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 September 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: 18,243,873 shares of common
stock as of September 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 September 30,
2000 is being amended to conform the filing with the disclosure and audited
financial statements for the year ended December 31, 2000. In particular, this
Amendment also reflects the cumulative effect of Amendment No. 2 to the Report
on 10-Q for the period ended June 30, 2000 being filed concurrently.
Specifically, this Amendment reflects the adjustment from the issuance of
2,817,533 shares issued for compensation of which 1,339,500 were returned to the
Company by the holders and cancelled. Since the returned shares included shares
issued to officers and directors, there is a resulting decrease in officer
compensation and related payroll liabilities. In addition, 50,000 shares
recorded as compensation have been reclassified to issuance in settlement of
debt.
The adjustments were 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.
When fully recorded, the adjustments resulted 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
September 30, 2000 (Unaudited).................................... 2
Consolidated Statements Of Operations
For The Nine Months And Three Months Ended
September 30, 2000 And 1999 (Unaudited)........................... 3
Consolidated Statement Of Changes In
Stockholders' Equity For The Nine Months Ended
September 30, 2000 (Unaudited).................................... 4
Consolidated Statement Of Cash Flows
For The Nine Months Ended
September 30, 2000 And 1999 (Unaudited)........................... 5
Notes To Consolidated Financial Statements As Of
September 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............... 20
Item 5. Other Information................................................. 20
Item 6. Exhibits and Reports on Form 8-K.................................. 20
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ITEM 1. BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2000
CONTENTS
PAGE 1 INDEPENDENT ACCOUNTANTS' REPORT
PAGE 2 CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PAGE 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS AND THREE
MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
PAGE 4 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
PAGE 5 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
PAGES 6 -- 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 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 September 30, 2000 and the related
consolidated statements of operations for the nine and three months then ended
and changes in stockholders' equity and cash flows for the nine 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
November 3, 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)
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BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
ASSETS
September
30, 2000 December 31,
(Unaudited) 1999
----------- -----------
CURRENT ASSETS
Cash $ 27,810 $ --
Accounts receivable 297,278 479,054
Other current assets 11,504 1,918
Prepaid expenses 32,678 --
Note receivable -- stockholder 75,000 --
Loan receivable -- stockholder 43,948 38,948
----------- ---------
Total Current Assets 488,218 519,920
PROPERTY AND EQUIPMENT -- NET 75,564 6,942
----------- ---------
TOTAL ASSETS $ 563,782 $ 526,862
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Notes and loans payable -- current portion $ 63,607 $ 80,152
Line of credit -- 74,713
Accounts payable and accrued expenses 319,909 460,587
----------- ---------
Total Current Liabilities 383,516 615,452
LONG-TERM LIABILITIES
Notes and loans payable -- 50,000
----------- ---------
Total Liabilities 383,516 665,452
----------- ---------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.001 par value, 100,000,000 shares authorized,
18,243,873 and 12,069,873 shares issued and outstanding 18,244 12,070
Additional paid-in capital 3,400,017 24,630
Accumulated deficit (3,214,206) (175,290)
----------- ---------
204,055 (138,590)
Subscriptions receivable (23,789) --
----------- ---------
Total Stockholders' Equity (Deficiency) 180,266 (138,590)
----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 563,782 $ 526,862
=========== =========
See accompanying notes to consolidated financial statements.
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BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Nine For The Nine For The Three For The Three
Months Ended Months Ended Months Ended Months Ended
September 30, September 30, September 30, September 30,
2000 (Unaudited) 1999 (Unaudited) 2000 (Unaudited) 1999 (Unaudited)
---------------- ---------------- ---------------- ----------------
REVENUES -- NET $ 1,403,136 $ 1,998,538 $ 454,494 $ 648,710
COST OF REVENUES 1,139,901 1,665,451 349,902 712,542
------------ ----------- ------------ -----------
GROSS PROFIT (LOSS) 263,235 333,087 104,592 (63,832)
------------ ----------- ------------ -----------
OPERATING EXPENSES
Officers' compensation 696,420 109,286 109,920 24,060
Employee compensation and taxes 153,224 172,556 30,126 74,879
Travel and entertainment 156,462 -- 24,658 --
Other general and administrative 161,126 18,004 59,020 7,356
Professional and consulting fees 1,704,816 15,082 673,731 5,062
Rent 61,206 23,630 22,962 7,089
Telephone 21,366 12,643 5,890 4,716
Advertising 148,538 -- 25,471 --
Auto 8,583 6,841 223 2,225
Depreciation 8,154 -- 3,838 --
------------ ----------- ------------ -----------
Total Operating Expenses 3,119,895 358,042 955,839 125,387
------------ ----------- ------------ -----------
LOSS FROM OPERATIONS (2,856,660) (24,955) (851,247) (189,219)
------------ ----------- ------------ -----------
OTHER INCOME (EXPENSE)
Subsidiary acquisition cost (179,220) -- -- --
Interest expense (8,613) (6,089) (2,172) (1,898)
Interest income 5,577 1,201 2,386 482
------------ ----------- ------------ -----------
Total Other Income (Expense) (182,256) (4,888) 214 (1,416)
------------ ----------- ------------ -----------
NET (LOSS) INCOME $ (3,038,916) $ (29,843) $ (851,033) $ (190,635)
============ =========== ============ ===========
Net (loss) income per common
share -- basic and diluted $ (0.21) -- (0.05) 0.02
============ =========== ============ ===========
Weighted average number of common
shares outstanding -- basic and diluted 14,194,612 8,200,000 16,269,351 8,200,000
============ =========== ============ ===========
See accompanying notes to consolidated financial statements.
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BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
Common Stock Additional
------------------------ Paid-in Accumulated
Shares Amount Capital Deficit
---------- ------- ---------- -----------
Balance, January 1, 2000 12,069,873 $12,070 $ 24,630 $ (175,290)
Stock issued for cash and subscribed to 2,700,000 2,700 1,284,800 --
Stock issued for compensation and services 3,024,000 3,024 1,920,817 --
Stock issued for settlement of debt 400,000 400 90,600 --
Stock issued in MNS Acquisition 50,000 50 79,170 --
Net loss, September 30, 2000 -- -- -- (3,038,916)
---------- ------- ---------- -----------
BALANCE, SEPTEMBER 30, 2000 18,243,873 $18,244 $3,400,017 $(3,214,206)
========== ======= ========== ===========
Subscriptions
Receivable Total
------------- -----------
Balance, January 1, 2000 $ -- $ (138,590)
Stock issued for cash and subscribed to (15,334) 1,272,166
Stock issued for compensation and services -- 1,923,841
Stock issued for settlement of debt (8,455) 82,545
Stock issued in MNS Acquisition -- 79,220
Net loss, September 30, 2000 -- (3,038,916)
-------- -----------
BALANCE, SEPTEMBER 30, 2000 $(23,789) $ 180,266
======== ===========
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 Nine For The Nine
Months Ended Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income $(3,038,916) $(29,843)
Adjustments to reconcile net (loss) income to net cash (used
in) provided by operating activities:
Depreciation 8,154 --
Stock based acquisition cost of subsidiary 79,220 --
Stock issued for compensation and services 1,923,841 --
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 181,776 19,974
Other current assets (9,586) --
Prepaid expenses (32,678) --
Loan receivable -- stockholder (5,000) 5,253
Increase (Decrease) in:
Accounts payable and accrued expenses (124,678) (40,249)
----------- --------
Net cash (used in) provided by operating activities (1,017,867) (44,865)
----------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (76,776) --
Note receivable stockholder (75,000) --
----------- --------
Net cash used in investing activities (151,776) --
----------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance 1,272,166 --
Repayment of loans -- (3,760)
Line of credit - net (74,713) 9,982
----------- --------
Net cash provided by financing activities 1,197,453 6,222
----------- --------
NET INCREASE (DECREASE) IN CASH 27,810 (38,643)
CASH -- BEGINNING OF PERIOD -- 67,342
----------- --------
CASH -- END OF PERIOD $ 27,810 $ 28,699
=========== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for -- Interest $ 8,613 $ 6,089
=========== ========
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 SEPTEMBER 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 September 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.
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BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 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 underling 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
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12
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2000
(UNAUDITED)
financial statement carrying amounts of existing assets and liabilities
and their respective 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 nine months ended September
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 September 30, 2000 have not been included in
the computation of diluted earnings per share since the effect would be
anti-dilutive.
(L) Segment INFORMATION
The Company follows Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information."
During the nine months ended September 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.
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13
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 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 October 31, 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 September 30,
2000:
Computer equipment $ 38,690
Furniture and fixtures 51,831
Office equipment 13,880
Leasehold improvements 2,876
----------
107,277
Less: Accumulated depreciation (31,713)
----------
Property and equipment - net $ 75,564
===========
Depreciation expense was $8,154 for the period ended September 30, 2000.
NOTE 4 NOTES AND LOANS PAYABLE
The following schedule reflects notes and loans payable at September 30,
2000:
Note payable, interest at 6% due March 31, 2001. In addition, the
Company had 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
Loan payable, interest at 9.5%, due on demand. 13,607
----------
63,607
Less current portion 63,607
----------
Notes and loans payable -- non-current $ --
==========
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14
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 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 2,700,000 shares of common stock for cash totaling
$1,272,166.
The Company issued 3,024,000 shares of common stock for compensation,
consulting, legal and other services having a fair value of $1,923,841
based upon the per share fair value at the issuance date.
The Company issued 400,000 shares of common stock for the settlement of
a debt of $82,545 and a subscription receivable of $8,455.
In connection with its acquisition of MNS Eagle, the Company issued
50,000 shares of common stock 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 September 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.
10
15
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2000
(UNAUDITED)
As of September 30, 2000, the options issued under the loan guarantee
agreement expired and were not exercised.
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 September 30: Amount
-------------------------- ---------
2001 $ 109,068
2002 109,068
2003 63,623
(B) CONSULTING AGREEMENTS
On December 2, 1999, the Company originally 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. The Company is currently employing the same
consulting firm on a month to month basis.
On December 1, 1999, the Company entered into a five-year agreement with
a consultant whereby the consultant was to 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 issued
50,000 shares of common stock as consideration during the period ended
September 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
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BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2000
(UNAUDITED)
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 92% of revenues were derived from two customers for the
period ended September 30, 2000. Approximately 81% of accounts
receivable were due from three customers having balances an excess of
10% as of September 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 expense (benefit) for the nine months ended
September 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 September 30, 2000
are as follows:
Deferred tax assets:
Net operating loss carryforward $ 1,065,570
-----------
Total gross deferred tax assets 1,065,570
Less valuation allowance (1,065,570)
-----------
Net deferred tax assets $ --
===========
At September 30, 2000, the Company had a net operating loss carryforward
of approximately $3,134,000 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 September 30, 2000
was an increase of approximately $1,033,200.
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
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17
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2000
(UNAUDITED)
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 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.
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BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2000
(UNAUDITED)
Subsequent thereto, the Company rescinded this agreement for failure of
consideration and other deficiencies.
NOTE 11 SUBSEQUENT EVENT
On October 20, 2000 the Company executed a letter of intent to acquire a
controlling equity interest in Tri-Gate Entertainment, Inc., a Bermuda
corporation, ("Tri-Gate"). Under the terms of the letter of intent, the
Company will initially acquire 51% of Tri-Gate in exchange for 1,900,000
shares of the Company's restricted rule 144 common stock and would be
granted an option to acquire the remaining 49% equity interest in
Tri-Gate. In the event that a definitive acquisition agreement has not
been executed and delivered by 90 days, either party may terminate the
letter of intent without liability on the part of either party.
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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 SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
Net Revenues (principally from advertising placements, commissions and
revenue sharing arrangements) for the three month period ended September 30,
2000 as compared to the same period in 1999 decreased from $648,710 to $454,494
(30%). 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
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acquired by another insurer which then ceased all advertising efforts. The
acquisition occurred in late 1999 but the change in advertising policy fully
impacted the Company's revenues commencing in the second quarter of 2000. The
decrease in revenues between the two years of $194,216 (30%) was not reflected
in gross profits, which increased from a loss of $63,832 in the third quarter of
1999 to a gross profit of $104.592 in the third quarter of 2000, reflecting an
increase of $168,424 (264%). The gross profit margins reflect both the changes
in revenues, since the nature of the Company's business provides margins which
tend to be proportionate to its revenues, and the improved operating results
because of efficiencies from the use of computer tracking systems which began to
be reflected during the third quarter of 2000. For the comparable nine month
periods in 2000 and 1999, gross profit was $263,235 in 2000 and $333,087 in
1999, representing a $69,852 (21%) 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 $830,542 (439%) increase in total
operating expenses (consisting principally of the $612,341 in Non-Cash
Compensation and services described below) from $125,387 during the three months
ended September 30, 1999 to $955,839 for the three months ended September 30,
2000 resulted in a loss (before other income net of $214) in 2000 of $851,247
compared to operating losses of $189,219 for the three month period in 1999 or a
1037% increase in operating losses. During the three months ended September 30,
2000, the Company issued 1,712,500 common shares as compensation for prior
services to various consultants and 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 $612,341 in non cash
compensation, which has been reflected as a portion of both the Professional and
Consulting Fees and Other General and Administrative Expenses (collectively
"Non-Cash Compensation").
The increase in operating costs also resulted from the Company's status
as a public entity which accounted for a $83,890 increase in cash professional
fees and a $74,380 aggregate increase in travel, other cash general and
administrative expenses and similar costs during the three month period ended
September 30, 2000 as compared to the same period in 1999. In addition, the
Company experienced aggregate increases from $115,460 to $194,369 (168%) in cash
compensation to officers and in other compensation related costs, rents,
advertising and related items, principally in connection with the expanded
operating requirements and the need for some 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. The increases experienced over prior
quarters were partially offset by the increased use of the computer tracking
system and technology systems, by management's increased experience with public
company status which has allowed them to redirect more of their efforts to
day-to-day operating activities and the retention of professionals familiar with
public company requirements generally. Also, management believes that it has now
addressed the cumulative effects of the direct and indirect Non-Cash
Compensation and other equity commitments and dilution matters which arose from
the Unistat and NMS transactions from the Company's early experiences as a
public entity and from deferrals of cash compensation by officers and
consultants.
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COST OF REVENUES
Cost of revenues (principally consisting of media acquisition and
airtime costs) for the three months ended September 30, 2000 decreased from
$712,542 to $349,902 representing a decrease of $362,640 (51%) primarily due to
the impact of the loss of the large insurance company account, partially offset
by the improved efficiencies realized from the integration of the computer
tracking systems. As a general matter, the Company incurs media costs in direct
proportion to operating revenues and, therefore, the decrease in costs was
principally related to the decrease in advertising revenues. For the nine months
ended September 30, 2000, the cost of revenues decreased from $1,665,451 to
$1,339.901 representing a decrease of $525,550 (32%) again, due primarily to the
reduced media purchases because of the loss of the large insurance company
account.
GENERAL AND ADMINISTRATIVE EXPENSES
Total general and administrative expenses increased from $125,387 to
$955,839 (762%) for the three month period ended September 30, 2000 and from
$358,042 to $3,119,895 (871%) for the nine months ended September 30, 1999 and
2000 respectively. The increase consisted principally of the $830,542 of
Non-Cash Compensation and the increase in cash professional fees from $5,062 to
$83,890 for the three months and $15,082 to $239,975 for the nine months ended
September 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, all of which were
partially offset by the savings from computer tracking and reduced travel and
entertainment costs. The Non-Cash Compensation amount which was reflected in
this and the prior quarter is not expected to be a recurring item in future
periods because obligations from the prior entities and other commitments have
generally been satisfied. 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 increased from $1,898 to $2,172 (14%). In the nine month period ended
September 30, 2000, the interest expense increased from $6,089 to $8,613 (41%)
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 September 30, 2000, the Company had loans of $118,948 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.
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LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 2000, compared to December 31,
1999, the Company's available cash increased by $27,810, but was offset by a
decrease in accounts receivable from $479,054 to $297,278 resulting in a
decrease in current assets from $519,920 to $488,218 (6%) from December 31, 1999
until September 30, 2000. However, the accounts payable at September 30, 2000
was $319,909 compared to $460,587 at December 31, 1999, a 31% decrease. Those
shifts in accounts receivable and accounts payable were the result of the impact
of the loss of the large insurance company account, the initial impact from new
accounts and improved internal controls. Management anticipates that additional
accounts now being acquired by the Company will replace all, or a substantial
portion, of the lost revenues from the insurance 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 nine months ended September 30, 2000, the Company issued
6,174,000 common shares of which 2,700,000 were issued for new capital, 50,000
were issued in connection with the MNS transaction and 3,424,000 common shares
were issued as Non-Cash Compensation and debt settlement. These transactions
resulted in 18,243,873 common shares outstanding at September 30, 2000. During
the first nine months of 2000, the Company received additional paid-in capital
of $1,284,800, 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 $180,266 at September
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 or acquisitions
with other industry partners. These endeavors will require additional capital
funding which the Company hopes to raise 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
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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.
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 September 30, 2000, the Company issued
2,817,533 common shares of which 700,000 were for cash of $175,000, 5,033
constituted the balance of 50,000 shares issued in connection with the MNS
transaction, 400,000 for settlement of debt, and 1,712,500 common shares were
issued as Non-Cash Compensation as described in Part 1. During the nine months
ended September 30, 2000, the Company received additional paid-in capital of
$1,272,166, 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 $180,266 at September
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.
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ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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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