                          | )          |
|                                                                             |   |                                              |       |                                                              |       |                                                              |       |
| **Cash flows from investing activities**                                         |   |                                              |       |                                                              |       |                                                              |       |
| Purchase of fixed assets                                                         |   | (3,129                                            | )          | —                                                            |       | (3,129                                                            | )          |
| Net cash (used) by investing activities                                          |   | (3,129                                            | )          | —                                                            |       | (3,129                                                            | )          |
|                                                                             |   |                                              |       |                                                              |       |                                                              |       |
| **Cash flows from financing activities**                                         |   |                                              |       |                                                              |       |                                                              |       |
| Common stock                                                                     |   | —                                            |       | —                                                            |       | 45,515                                                            |       |
| Subscriptions payable                                                            |   | 42,000                                            |       | —                                                            |       | 42,000                                                            |       |
| Convertible debt                                                                 |   | 107,500                                           |       | —                                                            |       | 107,500                                                           |       |
| Payments on notes payable                                                        |   | (791                                              | )          | —                                                            |       | (1,320                                                            | )          |
| Proceeds from notes payable                                                      |   | 70,000                                            |       | 3,626                                                             |       | 70,000                                                            |       |
| Proceeds from shareholder loan                                                   |   | —                                            |       | 3,692                                                             |       | 7,500                                                             |       |
| Net cash provided by financing activities                                        |   | 218,709                                           |       | 7,318                                                             |       | 271,195                                                           |       |
|                                                                             |   |                                              |       |                                                              |       |                                                              |       |
| Net increase (decrease) in cash                                                  |   | 33,031                                            |       | 1,232                                                             |       | 37,876                                                            |       |
| Cash - beginning                                                                 |   | 4,845                                             |       | —                                                            |       | —                                                            |       |
| Cash - ending                                                                    |   | $                                                 | 37,876     |                                                              | $          | 1,232                                                             |       | $ | 37,876 |   |
|                                                                             |   |                                              |       |                                                              |       |                                                              |       |
| Supplemental disclosures:                                                        |   |                                              |       |                                                              |       |                                                              |       |
| Interest paid                                                                    |   | $                                                 | —     |                                                              | $          | —                                                            |       | $ | — |   |
| Income taxes paid                                                                |   | $                                                 | —     |                                                              | $          | —                                                            |       | $ | — |   |
| Non-cash transactions:                                                           |   |                                              |       |                                                              |       |                                                              |       |
| Number of shares issued for services                                             |   | 430,000                                           |       | —                                                            |       | 597,800                                                           |       |
| Number of shares issued for services to related party                            |   | —                                            |       | —                                                            |       | 8,200                                                             |       |
| Number of shares issued as compensation to related parties                       |   | 18,101,397                                        |       | —                                                            |       | 18,101,397                                                        |       |
| Number of shares issued for equipment                                            |   | 8,333                                             |       | —                                                            |       | 8,333                                                             |       |
| Number of shares issued to convert debt to equity                                |   | 895,833                                           |       | —                                                            |       | 895,833                                                           |       |

 

The accompanying notesare an integral part of these financial statements.

 

5

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**Immediatek,Inc.**

**(formerlyModernGroove Entertainment, Inc.)**

**(aDevelopment Stage Company)**

**Notes**

 

Note 1 – Basis of Presentation

 

The consolidated interim financial statements includedherein, presented in accordance with United States generally acceptedaccounting principles and stated in US dollars, have been prepared by theCompany, without audit, pursuant to the rules and regulations of the Securitiesand Exchange Commission.  Certaininformation and footnote disclosures normally included in financial statementsprepared in accordance with generally accepted accounting principles have beencondensed or omitted pursuant to such rules and regulations, although theCompany believes that the disclosures are adequate to make the information presentednot misleading.

 

These statements reflect all adjustments, consistingof normal recurring adjustments, which, in the opinion of management, arenecessary for fair presentation of the information contained therein.  It is suggested that these consolidatedinterim financial statements be read in conjunction with the financialstatements of the Company for the year ended December 31, 2002 and notesthereto included in the Company’s 10-KSB annual report.  The Company follows the same accountingpolicies in the preparation of interim reports.

 

Results of operations for the interim periods are notindicative of annual results.

 

Note 2 – Going concern

 

The Company’s financial statements are prepared usingthe generally accepted accounting principles applicable to a going concern,which contemplates the realization of assets and liquidation of liabilities inthe normal course of business.  However,the Company has not commenced its planned principal operations and it has notgenerated any revenues.  In order to obtainthe necessary capital, the Company raised funds via private placementoffering.  If the securities offeringdoes not provide sufficient capital, some of the shareholders of the Companyhave agreed to provide sufficient funds as a loan over the next twelve-monthperiod.  However, the Company isdependent upon its ability to secure equity and/or debt financing and there areno assurances that

 

6

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the Company will be successful, without sufficientfinancing it would be unlikely for the Company to continue as a going concern.

 

The officers and directors are involved in otherbusiness activities and may, in the future, become involved in other businessopportunities.  If a specific businessopportunity becomes available, such persons may face a conflict in selectingbetween the Company and their other business interests.  The Company has not formulated a policy forthe resolution of such conflicts.

 

Note 3 – Notes payable

 

The Company received loans totaling $70,000 fromvarious individuals.  The notes arenon-interest bearing and are due on demand.

 

During the three months ended September 30, 2003,certain note holders elected to convert $107,500 of Company debt into 895,833shares of the Company’s $0.001 par value common stock.

 

Note 4 – Subscriptions payable

 

During the three months ended September 30, 2003,the Company received $42,000 of cash from investors to acquire 140,000 sharesof the Company’s $0.001 par value common stock at $0.30 per share pursuant toits Private Placement Memorandum dated July 10, 2003.  As of September 30, 2003, the Companyowed the investors 140,000 shares of its $0.001 par value common stock.

 

The Company has expended $10,000 of the $42,000 cashreceived from investors to fund operations.

 

7

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Note 5 – Stockholders’ equity

 

The Company is authorized to issue 5,000,000 shares of$0.001 par value preferred stock and 500,000,000 shares of $0.001 par valuecommon stock.

 

Common stock

On March 17, 2003, the Company issued 18,101,397shares of its $0.001 par value common stock pursuant to two separate AssetPurchase Agreements (“Agreements”) with Paul Marin, an individual, and ZachBair, an individual and president of the Company, to purchase certain strategicassets.  The acquired assets are valuedat $7,360 and $10,741 (based on the par value of the underlying shares) for acombined total of $18,101.  The fairmarket value of the underlying shares was $0.13 per share on March 17,2003.  The difference between the parvalue of $18,101 and the fair market value of $2,353,182, or $2,335,081,represents compensation expense to Mr. Bair and Mr. Marin.

 

On April 10, 2003, the Company issued 380,000shares of its $0.001 par value common stock to an individual for consultingservices valued at $68,400, the fair market value of the underlying shares.

 

On August 3, 2003, the Company issued 895,833shares of its $0.001 par value common stock to certain note holders who electedto convert their notes totaling $107,500 into Company equity.

 

On August 3, 2003, the Company issued 8,333shares of its $0.001 par value common stock to an individual to acquireequipment valued at $1,000.

 

On August 3, 2003, the Company issued 50,000shares of its $0.001 par value common stock to an individual for consultingservices rendered valued at $10,000.

 

There have been no other issuances of common and/orpreferred stock.

 

Note 6 – Related party transactions

 

Intellectual property

On March 17, 2003, the Company entered into twoseparate Asset Purchase Agreements (“Agreements”) with Paul Marin, anindividual, and Zach Bair, an individual and president of the Company, topurchase certain strategic assets. Pursuant to the terms of the Agreements, the Company issued to Mr. Marin7,360,000 restricted shares and to Mr. Bair 10,741,397 restricted shares of its$0.001 par value common stock for a combined total of 18,101,397 shares.  The acquired assets are valued at $7,360 and$10,741 (based on the par value of the underlying shares) for a combined totalof $18,101.  The fair market value ofthe underlying shares was $0.13 per share on March 17, 2003.  The difference between the par value of $18,101and the fair market value of $2,353,182, or $2,335,081, represents compensationexpense to Mr. Bair and Mr. Marin.

 

Shareholder loan

As of September 30, 2003, the Company owed ashareholder $7,500.  The loan isnon-interest bearing and due on demand.

 

8

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS

 

Immediatek, Inc., formerly called ModernGrooveEntertainment, Inc., and originally called Barrington Laboratories, Inc., and,is a developmental stage company, hereinafter referred to as (“the Company”),was organized by the filing of Articles of Incorporation with the Secretary ofState of the State of Nevada on August 6, 1998.  The Articles of Incorporation of the Company were amended onDecember 9, 2002 to officially change the name of the Company toImmediatek, Inc, and increase the number of authorized shares to five hundredmillion  (500,000,000) shares of commonstock having a par value of $0.001.  TheCorporation shall have the authority to issue and five million (5,000,000)  shares of preferred stock at a par value of$0.001.

 

On February 27, 2003, Immediatek, Inc. announcedthat it was acquiring key assets from Zach Bair and Paul Marin,individually.  These assets represent,breakthrough technology enabling Internet music fans to download standard MP3files directly to their CD burners while simultaneously protecting the artists’copyrights.  Acquisition of theseassets, include:  the CD burningsoftware and the Company’s flagship website, www.TwoBigToes.com.

 

Immediatek currently has license agreements with over330 independent labels, 1,200 artists, and 30,000 music tracks for itswww.TwoBigToes.com website and core NetBurn (tm) technology.  The Company is currently focusing itsefforts towards digital media delivery, utilizing its patent pending NetBurn(tm) technology.  NetBurn (tm) is apatent-pending digital delivery system designed for music labels, distributors,artists and retailers.  NetBurn (tm)allows web and NetBurn Station(tm) users to download and burn fully licensedmusic tracks from a sophisticated content management system utilizing a simple“one-click” interface, while at the same time protecting the copyright holderswho own the material.  NetBurn (tm)allows music, audio and video buyers, using the Internet or an AutomatedDigital Media Server (tm) (“ADM”) to burn digital media directly to RecordableCDs drive and leaves no files for the user to pirate.  It requires no prior download to use, no custom drivers, andfeatures easy centralized software updating and robust content management.

 

NetBurn (tm) is available both as an ApplicationService Provider (“ASP”) solution as well as deployable, Internet-enabledAutomated Digital MediaServers

 

9

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called “NetBurn Stations(tm)”. What makes thistechnology unique is that with only a single mouse click by the user, or a fewtouches on the NetBurn Station(tm) touch screen, selected, fully licensed musictracks are burned directly to a CD-recordable drive.  In the case of the Internet version, the user is left with nofiles on their hard disk.  This meansthere are no files for the user to copy, thereby providing an extra layer ofsecurity and furthering the demise of music piracy. Users pay by the track orby the CD.  They can create custom CDscomplete with liner notes and CD jacket, or choose to burn exact CDs as foundin retail stores.  It is Immediatek’sgoal to work with the music industry and artist community to help establish theNetBurn (tm) technology as the de facto standard for digital music delivery.

 

The NetBurn Stations(tm) are available in stand-up andwill also be available as countertop bolt-on units. The machines accept creditand debit cards as well as cash, and the stand-up units are equipped with42-inch plasma screens for targeted custom media and advertising delivery.Various licensing packages for both the NetBurn Stations(tm) and the coreNetBurn (tm) technology are available and flexible.  Licensing, for example, may include a flat yearly fee based onestimated burns and/or a transaction fee per burn, and a monthly charge forNetBurn Station(tm) deployment maintenance.

 

NetBurn (tm) is as much a supply chain solution for the music industryas it is a tool to be used to combat music piracy. If the Company is successfulin its mission to make NetBurn (tm) the industry standard in digital musicdelivery, CD distribution in its present form, as well as the costs associatedwith it, will be transformed, with significant costs being driven out of thesupply chain.  Artists, record labelsand end users alike will all be the beneficiaries.

 

Coupled with new laws and stricter policing of existing legislation,which will increasingly become a greater disincentive to music pirates, NetBurn(tm) offers a legal solution to end users that will retain and enhance theirability to download individual tracks of their choice, while improving qualityand eliminating the very high risk of exposure to computer viruses.  Music downloads will not be free of charge,as is the case with existing “peer-to-peer” solutions, but they will be lessexpensive than existing retail alternatives, with no loss of quality.

 

The Company’s website at www.TwoBigToes.com targets a market inproviding “one click” web CD burning capabilities.  The independent musician is actively seeking ways to promotetheir music.  There are an estimated300,000 musician- owned “official websites” that promote the musician’s music,the vast majority of which do not have CD burning capabilities or e-commerce capabilities.  TwoBigToes is the first and only site tooffer CD burning capabilities plus real-time sales statistics and proceeds paidto the musician.  Previously themusician has opted to link their sites to destination sites such as CDNOW,  MP3.com, Amazon Music, etc. Under MP3.com’smodel, for example, the musician is required to pay a monthly service fee of$19.99 and has access to upload their selections of MP3 files which is hostedby MP3.com’s servers, with no CD burning capabilities and shared salesproceeds.

 

Immediatek library includes tracks from independent artists and evensome well- known artists such as multi-platinum artist Shania Twain and world’slargest independent contemporary blues label, Alligator Records.  Immediatek customer base includes:  Kviar Music, the leading Internet musicportal and record label in Latin America and Yoshi Dillon Technologies, Inc.,who owns an independent music site promoting artists, which is scheduled forfull launch in late summer,

 

10

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Going Concern – The Company experienced operating losses for the periodended September 30, 2003.  Thefinancial statements have been prepared assuming the Company will continue tooperate as a going concern which contemplates the realization of assets and thesettlement of liabilities in 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 was unable to continue its operations.  (See Financial Footnote 2.)

 

Results of Operations

 

During the nine months ended September 30, 2003, the Companygenerated $ 60,887 13 in revenues, this compares to  $52,346 in revenues for the same period last year.  In its most recent nine month operating periodended September 30, 2003, the Company experienced a net loss of $2,633,395versus a net loss of $43,507 for the same period last year.  The bulk of this loss came from compensationexpenses of $2,335,080 to purchase certain strategic assets; general andadministrative expenses of $136,561 and consulting fees of $ 78,400.  During the first nine months, the Companycontinued to seek new strategies for market its business plan.  Since the Company’s inception, the Companyexperienced a net lost $ 3,154,522.

 

For the quarter ended September 30, 2003, approximately 90% ofsales were derived from one customer, SOLD-RITE, Inc.

 

The major components to expenses faced by the company in its day-to-dayoperations includes auditor fees, legal fees, developing software, databases,marketing its internet site, and general administrative expenses.  If the Company becomes profitable, thecompany will access salaries and adding additional personnel to the payroll.  Management intends to continue minimizecosts until such a time in its discretion it believes expansion would beprudent.  One element in making thisdetermination is positive cash flow on a quarterly basis.  If or when the company is successful inachieving this quarterly positive cash flow, it is likely that the company willconsider expanding its personnel which will increase costs.

 

Plan of Operation

 

Management does not believe that the Company will be able to generatesignificant profit during the coming year, unless the company can expand itscustomer base for its NetBurn (tm) products. NetBurn (tm) is a patent- pending digital delivery system which allowsweb and NetBurn Station(tm) users to download and burn fully licensed musictracks by utilizing a simple “one- click” interface, while at the same time protectingthe copyright holders who own the material. Management does not believe the company will generate any significantprofit in the near future, as developmental and marketing costs will mostlikely exceed any anticipated revenues.

 

Liquidity and Capital Resources

 

On March 17, 2003, the Company issued 18,101,397 shares of its$0.001 par value common stock pursuant to two separate Asset PurchaseAgreements (“Agreements”)  with PaulMarin, an individual, and Zach Bair, an individual and president of theCompany, to purchase certain strategic assets. The acquired assets are

 

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valued at $7,360 and $10,741 (based on the par value of the underlyingshares) for a combined total of $18,101. The fair market value of the underlying shares was $0.13 per share onMarch 17, 2003.  The differencebetween the par value of  $18,101 andthe fair market value of $2,353,182, or $2,335,081, represents compensationexpense to Mr. Bair and Mr. Marin.

 

On April 10, 2003, the Company issued 380,000 shares of its $0.001par value common stock to an individual for consulting services valued at$68,400, the fair market value of the underlying shares.

 

As of September 30, 2003, the Company owed a shareholder$7,500.  The loan is non-interestbearing and due on demand.  (SeeFinancial Footnote 6.)

 

The Company received loans totaling $70,000 from variousindividuals.  The notes are non-interestbearing and are due on demand.

 

The Company could be required to secure additional financing to fullyimplement its entire business plan. 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 has no current commitments or other long-term debt.  Additionally, the Company has and may in thefuture invest in short-term investments from time to time.  There can be no assurance that theseinvestments will result in profit or loss.

 

Employees

 

The Company currently has four employees, two of employees also serveas officers and directors of the Company.

 

The Company has no material commitments for capital expenditures nordoes it foresee the need for such expenditures over the next year.

 

Market For Company’s Common Stock

 

Market Information

 

On September 14, 1999, the Company’s common stock was initiallycleared for trading on the OTC Bulletin Board system under the symbolBRRT.  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. and its trading symbol to IMDK.  OnFebruary 25, 2003, the Company initiated a 1 for 250 reverse stock splitand changed it trading symbol to ITEK. A very limited market exists for the trading of the Company’s commonstock.

 

There is currently 447,917 warrants to purchase the Company’s commonstock. The warrants are exercisable at $0.15 per share with an exercise term of12 months.  The Warrants may not be soldor transferred without complying with Rule 144 in the absence of an effectiveregistration or other compliance under the Securities Act.  There is currently no Common Stock, which issubject to outstanding options to purchase, or securities convertible into, theCompany’s common stock.

 

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There is currently no common stock of the Company which could be soldunder Rule 144 under the Securities Act of 1933 as amended or that theregistrant has agreed to register for sale by security holders.

 

Dividends

 

Holders of common stock are entitled to receive such dividends as theboard of directors may from time to time declare out of funds legally availablefor the payment of dividends. No dividends have been paid on our common stock,and we do not anticipate paying any dividends on our common stock in theforeseeable future.

 

Forward-Looking Statements

 

This Form 10-QSB includes “forward-looking statements” within themeaning of Section 27A of the Securities Act of 1933, as amended, andSection 21E of the Securities Exchange Act of 1934, as amended.  All statements, other than statements ofhistorical facts, included or incorporated by reference in this Form 10-QSBwhich address activities, events or developments which the Company expects oranticipates will or may occur in the future, including such things as futurecapital expenditures (including the amount and nature thereof),  finding suitable merger or acquisitioncandidates, expansion and growth of the Company’s business and operations, andother such matters are forward-looking statements.  These statements are based on certain assumptions and analysesmade by the Company in light of its experience and its perception of historicaltrends, current conditions and expected future developments as well as otherfactors it believes are appropriate in the circumstances.

 

However, whether actual results or developments will conform with theCompany’s expectations and predictions is subject to a number of risks anduncertainties, general economic market and business conditions; the businessopportunities (or lack thereof) that may be presented to and pursued by theCompany; changes in laws or regulation; and other factors, most of which arebeyond the control of the Company.

 

This Form10-QSB contains statements that constitute “forward-lookingstatements.” These forward-looking statements can be identified by the use ofpredictive, future-tense or forward-looking terminology, such as“believes,”  “anticipates,” “expects,”“estimates,” “plans,” “may,” “will,” or similar terms. These statements appearin a number of places in this Registration and include statements regarding theintent, belief or current expectations of the Company, its directors or itsofficers with respect to, among other things: (i) trends affecting theCompany’s financial condition or results of operations for its limited history;(ii) the Company’s business and growth strategies; and, (iii) the Company’sfinancing plans.  Investors arecautioned that any such forward-looking statements are not guarantees of futureperformance and involve significant risks and uncertainties, and that actualresults may differ materially from those projected in the forward-lookingstatements as a result of various factors. Factors that could adversely affect actual results and performanceinclude, among others, the Company’s limited operating history, dependence oncontinued growth in the irrigation industry, potential fluctuations inquarterly operating results and expenses, government regulation dealing withirrigation systems, technological change and competition.

 

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Consequently, all of the forward-looking statements made in this Form10-QSB are qualified by these cautionary statements and there can be noassurance that the actual results or developments anticipated by the Companywill be realized or, even if substantially realized, that they will have theexpected consequence to or effects on the Company or its business oroperations.  The Company assumes noobligations to update any such forward-looking statements.

 

Item 3. Controls and Procedures

 

Within the 90 days prior to the date of this report,we carried out an evaluation, under the supervision and with the participationof our management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of the design and operation of our disclosurecontrols and procedures pursuant to Securities Exchange Act Rule 13a-14.  Based upon that evaluation, our Chief ExecutiveOfficer and Chief Financial Officer concluded that our disclosure controls andprocedures are effective in timely alerting them to material informationrelating to us (including our consolidated subsidiaries) required to beincluded in our periodic SEC filings. There have been no significant changes in our internal controls or inother factors that could significantly affect internal controls subsequent tothe date of their evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 

 

PART II  OTHER INFORMATION

 

ITEM 1.  LegalProceedings

 

The Company as plaintiff initiated a lawsuit in TexasState District Court on October 2,2003 against FRANK MERHIB, SCOTTWILDING, JENNIFER MERHIB, J & SON CONSULTING, a Florida Corporation, andRESEARCH INVESTMENT GROUP, a Florida Corporation alleging that theaforementioned defendants engaged jointly and severally in activity amountingto, among other causes of action, business disparagement of Immediatek and itspresident, Zach Bair. The lawsuit has demanded certain damages from thedefendants and the court has granted temporary injunctions against the severaldefendants.

 

ITEM 2. Changes in Securities and Use of Proceeds

 

None as of September 30, 2003 however we haveinitiated a Regulation D, Rule 506 private placement whereby the company isoffering up to 2,000,000 shares of its common stock at $0.30 per share for atotal offering of up to $600,000

 

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ITEM 3.  Defaultsupon Senior Securities

 

None.

 

ITEM 4. Submission of Matters to a Vote of Security Holders

 

During the quarter ended,  no matters were submitted to the Company’s security holders.

 

ITEM 5.  OtherInformation

 

None

 

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 |
|   | None                |

 

 

SIGNATURES

 

In accordance with Section 12 of the SecuritiesExchange Act of 1934, the registrant caused this registration statement to besigned on its behalf by the undersigned, thereunto duly authorized.

 
|                                 | Immediatek, Inc.                            |
|--------------------------------------|---------------------------------------------|
|                                 | (Registrant)                                |
|                                 |                                        |
| Dated:   November 14, 2003 | By:  /s/ Zach Bair                     |   |
|                                 | Zach Bair                                   |
|                                 | Chairman of the Board  President, Secretary |
|                                 | Chief Executive Officer                     |

 

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In accordance with the Exchange Act, this report hasbeen signed below by the following persons on behalf of the Registrant and inthe capacities and on the dates indicated.

 

 
|                                | IMMEDIATEK, INC.        |
|-------------------------------------|-------------------------|
|                                |                    |
| Date:   November 14, 2003 | By: /s/ Zach  Bair      |   |
|                                | Zach Bair               |
|                                | Chief Executive Officer |

 

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