UNITED STATES |
| SECURITIES AND EXCHANGE COMMISSION |
| Washington, D.C. 20549 |
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period endedMarch 31, 2004 |
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ___________to___________. |
|
Commission file number:333-90614 |
MCG DIVERSIFIED, INC.
|
| (Exact name of small business issuer in its charter) |
| Florida | 59-3217746 |
| ( State or jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 770 First Avenue North |
| St. Petersburg, Florida33701 |
| (Address of principal executive offices) |
| (727) 898-5600 |
| (Issuer's Telephone Number) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer has 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 a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:As of March 31, 2004, the registrant has outstanding 1,036,900 shares of common stock.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
TABLE OF CONTENTS
| PART I - FINANCIAL INFORMATION . . . . . .1 |
| Item 1. Financial Statements . . . . . . 1 |
| Accountant's Review Report . . . . . .1 |
| Balance Sheet (Unaudited) March 31, 2004 . . . . . .2 |
| Statement of Operations (Unaudited) For the Three months Ended March 31, 2004 . . . . . .3 |
| Statement of Cash Flows (Unaudited) For the Three months Ended March 31, 2004 . . . . . .4 |
| Statement of Changes in Stockholder's Equity (Unaudited) For the Three months Ended March 31, 2004 . . . . . .5 |
| Notes to Financial Statements (Unaudited) March 31, 2004 . . . . . .6 |
| Item 2. Management's Discussion and Analysis or Plan of Operation.. . . . . .8 |
| Plan of Operation . . . . . . 8 |
| Management's Discussion and Analysis . . . . . .11 |
| Liquidity & Capital Resources . . . . . . 13 |
| Off-balance Sheet Arrangements . . . . . . 14 |
| Item 3. Controls and Procedures . . . . . . 14 |
| PART II - OTHER INFORMATION . . . . . . 15 |
| Item 1. Legal Proceedings . . . . . .15 |
| Item 2. Changes in Securities . . . . . . 15 |
| Item 3. Defaults Upon Senior Securities . . . . . .15 |
| Item 4. Submission of Matters to a Vote of Security Holders . . . . . .15 |
| Item 5. Other Information . . . . . .15 |
| Item 6. Exhibits and Reports on Form 8-K . . . . . .15 |
| SIGNATURES . . . . . .16 |
i
References in this document to "us," "we," "the Corporation," or "the Company" refer to MCG Diversified, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
| Randall N. Drake, C.P.A. |
| 1981 Promenade Way |
| Clearwater, Florida 33760 |
Accountant's Review Report
| To the Board of Directors and Stockholders of |
| MCG Diversified, Inc. |
I have reviewed the accompanying balance sheet of MCG Diversified, Inc. (a development stage company) as of March 31, 2004, and the related statements of operation, changes in stockholders' equity, and cash flows for the three months then ended and for the period from December 29, 1993 (inception) to March 31, 2004, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of MCG Diversified, Inc.
A review consists principally of inquiries of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles.
| Randall N. Drake, C.P.A. |
| Randall N. Drake, C.P.A. |
April 26, 2004
| Telephone: 727-535-9764 |
| Fax: 727-521-2825 |
1
| MCG Diversified, Inc. |
| (A Development Stage Company) |
| Balance Sheet (Unaudited) |
| March 31, 2004 |
|
| ASSETS |
| Current Assets: | |
| Cash & Cash Equivalents | $22.18 |
| Accounts Receivable
| 2,404.00
|
| | 2,426.18
|
| | |
TOTAL ASSETS
| $2,426.18
|
| | |
| LIABILITIES & STOCKHOLDERS' EQUITY |
| Current Liabilities: | |
| Accrued Expenses
| $3,275.63
|
| | |
TOTAL LIABILITIES
| 3,275.63
|
| | |
| Stockholder's Equity: | |
| Common Stock, $.001 par value, 50,000,000 shares | |
| authorized, 1,036,900 shares issued & outstanding | 196.90 |
| Contributed Capital | 138,493.97 |
Retained Earnings
| (139,540.32)
|
| | (849.45)
|
| | |
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY
| $2,426.18
|
| | |
| See accompanying notes and accountant's report. |
2
| MCG Diversified, Inc. |
| (A Development Stage Company) |
| Statement of Operations (Unaudited) |
| For the Three Months Ended March 31, 2004 |
|
Revenues
| $3,000.00
|
| | |
| Operating Expenses: | |
| Bank/Brokerage Fees | 224.00 |
| Executive Compensation | 9,000.00 |
| Meals & Entertainment | 16.68 |
| Professional Fees | 500.00 |
| Rent | 900.00 |
| Supplies | 244.25 |
| Taxes | 100.00 |
| Telephone | 200.34 |
| Travel
| 280.80
|
| | 11,466.07
|
| | . |
| | |
Net Income (Loss)
| ($8,466.07)
|
| | |
| | |
Cumulative Revenue From Inception
| $137,291.00
|
| | |
Cumulative Expenses From Inception
| $207,502.32
|
| | |
| Earnings (loss) per common share: | |
Net income (loss) per share
| ($0.01)
|
| | |
| See accompanying notes and accountant's report. |
3
| MCG Diversified, Inc. |
| (A Development Stage Company) |
| Statement of Cash Flows (Unaudited) |
| For the Three Months Ended March 31, 2004 |
| | Cumulative From |
OPERATING ACTIVITIES:
| | | Inception
|
| Net Income | $(8,466.07) | | ($70,439.32) |
| Depreciation | $0.00 | | 12,964.00 |
| Loss on Fixed Assets Disposition | 0.00 | | 197.00 |
| Contributed Noncash Executive Compensation | 9,000.00 | | 137,175.14 |
| (Increase) Decrease in: | | | |
| Accounts Receivable | (110.00) | | (2,404.00) |
| Increase (Decrease) in: | | | |
| Accrued Expenses
| (588.92)
| | 3,275.63
|
| | (164.99)
| | 80,768.45
|
| | | | |
| INVESTING ACTIVITIES | | | |
| Acquisition of Fixed Assets
| 0.00
| | (13,161.00)
|
| | 0.00
| | (13,161.00)
|
| | | | |
| FINANCING ACTIVITIES: | | | |
| Shareholder Distributions | 0.00 | | (69,101.00) |
| Contributed Capital | 191.73 | | 191.73 |
| Issuance of Common Stock
| 0.00
| | 1,324.00
|
| | 191.73
| | (67,585.27)
|
| | | | |
| NET CASH INCREASE (DECREASE) FOR THE PERIOD | 26.74 | | 22.18 |
| | | | |
BEGINNING CASH
| (4.56)
| | 0.00
|
| | | | |
ENDING CASH
| $22.18
| | $22.18
|
| | | | |
| SUPPLEMENTAL DISCLOSURE: | | | |
| Noncash Investing & Financing Activities | | | |
| Decrease in Fixed Assets - Dispositions | $0.00 | | $13,161.00 |
| Decrease in Accumulated Depreciation - | | | |
| Fixed Asset Dispositions | $0.00 | | $12,964.00 |
| | | | |
| See accompanying notes and accountant's report. |
4
| MCG Diversified, Inc. |
| (A Development Stage Company) |
| Statement of Changes in Stockholder's Equity (Unaudited) |
| For the Three Months Ended March 31, 2004 |
| | | | | | |
| | Common Stock | Contributed | Retained | |
| | Shares
| Amount
| Capital
| Earnings
| Total
|
| Balances at January 1, 2004 | 1,036,900 | $196.90 | $129,302.24 | ($131,074.25) | ($1,575.11) |
| | | | | | |
| Net Income (Loss) | | | | (8,466.07) | (8,466.07) |
| | | | | | |
| Contributed Capital | | | 9,191.73 | | 9,191.73 |
|
|
|
|
|
|
| Balances at March 31, 2004 | 1,036,900 | $196.90 | $138,493.97 | ($139,540.32) | ($849.45) |
|
| See accompanying notes and accountant's report. |
5
MCG Diversified, Inc. |
(A Development Stage Company) |
Notes to Financial Statements (Unaudited) |
March 31, 2004 |
NOTE A - ORGANIZATION AND NATURE OF BUSINESS
The Company was incorporated December 29, 1993 in the State of Florida. The Company is in the business of providing EDP processing, administrative support services, property management products and services, and business development services such as writing business plans and providing business development solution services. The Company is considered to be a development stage company as defined by FAS-7.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all short-term securities with a maturity of three months or less to be cash equivalents.
Fixed Assets
Property and equipment are stated at cost. Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires the corporation to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Revenue Recognition
The Company generates revenue by providing a variety of administrative support, EDP processing, payroll, and property management services. The Company provides these services and bills for them on a monthly basis. The Company recognizes its revenue when its monthly services are completed and its customers are billed.
NOTE C - RENT
The Company sublets its principal business location at 770 First Avenue North, St. Petersburg, Florida on a month-to-month basis from a customer that has a common stockholder with the Company. The monthly rent of $300.00 is fair market value for the space and usage being provided.
6
NOTE D - RELATED PARTY TRANSACTIONSAs a development stage company, the Company currently derives all of its revenue from related entities in which the Company and the related entities have common stockholders. The services being provided by the Company are charged at prevailing arm's length market rates.
NOTE E - EARNINGS PER COMMON SHARE
Earnings (loss) per common share of ($.01) were calculated based on a net loss numerator of ($8,466.07) divided by a denominator of 1,036,900 weighted-average shares of outstanding common stock. The denominator was calculated based on the following issuances of common shares during the three months ended March 31, 2004:
| January 1, 2004 | 1,036,900 common shares outstanding |
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Item 2. Management's Discussion and Analysis or Plan of Operation.The following plan of operation, management's discussion and analysis of financial condition, and results of operations should be read in conjunction with our financial statements and notes thereto contained elsewhere in this report.
Plan of Operation
(1) General
We currently derive all of our revenues and income pursuant to MCG Diversified, Inc.'s operations, which are located in the Tampa Bay area of Florida. We do not anticipate revenues from our operations to increase significantly until we are able to raise additional capital for operations.
Presently, the cash necessary to support our business plan implementation is being supplied by the operations. However, this is only enough to sustain the business in its current manner and is not sufficient for the full implementation of the business plan, specifically, expanding the business development/consulting services. We believe that further cash will be needed to expand operations and management is currently discussing methods of raising additional cash for our planned expansion.
Management has determined that the business opportunity in the Tampa Bay area is keeping pace with the national trend and that the opportunities open to the company are consistent with our goals. Our business did not increase in the first quarter of 2004 due to our inability to move forward while we contemplate the best course of action for the company in raising its capital.
Management has determined that the lack of investment capital has been due in great part to the problems that beset industry in general. As a result, the company has spent the past quarter trying to develop alternative markets for the services it offers and the best sources for raising capital.
(2) Our Business
Presently our President, Marguerite Godels, provides the necessary services to our clients. The services we provide, professional business services, such as accounting services, equipment and furniture leasing services, and administrative support services, and business development services have been provided on a limited basis due to the development of the business plan as well as the lack of capital.
We anticipated that the funds from our offering that was registered with the Securities Exchange Commission and effective in December 2002, would provide us sufficient capital for the next twelve months. As a result of the lack of investment funds, we need to raise additional funds, which we will finance either through subsequent offerings of our shares or through other financing arrangements.
(i) How long can we satisfy our cash requirements and will we need to raise additional funds in the next 12 months?
Our Plan of Operation for the next twelve months is to further develop our cash flow model to attract investors by providing for liquidity in the future and then implementing our business plan so we can establish new corporate headquarters, hire additional staff, and expand our services to other areas of
8
Florida. Specifically, we plan on expanding our services into Miami, Florida in or around the fourth quarter 2004. We also plan to offer our services in Orlando, Florida in or around the first quarter 2005. We would operate from the one physical facility in St. Petersburg and travel to the new service areas. We will use the funds raised in our offering and revenues generated to fund equipment purchases and office improvement and for marketing activities and working capital.
We cannot guaranty that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then we may not be able to expand our operations. If adequate funds are not available, we believe that our officers and directors will contribute funds to pay for some of our expenses. However, we have not made any arrangements or agreements with our officers and directors regarding such advancement of funds. We do not know whether we will issue stock for the loans or whether we will merely prepare and sign promissory notes. If we are forced to seek funds from our officers or directors, we will negotiate the specific terms and conditions of such loan when made, if ever. None of our officers or directors is obligated to pay for our expenses. Moreover, none of our officers or directors have specifically agreed to pay our expenses should we need such assistance.
The only agreements of any kind are the monthly agreements for our office space and an agreement with Avalon Development Enterprises for property management services at a rate of $300.00 per month. This is not the only revenue generated by us. This transaction has been constructed as an arms length transaction based on fair market value of these services in the Tampa Bay area.
The implementation of our full business plan is estimated to take approximately 12-18 months. Once we are able to secure funding, implementation will begin immediately. We anticipate 30 days to be in a stage of operational activity to gain additional clients. The major parts of the business plan that will be immediately implemented will be the sales and marketing as well as office equipment and human resource procurement.
(ii) Summary of product research and development
We are not currently nor do we anticipate in the future to be conducting any research and development activities, other than the development of our proposed website and looking into a possible new industry to target for offering our services. However, we do plan to market ourselves aggressively.
(a) Marketing Plan
Our current marketing plan involves positioning ourselves as a business services company targeting both the accounting industry, the Big 5 accounting firms in particular, and small businesses. We intend to retain the services of a public relations company for the development of our brochures, advertising sheets, and public relations.
The extensive advertising needed to produce a major increase in potential business will not be done during the next twelve months. We will use a softer approach and target advertising to grow the business in a controlled way. This will allow us to determine human resource needs and ensure we do not overstaff too early thereby avoiding high labor and benefits costs.
9
We will utilize a direct marketing person to contact companies to solicit business. Ms. Godels' personal contacts within the accounting industry, we believe, will assist our marketing person in gaining entry to decision makers.
Our target markets and marketing strategy will be fully developed. We will primarily market our services to accounting firms and small and mid-size businesses, which we believe can benefit from our knowledge of the day-to-day requirements of operating a business. Our marketing initiatives will include:
(a) utilizing direct response print advertisements placed primarily in small business, entrepreneurial, and special interest magazines;
(b) links to industry focused websites;
(c) advertising by television, radio, banners, affiliated marketing and direct mail
(d) presence at industry trade shows; and
(e) promoting our services and attracting businesses through our proposed website.
(b) Sales Strategies
- Power Point Presentation. We plan to create a flexible Power Point presentation that our marketing department will use to deliver a professional sales presentation specifically tailored to the needs of our target markets. The presentation will have a core section that is generic to all customer segments as well as specific customer segment modules allowing modification of the presentation for the appropriate audience. Additionally, this Power Point presentation will be the basis for brochures and print advertising layout to ensure we have a consistent look through out all our marketing communications.
- Capability Brochures. We expect to create a capability brochure featuring our family of services and products. This will be a high quality brochure with extensive detail.
- Public Relations and Advertising. We plan to implement a campaign to obtain media coverage by publishing persuasive news articles and feature stories that increase the awareness of the business services and further the acceptance of our products, services and technologies as the solution to targeted customer segments.
(c) Other Markets
During our nine years of developing our business plan and our small operations we have uncovered another potential target market in addition to the accounting industry: the travel/leisure industry. The entry into the travel/leisure industry appears to be easy and there is a large percentage of these business that are the traditional "mom and pop" operations that likely need assistance with administrative services as well as business planning.
10
(iii) Any expected purchase or sale of plant and significant equipment?We do not anticipate purchases of plant or significant equipment other than general office supplies and general office equipment, should we raise sufficient funds to purchase such office equipment. In the event that we expand our customer base, then we may need to hire additional employees or independent contractors. Specifically, if we are able to raise sufficient capital to expand our services and service area and our revenue levels justify such action, we plan on hiring five additional employees over the next 12 months. Accordingly, we are hoping to move to a new, larger location in 2004, however, no locations have been identified at this time, and such move depends upon our securing sufficient capital.
(iv) Employees
As of March 31, 2004, we had one full time employee, Marguerite Godels. As our founder and President, Ms. Godels currently provides her time as our only employee, paid on an irregular basis. We anticipate that we will not hire any additional employees in the next six months unless we generate significant revenues. From time to time, we anticipate using the services of an outside firm for additional website design and development.
With our growth strategy our objective is to expand our operations by adding staff while increasing our market presence in the Tampa Bay area of Florida, and into nearby regions. We anticipate achieving growth by leasing additional staff through an employee leasing company, installing computers, and launching a professionally designed website to attract new clients.
Management's Discussion and Analysis
(1) Results of Operations For the Period Ended March 31, 2004
During the period ended March 31, 2004, our assets consisted of our cash and cash equivalents along with our trade receivables. We also generated revenues of $3,000.00 from providing our services. It should be noted, a portion of the revenue generated during the first quarter 2004 was generated from a property management agreement with Avalon Development Enterprises, Inc. ("Avalon"). Approximately 20% of our revenue was generated from Avalon. Our president, Marguerite Godels is a 50% shareholder in Avalon and provides the services required under the agreement to Avalon. This transaction was structured at arms length and the rates charged were and continue to be at fair market value. Mr. Charles Godels is a stockholder in Avalon Development Enterprises, Inc.
For the quarter ending March 31, 2004 we had a net loss of $8,466.07 which included $9,000.00 of noncash expense in executive compensation which was foregone and recognized as contributed capital.
Our operations for the quarter ending March 31, 2004 utilized cash of $164.99. During the quarter ended March 31, 2004 we had cash flows from financing activities of $191.73 from contributed capital. Accordingly, for the quarter ending March 31, 2004 we realized a net increase in cash and cash equivalents of $26.74. When added to cash and cash equivalents of ($4.56) on hand at the beginning of the period, this resulted in cash and cash equivalents on hand at the end of the period March 31, 2004 of $22.18.
11
(2) Results of Operations For the Year Ended December 31, 2003During the year ended December 31, 2003, we had revenues of approximately $12,000.00. Approximately 30% of this revenue was derived from a related entity, Avalon Development Enterprises, Inc. Our President, Marguerite Godels is also the President of this company and she is a fifty percent (50%) shareholder in Avalon as well as owning fifty-nine percent (59%) of our stock.
We utilized $1,507.97 of cash flow for operating activities. We had a $35,806.58 net loss including $32,890.48 of noncash expense in executive compensation which was foregone and recognized as contributed capital.
We did not have any cash flows from investing activities for the year ended December 31, 2003, but did have utilization of cash flow of $1156.00 from financing activities resulting from the sale of stock.
The result of the above activity was a net cash decrease of $351.97 for the year ended December 31, 2003, which when deducted from $347.41 of cash and cash equivalents at the beginning of the period, resulted in ($4.56) of cash and cash equivalents at the end of the period.
We do not foresee any circumstances or events that will have an adverse impact on our operations. We do anticipate an increase in our business based on our current business plan and the activities of our officers and directors. Thus, we do not expect to satisfy our current cash requirements. We will need additional cash to implement the expansion strategy contained in our business plan, which includes expanding the business development/consulting services and to continue operations.
(3) Results of Operations For the Year Ended December 31, 2002
During the year ended December 31, 2002, we had revenues of approximately $14,560.00. Approximately 20% of this revenue was derived from a related entity, Avalon Development Enterprises, Inc. Our President, Marguerite Godels is also the President of this company and she is a fifty percent (50%) shareholder in Avalon as well as owning fifty-nine percent (59%) of our stock.
We utilized $424.59 of cash flow for operating activities. We had a $31,842.80 net loss including $30,791.79 of noncash expense in executive compensation which was foregone and recognized as contributed capital.
We did not have any cash flows from investing activities for the year ended December 31, 2002, but did have utilization of cash flow of $100.00 from financing activities resulting from repayment of shareholder loans.
12
The result of the above activity was a net cash decrease of $524.59 for the year ended December 31, 2002, which when deducted from $872.00 of cash and cash equivalents at the beginning of the period, resulted in $347.41 of cash and cash equivalents at the end of the period.
We do not foresee any circumstances or events that will have an adverse impact on our operations. We do anticipate an increase in our business based on our current business plan and the activities of our officers and directors. Thus, we expect to satisfy our current cash requirements indefinitely. However, we will need additional cash to implement the expansion strategy contained in our business plan, which includes expanding the business development/consulting services.
(4) Results of Operations For the Year Ended December 31, 2001
During the year ending December 31, 2001, we had revenues of approximately $14,000.00, and our costs associated with generating revenues was approximately $42,088.87. After a loss on disposition of equipment and income taxes, this resulted in a net loss of approximately $28,088.87. Approximately 27% of this revenue was derived from a related entity, Avalon Development Enterprises, Inc. Our President, Marguerite Godels is also the President of this company and she is a fifty percent (50%) shareholder in Avalon as well as owning fifty-nine percent (59%) of our stock.
Furthermore, during the year ended December 31, 2001, we generated $704.00 of cash flow from operating activities. We had a $28,316.87 net loss including the recognition of $197.00 of noncash losses on disposition of fixed assets along with $28,492.80 of noncash expense in executive compensation which was foregone and recognized as contributed capital. We also had an increase of $331.00 in liabilities (expenses incurred but not paid as of the December 31, 2001 year end) consisting of customer deposits of $300.00 and income taxes payable of $31.00. Since these amounts were deducted in determining net income but did not utilize cash funds (as they were unpaid liabilities at year end), they are added back to net income (just as the above noncash loss on fixed assets) in determining cash flows from operating activities.
We also received $68.00 for the issuance of additional shares of its common stock as a financing activity.
The result of the above operating and financing activities was net cash flow of $772.00 for the year ended December 31, 2001, which when added to $100.00 of cash and cash equivalents at the beginning of the year, resulted in $872.00 of cash and cash equivalents at the end of the year.
Liquidity & Capital Resources
During the quarter ending March 31, 2004 we had a decrease in cash flow of ($164.99) for operating activities and a net loss of ($8,466.07.) We had cash flows of $191.73 from investing activities for the period ending March 31, 2004 that were due to contributed capital. As of March 31, 2004 our cumulative gross revenues since inception were $137,291.00 with a resulting net loss since inception of $70,439.32. This net loss since inception included a cumulative total of $137,175.14 of noncash expense in executive compensation which was foregone and recognized as contributed capital.
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Compared to the same period ending March 31, 2003 our net loss increased by $123.59 with our net cumulative loss since inception increasing $35,930.17. Our net cash increase of $26.74 for the period ending March 31, 2004 improved over the net cash decrease of $278.76 for the same period ending March 31, 2003.
We believe that the minimal net cash increase and/or decrease for the years 2000, 2001, 2002 and 2003 and the minimal net increase in cash for the nine month period ending March 31, 2004 will not be sufficient to sustain expanded operations and additional funds will be needed to support future business operations when we expand. Consequently, we will seek additional funding through public or private financing or other arrangements. Such additional funding may be financed by bank borrowings, public offerings, or private placements of equity or debt securities, loans with shareholders, or a combination of the foregoing.
It is our belief that our cash flow is only sufficient to sustain our current level of minimal operations. While operations could be sustained for a long time (over twelve months), there would be minimal to be distributed for the efforts of the officers and directors. To begin expansion, funds will need to be brought into the company to permit us to move forward with our expansion. Without these funds, management believes it cannot sustain expanding operations.
Off-balance Sheet Arrangements
The company has made no arrangements of any type for off-balance sheet transactions that would have or are reasonably likely to have a current or future effect on our financial condition.
Item 3. Controls and Procedures
a. Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company's "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)), have each independently concluded that, as of the as of March 31, 2004, our disclosure controls and procedures were effective at ensuring that required information was disclosed on a timely basis under the Exchange Act.
b. Changes in Internal Controls
There have been no significant changes in internal controls or in other factors, including any corrective actions with regard to significant deficiencies and material weaknesses that could significantly affect these controls subsequent to March 31, 2004.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any legal proceedings at this time or during the period of this report.
Item 2. Changes in Securities
The Company made no amendments or modifications of any instruments governing or affecting the rights of any security holders during the period of this report.
Item 3. Defaults Upon Senior Securities
There were no defaults in the payment of any indebtedness during the period of this report.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the period of this report.
Item 5. Other Information
The registrant does not elect to state any other information in this report.
Item 6. Exhibits and Reports on Form 8-K.
| (a) | Reports on Form 8-K. None |
| (b) | Exhibits. Exhibits included or incorporated by reference herein: See Exhibit Index below. |
EXHIBIT INDEX
| Number | Exhibit Description |
| |
| 31.1 | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act |
| 31.2 | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act |
| 32.1 | Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act |
| 32.2 | Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act |
15
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MCG Diversified, Inc. |
| Registrant |
| |
| Date: April 30, 2004 | /s/ MARGUERITE GODELS |
| Marguerite Godels, President, Chairman of the Board of Directors, Chief Executive Officer |
| |
| Date: April 30, 2004 | /s/ JAY D. SOLOMON |
| Jay D. Solomon, P.A., Treasurer, Chief Financial Officer, Principal Accounting Officer |
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