1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
AMENDMENT NO. 2 TO REPORT ON FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to _____________.
Commission File No.: 000-27777
Blagman Media International, Inc.
(successor registrant to MNS Eagle Equity Group I Inc.)
------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Nevada 95-472-9314
------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1901 Avenue of the Stars,
Suite 1710, Los Angeles, CA 90067
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 310.788.5444
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(G) of the Act:
COMMON STOCK --$.001 PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 14,426,340 shares of common
stock as of June 30, 2000
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
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PURPOSE OF AMENDMENT
This Amendment to the Report on Form 10-Q for the period ended June 30, 2000 is
being amended to conform the filing with the disclosure and audited financial
statements for the year ended December 31, 2001.
In particular, the Amendment reflects 761,083 shares issued for compensation and
not recorded during the quarter ended June 30, 2000. The issuance was identified
during the audit for the year ended December 31, 2000. The disclosure in the
Amendment is now consistent with the financial information for the year ended
December 31, 2000 and is being filed as an amendment to allow for accurate
comparative analysis when the report for the quarter ended June 30, 2001 is
filed.
All of the 761,083 shares were issued and have been recorded as compensation or
as additional professional and consulting fees. However, during the period, in
separate entries, a portion of those professional and consulting fees were
recorded as officers compensation rather than as professional and consulting
fees. This adjustment has also been made and accounted for in the Amendment. As
a result, the Amendment reflects a reduction in employee compensation and taxes
and an increase in professional and consulting fees which, when fully recorded,
results in changes in the Statement of Operations, the Balance Sheet and the
Consolidated Statement of Cash Flow and the related Notes. Conforming changes
have been reflected in the Management's Discussion and Analysis of Results of
Operations.
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INDEX
BLAGMAN MEDIA INTERNATIONAL, INC.
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Accountants' Report ................................... 1
Consolidated Balance Sheet as of June 30, 2000 (unaudited) ........ 2
Consolidated Statements of Operations for the Six Months
and Three Months Ended June 30, 2000 and 1999 (unaudited) ......... 3
Consolidated Statement of Changes in Stockholders' Equity
for the Six Months Ended June 30, 2000 (unaudited) ................ 4
Consolidated Statement of Cash Flows for the Six Months Ended
June 30, 2000 and 1999 (unaudited) ................................ 5
Notes to Consolidated Financial Statements as of June 30, 2000
(unaudited) ....................................................... 6
Item 2. Management's Discussion and Analysis of
Results of Operations ............................................. 15
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings ................................................ 19
Item 2. Changes in Securities and Use of Proceeds ........................ 19
Item 3. Default Upon Senior Securities ................................... 19
Item 4. Submission of Matters to a Vote of Security Holders .............. 19
Item 5. Other Information ................................................ 19
Item 6. Exhibits and Reports on Form 8-K ................................. 19
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ITEM 1. BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
CONTENTS
PAGE 1 INDEPENDENT ACCOUNTANTS' REPORT
PAGE 2 CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 (UNAUDITED)
PAGE 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS AND
THREE MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
PAGE 4 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR
THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
PAGE 5 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999 (UNAUDITED)
PAGES 6 - 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2000
(UNAUDITED)
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INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors of:
Blagman Media International, Inc.
We have reviewed the accompanying consolidated balance sheet of Blagman Media
International, Inc. and Subsidiaries as of June 30, 2000 and the related
consolidated statements of operations for the six and three months then ended
and changes in stockholders' equity and cash flows for the six months then
ended. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted 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, we do not express such an opinion.
Based on our review, we are 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.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
August 10, 2000
(Except for Note 6 and the revised Statement of Operations, Balance Sheet and
Consolidated Statement of Cash Flow as to which the date is February 22, 2001)
6
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2000
ASSETS
June 30, 2000 December 31,
(Unaudited) 1999
----------- -----------
CURRENT ASSETS
Cash $ 199,679 $ --
Accounts receivable 116,077 479,054
Other current assets 28,053 1,918
Note receivable -- stockholder 75,000 --
Loan receivable -- stockholder 31,321 38,948
----------- -----------
Total Current Assets 450,130 519,920
PROPERTY AND EQUIPMENT -- NET 69,424 6,942
----------- -----------
TOTAL ASSETS $ 519,554 $ 526,862
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Notes and loans payable -- current portion $ 80,152 $ 80,152
Line of credit -- 74,713
Accounts payable and accrued expenses 227,989 460,587
----------- -----------
Total Current Liabilities 308,141 615,452
LONG-TERM LIABILITIES
Notes and loans payable 50,000 50,000
----------- -----------
Total Liabilities 358,141 665,452
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.001 par value, 100,000,000
shares authorized, 15,426,340 and
12,069,873 shares issued and outstanding 15,427 12,070
Common stock to be issued (5,033 shares) 5 --
Additional paid-in capital 2,524,488 24,630
Accumulated deficit (2,363,173) (175,290)
----------- -----------
176,747 138,590
Subscriptions receivable (15,334) --
----------- -----------
Total Stockholders' Equity (Deficiency) 161,413 (138,590)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 519,554 $ 526,862
=========== ===========
See accompanying notes to consolidated financial statements.
2
7
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Six For The Six For The Three For The Three
Months Ended Months Ended Months Ended Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ----------- ------------ -----------
REVENUES -- NET $ 948,642 $ 1,349,828 $ 523,928 $ 906,911
COST OF REVENUES 789,999 952,909 327,419 594,479
------------ ----------- ------------ -----------
GROSS PROFIT 158,643 396,919 196,509 312,432
------------ ----------- ------------ -----------
OPERATING EXPENSES
Officers' compensation 586,500 85,226 512,000 33,847
Employee compensation and taxes 123,098 97,677 84,017 76,095
Travel and entertainment 131,804 -- 73,884 --
Other general and administrative 102,106 10,648 63,408 7,658
Professional and consulting fees 1,031,085 10,020 939,231 5,000
Rent 38,244 16,541 30,616 7,089
Telephone 15,476 7,927 8,775 3,304
Advertising 123,067 -- 95,830 --
Auto 8,360 4,616 7,766 2,221
Depreciation 4,316 -- 2,422 --
------------ ----------- ------------ -----------
Total Operating Expenses 2,164,056 232,655 1,817,949 135,214
------------ ----------- ------------ -----------
(LOSS) INCOME FROM OPERATIONS (2,005,413) 164,264 (1,621,440) 177,218
------------ ----------- ------------ -----------
OTHER INCOME (EXPENSE)
Subsidiary acquisition cost (179,220) -- (179,220) --
Interest expense (6,441) (4,191) (2,402) (2,906)
Interest income 3,191 719 2,279 399
------------ ----------- ------------ -----------
Total Other (Expense) (182,470) (3,472) (179,343) (2,507)
------------ ----------- ------------ -----------
NET (LOSS) INCOME $ (2,187,883) $ 160,792 $ (1,800,783) $ 174,711
============ =========== ============ ===========
Net (loss) income per common share --
basic and diluted $ (0.17) 0.02 (0.13) 0.02
============ =========== ============ ===========
Weighted average number of common shares
outstanding -- basic and diluted 13,140,048 8,200,000 13,865,353 8,200,000
============ =========== ============ ===========
See accompanying notes to consolidated financial statements.
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8
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
Common Stock To Be Additional
Common Stock Issued Paid-in Accumulated Subscriptions
Shares Amount Shares Amount Capital Deficit Receivable Total
---------- ------- ----- --- ---------- ----------- -------- -----------
Balance, January 1, 2000 12,069,873 $12,070 -- -- $ 24,630 $ (175,290) $ -- $ (138,590)
Stock issued for cash and
subscribed to 2,000,000 2,000 -- -- 1,110,500 -- (15,334) 1,097,166
Stock issued for
compensation and services 1,311,500 1,312 -- -- 1,310,188 -- -- 1,311,500
Stock issued in MNS
Acquisition 44,967 45 -- -- 71,253 -- -- 71,298
Stock to be issued in MNS
Acquisition -- -- 5,033 5 7,917 -- -- 7,922
Net loss, June 30, 2000 -- -- -- -- -- (2,187,883) -- (2,187,883)
---------- ------- ----- --- ---------- ----------- -------- -----------
BALANCE, JUNE 30, 2000 15,426,340 $15,427 5,033 5 2,524,488 $(2,363,173) $(15,334) $ 161,413
========== ======= ===== === ========== =========== ======== ===========
See accompanying notes to consolidated financial statements.
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9
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For The Six For The Six
Months Ended Months Ended
June 30, 2000 June 30, 1999
----------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income $(2,187,883) $ 160,792
Adjustments to reconcile net (loss) income to net cash (used
in) provided by operating activities:
Depreciation 4,316 --
Stock based acquisition cost of subsidiary 79,220 --
Stock issued for compensation and services 1,311,500 --
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 362,977 8,362
Other current assets (26,135) --
Loan receivable -- stockholder 7,627 5,079
Increase (Decrease) in:
Accounts payable and accrued expenses (232,598) (56,821)
----------- ---------
Net cash (used in) provided by operating activities (680,976) 117,412
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (66,798) --
Note receivable stockholder (75,000) --
----------- ---------
Net cash used in investing activities (141,798) --
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance 1,097,166 --
Repayment of loans -- (3,760)
Line of credit - net (74,713) 9,988
----------- ---------
Net cash provided by financing activities 1,022,453 6,228
----------- ---------
NET INCREASE IN CASH 199,679 123,640
CASH -- BEGINNING OF PERIOD -- 67,342
----------- ---------
CASH -- END OF PERIOD $ 199,679 $ 190,982
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for -- Interest $ 6,441 $ 4,191
=========== =========
See accompanying notes to consolidated financial statements.
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10
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A) ORGANIZATION
Blagman Media International, Inc. (the "Company") was formed on January
29, 1999 upon incorporation from a sole proprietorship. The Company is a
global direct response marketing and advertising agency that produces
response-driven infomercials, and provides product placement, media
buying, medical marketing, production and syndication of television
programming, and other associated transactional media business pursuits.
On August 2, 1999 one hundred percent of the issued and outstanding
common stock of Blagman Media International, Inc. was acquired by
Unisat, Inc. in a transaction accounted for as a recapitalization of
Blagman Media International, Inc. Unisat, Inc. subsequently changed its
name to Blagman Media International, Inc. (See Note 10)
During the quarter ended June 30, 2000 the Company acquired one hundred
percent of MNS Eagle Equity Group I, Inc., an inactive development stage
company incorporated in Nevada. (See Note 10(B))
(B) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles and the rules
and regulations of the Securities and Exchange Commission for interim
financial information.
(C) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant inter-company
transactions and balances have been eliminated in consolidation.
(D) USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reported
period. Actual results could differ from those estimates.
6
11
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
(E) CASH AND CASH EQUIVALENTS
For purposes of the cash flow statements, the Company considers all
highly liquid investments with original maturities of three months or
less at the time of purchase to be cash equivalents.
(F) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments", requires disclosures of
information about the fair value of certain financial instruments for
which it is practicable to estimate the value. For purposes of this
disclosure, the fair value of a financial instrument is the amount at
which the instrument could be exchanged in a current transaction between
willing parties other than in a forced sale or liquidation.
The carrying amounts of the Company's accounts receivable, loan
receivable, accounts payable and accrued liabilities, and notes and
loans payable, approximates fair value due to the relatively short
period to maturity for these instruments.
(G) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated, using
accelerated methods over the estimated economic useful lives of 5 to 7
years. Expenditures for maintenance and repairs are charged to expense
as incurred. Major improvements are capitalized.
(H) REVENUE RECOGNITION
The Company recognizes revenue from the sale of media time to
advertising clients when the related advertisement is broadcasted. In
addition, they earn commissions in connection with the procurement of
media time on behalf of advertising clients. Such commissions are also
considered earned when the underlying advertisement is broadcasted.
Additionally, the Company has entered into contractual agreements with
other advertising firms to share revenues based upon the terms of the
specific agreements. The income produced by these revenue-sharing
contracts are recognized as media or commission income depending upon
the nature of the income earned from the agreement.
(I) INCOME TAXES
The Company accounts for income taxes under the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" ("Statement 109"). Under Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
7
12
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(J) CONCENTRATION OF CREDIT RISK
The Company maintains its cash in bank deposit accounts, which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts and believes it is not exposed
to any significant credit risk on cash and cash equivalents.
(K) EARNINGS (LOSS) PER SHARE
Net income (loss) per common share for the six months ended June 30,
2000 is computed based upon the weighted average common shares
outstanding as defined by Financial Accounting Standards No. 128,
"Earnings Per Share".
Common stock equivalents at June 30, 2000 have not been included in the
computation of diluted earnings per share since the effect would be
anti-dilutive.
At June 30, 2000 there were 100,000 common stock options outstanding
which could potentially dilute future earnings per share.
(L) SEGMENT INFORMATION
The Company follows Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information."
During the six months ended June 30, 2000, the Company only operated in
one segment therefore segment disclosure has not been presented.
(M) RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued several new
accounting pronouncements. Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended by Statements No. 137
and 138, establishes accounting and reporting standards for derivative
instruments and related contracts and hedging activities. This statement
is effective for all fiscal quarters and fiscal years beginning after
June 15, 2000. The Company believes that its adoption of pronouncement
No. 133, as amended by No. 137 and 138, will not have a material effect
on the Company's financial position or results of operations.
8
13
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
(N) STOCK OPTIONS
In accordance with Statement of Financial Accounting Standards No. 123,
"Accounting For Stock Based Compensation" ("SFAS 123"), the Company has
elected to account for Stock Options issued to a loan guarantor in
accordance with SFAS 123.
NOTE 2 NOTE AND LOAN RECEIVABLE - STOCKHOLDER
The note receivable from stockholder is due on September 30, 2000 and
bears interest at 8% per annum.
The loan receivable from stockholder is uncollateralized and
non-interest bearing.
NOTE 3 PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at June 30, 2000:
Computer equipment $ 38,401
Furniture and fixtures 42,560
Office equipment 13,461
Leasehold improvements 2,876
--------
97,298
Less: Accumulated depreciation (27,875)
--------
Property and equipment - net $ 69,423
========
Depreciation expense was $4,316 for the period ended June 30, 2000.
NOTE 4 NOTES AND LOANS PAYABLE
The following schedule reflects notes and loans payable at June 30,
2000:
Note payable, interest at 6% due March 31, 2001. In addition, the Company
provided an option to purchase up to 100,000 shares of common stock, at
$0.25 per share, at any time until September 1, 2000. (See Note 6) $ 50,000
Note payable -- related party, due on demand with no interest. 66,545
Loan payable, interest at 9.5%, due on demand. 13,607
---------
130,152
Less current portion 130,152
---------
Notes and loans payable -- non-current $ --
=========
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14
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
NOTE 5 LINE OF CREDIT
The Company had a line of credit agreement with a bank that provided
that it could borrow up to $75,000 at 2% over Prime. The line matured on
February 7, 2000 and all principal and interest due was paid.
NOTE 6 EQUITY
(A) COMMON STOCK ISSUANCE
The Company issued 2,000,000 shares of common stock for cash totaling
$1,097,166.
The Company issued 1,311,500 shares of common stock for compensation,
consulting and legal services having a fair value of $1,311,500 based
upon the per share fair value at the issuance date.
In connection with its acquisition of MNS Eagle, the Company issued
44,967 shares of common stock and will issue another 5,033 shares having
an aggregate fair value of $79,220. (See Note 10(B)).
(B) COMMON STOCK OFFERING
On February 16, 2000, the Board of Directors agreed to offer up to
1,250,000 shares of common stock, pursuant to Regulation D, Section 4(6)
of the Securities Act of 1933, as amended, at $0.80 per share. The offer
was fully subscribed to by June 30, 2000 and $984,666 of the total
subscription of $1,000,000 had been received.
(C) STOCK OPTIONS GRANTED UNDER LOAN GUARANTEE AGREEMENT
For options issued in connection with a note (See Note 4), the Company
applies SFAS 123. Accordingly, a loan fee of $16,000 was charged to
operations in the year ended December 31, 1999.
For financial statement disclosure purposes and for purposes of valuing
stock options issued to new employees, the fair market value of each
stock option granted estimated on the date of grant using the
Black-Scholes Options-Pricing Model in accordance SFAS 123, using the
following weighted-average assumptions: expected dividend yield of 0%,
risk-free rate of 5.2%, volatility of 180% and expected term of one
year.
A summary of the options under the loan guarantee agreement as of June
30, 2000 is presented below:
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15
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
Weighted
Average
Number of Exercise
Options Price
------- -----
Stock Options
Balance at beginning of period 100,000 $0.25
Granted
Exercised
Forfeited
------- -----
Balance at end of period 100,000 $0.25
======= =====
Options exercisable at end of period 100,000 $0.25
Weighted average fair value of
options granted during the year
The following table summarizes information about stock options
outstanding at June 30, 2000:
Options Outstanding Options Exercisable
--------------------------------------------------------- ---------------------------
Weighted
Range Number Average Weighted Number Weighted
of Outstanding Remaining Average Exercisable Average
Exercise at June 30, Contractual Exercise at June 30, Exercise
Price 2000 Life Price 2000 Price
---------- ------------- ------------- ---------- ------------ -----------
$ 0.25 100,000 0.25 Years $ 0.25 100,000 $ 0.25
NOTE 7 COMMITMENTS AND CONTINGENCIES
(A) OPERATING LEASE
On February 29, 2000, the Company entered into a new lease agreement for
corporate offices. The lease term is for 37 months. The monthly base
rent is $9,089 commencing March 1, 2000. Minimum annual rentals under
this lease are as follows:
Years Ending June 30: Amount
------------------------- ---------------
2001 $ 109,068
2002 109,068
2003 90,890
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16
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
(B) CONSULTING AGREEMENTS
On December 2, 1999, the Company entered into a six-month agreement with
a consulting firm to provide management consulting, business advisory,
shareholder information, and public relations advice. The agreement
called for compensation based on proposed fees for services to be
rendered.
On December 1, 1999, the Company entered into a five-year agreement with
a consultant where the consultant will provide advisory business
services. The agreement called for the consultant to receive 25,000
shares of the Company's common stock upon execution of the agreement,
and an additional 25,000 shares upon expiration of each quarter year
during the first year term to an aggregate of 100,000 shares. None of
the above shares were issued. On March 21, 2000, the parties entered
into a settlement agreement and mutual release and the Company will
issue 50,000 shares of common stock as consideration after June 30,
2000.
(C) LEGAL ACTIONS
On April 1, 1999, a Nevada Corporation filed suit against the Company,
its former Chairman of the Board and a former director in the Second
Judicial District Court of the State of Nevada, in and for the County of
Washoe. In the complaint, the plaintiff alleged intentional interference
with contractual relations between the Company and a third party,
intentional interference with prospective economic advantage,
conspiracy, unfair business practices, breach of fiduciary duty, unjust
enrichment, rescission of contract, incomplete accounting and permanent
injunction. On February 7, 2000, the parties to the legal action
stipulated that the alleged complaints in the lawsuit be dismissed
without prejudice.
NOTE 8 CONCENTRATIONS
Approximately 83% of revenues were derived from three customers for the
period ended June 30, 2000. Approximately 92% of accounts receivable
were due from four customers having balances an excess of 10% as of June
30, 2000.
NOTE 9 INCOME TAXES
In 1998, the Company was a sole-proprietorship and the proprietor was
responsible for all taxes personally.
There was no income tax (benefit) for the six months ended June 30, 2000
as the Company incurred a loss.
The tax effects of temporary differences that gave rise to significant
proportions of deferred tax assets and liabilities at June 30, 2000 are
as follows:
12
17
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
Deferred tax assets:
Net operating loss carryforward $ 781,040
---------
Total gross deferred tax assets 781,040
Less valuation allowance (781,040)
---------
Net deferred tax assets $ --
=========
At June 30, 2000, the Company had a net operating loss carryforward of
approximately $2,297,200 for U.S. Federal income tax purposes available
to offset future taxable income expiring on various dates beginning in
2016 through 2018.
The valuation allowance at January 1, 2000 was $32,370. The net change
in the valuation allowance during the period ended June 30, 2000 was an
increase of approximately $748,670.
NOTE 10 BUSINESS COMBINATIONS
(A) ACQUISITION AND RECAPITALIZATION -- UNISTAT, INC.
Under a Stock Exchange Agreement (the "Agreement") consummated on August
2, 1999, Unisat, Inc., ("Unisat"), a non-reporting public shell with no
operations at that time, acquired one hundred percent of the issued and
outstanding common stock (9,000,000 shares) of Blagman Media
International, Inc. ("Blagman") in exchange for 8,200,000 shares of the
$0.001 par value common stock of Unisat. As a result of the exchange,
the Company became a wholly owned subsidiary of Unisat and the
stockholders of Blagman become stockholders of approximately sixty-eight
percent of Unisat. Generally Accepted Accounting Principles require that
the Company whose shareholders retain a majority interest in a business
combination be treated as the acquiror for accounting purposes. As a
result, the exchange was treated as an acquisition of Unisat by Blagman,
and a recapitalization of Blagman. The Company's consolidated financial
statements immediately following the acquisition were as follows: (1)
The Balance Sheet consists of Blagman's net assets at historical cost
and Unisat's net assets at historical cost and (2) the Statement of
Operations includes Blagman's operations for the period presented and
Unisat's operations from the date of acquisition. The Company filed an
amendment to its articles of incorporation to change its name from
Unisat, Inc. to Blagman Media International, Inc.
(B) STOCK EXCHANGE AGREEMENT
Pursuant to a Stock Exchange Agreement (the "Exchange Agreement") dated
as of April 20, 2000, as amended, between the Company and the
shareholders of MNS Eagle Equity Group I, Inc. ("MNS"), a Nevada
Corporation, 100% of the outstanding shares of
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BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
common stock held by the MNS shareholders were exchanged for 50,000
shares of common stock of the Company having a fair value of $79,220 and
$100,000 cash in a transaction in which the Company effectively became
the parent corporation of MNS.
The Exchange Agreement was adopted by the unanimous consent of the Board
of Directors of the Company and MNS on April 20, 2000. No approval of
the shareholders of either the Company or MNS is required under
applicable state corporate law.
At the date of the acquisition MNS Eagle was an inactive public shell
corporation with no assets or liabilities. Therefore, the cost of
acquiring MNS was not attributable to an intangible asset or goodwill,
but was accounted for as a charge to operations and classified as an
other deduction on the statement of operations in the account,
subsidiary acquisition costs.
(C) ACQUISITION AND RESCISSION AGREEMENTS
Under a Stock Exchange Agreement (the "Agreement") consummated in 2000,
the Company was to acquire Mullinger Media & Communications, Ltd.
("MMC") in exchange for 600,000 shares of Series A Preferred Stock of
the Company. As a result of the exchange, MMC would have become a wholly
owned subsidiary of the Company. Subsequent thereto, the Company
rescinded this agreement for failure of consideration and other
deficiencies.
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ITEM 2. MANAGEMENT'S DISCUSSION
AND
ANALYSIS OF RESULTS OF OPERATIONS
GENERAL
Blagman Media International, Inc. (the "Company") was incorporated on
January 29, 1999 as a successor to a sole proprietorship. The Company is a
global direct response marketing and advertising agency that produces
response-driven infomercials, and provides product placement, media buying,
medical marketing, production and syndication of television programming, and
other associated transactional media business products.
Under a Stock Exchange Agreement (the "Agreement") consummated on August
2, 1999, Unisat, Inc., ("Unisat"), a non-reporting public entity with no
operations at that time, acquired one hundred percent of the issued and
outstanding common stock (9,000,000 shares) of the Company in exchange for
8,200,000 shares of the $0.001 par value common stock of Unisat. As a result of
the exchange, the Company became a wholly owned subsidiary of Unisat and the
stockholders of the Company become stockholders of approximately sixty-eight
percent of Unisat. Generally Accepted Accounting Principles require that the
entity whose shareholders retain a majority interest in a business combination
be treated as the acquiror for accounting purposes. As a result, the exchange
was treated as an acquisition of Unisat by the Company, and a recapitalization
of the Company.
Pursuant to a Stock Exchange Agreement (the "Exchange Agreement") dated
as of April 20, 2000, as amended, between the Company and the shareholders of
MNS Eagle Equity Group I, Inc. ("MNS"), a Nevada corporation, 100% of the
outstanding shares of common stock held by the MNS shareholders were to be
exchanged for 50,000 shares of common stock of the Company having a fair value
of $79,220 and $100,000 cash in a transaction in which the Company effectively
became the parent corporation of MNS. At June 30, 2000, 89.9% of the shares had
been exchanged and the remainder were exchanged in July.
On April 20, 2000, the Company filed an interim report on Form 8-K as
successor to MNS and assumed MNS' reporting status. The transition of the name
change of the Securities and Exchange Commission file from MNS to the Company is
currently in process.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Net Revenues (principally from advertising placements, commissions and
revenue sharing arrangements) for the three month period ended June 30, 2000
decreased from $906,911 to $523,928 (42%). The reduction was principally the
result of the loss of a major insurance company account, which had accounted for
advertising placements of more than $4,000,000 for the Company, when that
insurer was acquired by another insurer which then ceased all
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advertising efforts. The acquisition occurred in late 1999 but the change in
advertising policy fully impacted the Company commencing in the second quarter
of 2000. The decrease in revenues of $382,982 (42%) was also reflected in gross
profits, which decreased from $312,432 to $196,509 or $115,923 (37%). The
changes in gross profit approximates the changes in revenues since the nature of
the Company's business provides margins which tend to be proportionate to its
revenues. For the comparable six month periods in 2000 and 1999, net revenues
were $948,642 in 2000 and $1,349,828 in 1999, representing a $401,186 (30%)
decrease. This decrease was also principally related to the loss of the
insurance client when it was acquired by another insurer.
The decrease in revenues as well as a $1,682,735 (1145%) increase in
total operating expenses from $135,214 during the three months ended June 30,
1999 to $1,817,949 for the three months ended June 30, 2000 resulted in a loss
(before other expenses of $179,343) in 2000 of $1,621,440 compared to operating
income of $177,218 for the three month period in 1999 or a 1008% decrease in
operating results. During the three months ended June 30, 2000, the Company
issued 1,311,500 common shares as additional compensation to officers and as
compensation to professionals. Under GAAP, the Company is required to record
these amounts as a compensation expense based on the market price of the
Company's shares on the date of issuance, even though no cash payments were
made. As a result, the Company recorded $436,500 in additional officer
compensation and $875,000 in additional professional and consulting fees
("Non-Cash Compensation").
The increase in operating costs also resulted from the Company's shift
to a public entity which accounted for a $59,831 increase in cash professional
fees and a $129,634 aggregate increase in travel, entertainment and other
general and administrative expenses during the three month period ended June 30,
2000 as compared to the same period in 1999. In addition, the Company
experienced aggregate increases from $122,556 to $302,504 (245%) in cash
compensation to officers and in other compensation related costs, rents,
advertising and related items, all in connection with the expanded operating
requirements and the need for additional operating staff since certain
executives were required to devote a substantial portion of their time to the
public aspects of the Company rather than to day-to-day sales and marketing
activities for the Company.
COST OF REVENUES
Cost of revenues (principally consisting of media acquisition and
airtime costs) for the three months ended June 30, 2000 decreased from $594,479
to $327,419 representing a decrease of $267,060 (45%) primarily due to the
impact of the loss of the large insurance company account. As a general matter,
the Company incurs media costs in direct proportion to operating revenues and,
therefore, the decrease in costs was related to the decrease in advertising
revenues. For the six months ended June 30, 2000, the cost of revenues decreased
from $952,909 to $789,999 representing a decrease of $162,910 (17%), again, due
primarily to the reduced media purchases because of the loss of the large
insurance company account.
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GENERAL AND ADMINISTRATIVE EXPENSES
Total general and administrative expenses increased from $135,214 to
$1,817,949 (1245%) for the three month period ended June 30, 2000 and from
$232,655 to $2,146,056 (830%) for the six months ended June 30, 1999 and 2000
respectively. The increase consisted principally of the $1,311,500 of Non-Cash
Compensation and services and the increase in cash professional fees from $5,000
to $59,831 for the three months and $10,020 to $146,065 for the six months ended
June 30, 1999 and 2000 respectively. Cash expenditures increased in each
category to accommodate the public company requirements and the expanded
staffing and overhead costs to accommodate the public status and the sales and
advertising personnel added when certain executives shifted a portion of their
efforts from sales and marketing to public company matters. The Non-Cash
Compensation amount is not expected to be a recurring item. The Company
anticipates that the other increases will moderate in future periods as
management gains experience overseeing a publicly held enterprise and is able to
manage and predict those costs and needs more effectively.
INTEREST EXPENSE AND OUTSTANDING LOANS
Interest expense in the three month periods was not a significant item
and decreased from $2,906 to $2,402 (17%). In the six month period ended June
30, 2000, the interest expense increased from $4,191 to $6,441 (54%) from the
same period in 1999. Since the Company records revenues as received and
generally commits to time expenditures only when there is assurance of payment
from its clients, interest costs and advertising revenue adjustments are small.
At June 30, 2000, the Company had loans of $106,321 due from shareholders who
have deferred salary and have received certain short term advances, and taken
advances from the Company, all or a portion of which is expected to be converted
to compensation expense when employment agreements are finalized.
SUBSIDIARY ACQUISITION COST
In the three months ended June 30, 2000, the Company recorded an expense
of $179,220 as the costs related to acquisition of MNS. This amount consists of
$100,000 in cash and $79,200 representing the fair value of the 50,000 common
shares of the Company exchanged for the MNS shares.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 2000, compared to December 31, 1999,
the Company's available cash increased by $199,679, but was offset by a decrease
in accounts receivable from $479,054 to $116,077 resulting in a decrease in
current assets from $519,920 to $450,130 (13%) from December 31, 1999 until June
30, 2000. Similarly, the accounts payable at June 30, 2000 were $227,989
compared to $460,587 at December 31, 1999, a 51% decrease. Those shifts in
accounts receivable and payables were the result of the impact of the loss of
the large insurance company account. Management anticipates that additional
accounts now being acquired by the Company will replace all, or a substantial
portion, of the lost revenues from this
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account and that a significant portion of those revenues will be recognized
during the balance of 2000, but there is no assurance that the Company will be
successful in fully offsetting the lost account.
During the six months ended June 30, 2000, the Company issued 3,356,467
common shares of which 2,000,000 were issued for new capital, 44,967 were issued
in connection with the MNS transaction and 1,311,500 common shares were issued
as Non-Cash Compensation. These transactions resulted in 15,426,340 common
shares outstanding at June 30, 2000. During the first six months of 2000, the
Company received additional paid-in capital of $1,097,166, consisting of the
cash proceeds of the sale of additional common shares. These funds, along with
the Non-Cash Compensation and the MNS transaction, resulted in a total
shareholders equity of $161,413 at June 30, 2000 compared to a deficit of
$138,590 at December 31, 1999. The additional capital was applied to meet
working capital requirements.
Management is currently pursuing various initiatives to expand the
Company's operations internally and through strategic alliances with other
industry partners. These endeavors may require additional capital funding which
the Company expects to raise funds through debt or equity financing
arrangements, if appropriate financing is available, on reasonable and accepted
terms.
The Company intends to continue to seek additional working capital to
meet its operating requirements and to provide further capital for expansion,
acquisitions or strategic alliances with businesses that are complementary to
the Company's long term business objectives. While the Company believes that
additional capital will be needed to maintain the growth plans of the Company,
management believes that the working capital now available to it along with
funds generated from operations will be sufficient to meet capital requirements
for the next 12 months even if substantial additional working capital does not
become available.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has adopted several notices
with regard to the treatment of interim financial statements. These issues are
presented in the Company's interim financial statements. As discussed in the
notes to the interim financial statements, the implementation of these new
pronouncements is not expected to have a material effect on the financial
statements.
YEAR 2000 STATEMENT
The Company has verified that all internal software used in the
operations of the Company and related developments are Year 2000 compliant. The
Company sees no risk at this time pertaining to Year 2000, and internal company
operations.
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FORWARD-LOOKING STATEMENTS
Safe Harbor statement under the Private Securities Litigation Reform Act of
1995: Except for historical information contained herein, the matters discussed
in this filing are forward-looking statements that involve risks and
uncertainties, including but not limited to economic, competitive, governmental
and technological factors affecting the Company's operations, markets, products
and prices and other factors discussed in the Company's various filings with the
Securities and Exchange Commission.
PART 2. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended June 30, 2000, the Company issued
1,299,967 common shares of which 44,967 were issued in connection with the MNS
transaction and 1,255,000 common shares were issued as Non-Cash Compensation as
described in Part 1. During the six months ended June 30, 2000, the Company
received additional paid-in capital of $1,159,666, consisting of the cash
proceeds of the sale of additional common shares. These funds, along with the
Non-Cash Compensation and the MNS transaction, resulted in a total shareholders
equity of $161,413 at June 30, 2000 compared to a deficit of $138,590 at
December 31, 1999. The additional capital was applied to meet working capital
requirements.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLAGMAN MEDIA INTERNATIONAL, INC.
Dated: July 19, 2001 /s/ Robert Blagman
-----------------------------------------
Robert Blagman, President
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