UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from________________ to ______________
Commission file number: 333-47924
OPUS MEDIA GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in it charter)
<Table>
COLORADO 84-1506325
- -------------------------------------------------------------- -------------------------------------
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
</Table>
1 BEACH DRIVE, UNIT 41, ST. PETERSBURG, FLORIDA
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(727) 822-7011
----------------------------------
(issuer's telephone number)
IDMEDICAL.COM, INC.
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of November 22, 2002, the issuer
had 31,218,083 shares of $.001 par value common stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
INDEX
<Table>
<Caption>
PAGE
----
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements F-1 - F-11
Item 2. Management's Plan of Operation. 1
Item 3. Controls and Procedures 2
PART 2 - OTHER INFORMATION
Item 1. Legal Proceedings 2
Item 2. Changes in Securities and Use of Proceeds 2
Item 3. Defaults upon Senior Securities 2
Item 4. Submission of Matters to a Vote of Security Holders 2
Item 5. Other Information 3
Item 6. Exhibits and Reports on Form 8-K 3
Signatures and Certification 4-6
</Table>
OPUS MEDIA GROUP, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEET
(Unaudited)
September 30, 2002
<Table>
ASSETS
Cash ................................................................................ $ 1,323
Property and equipment, less accumulated depreciation and
amortization of $32,927 ......................................................... 16,094
Intangible assets, less accumulated amortization of $445 ............................ 40
Other assets ........................................................................ 31,917
------------
$ 49,374
============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Liabilities:
Accounts payable and accrued expenses .......................................... $ 80,322
Due to former merger candidate (Note F) ........................................ 150,000
Loans payable (Note D) ......................................................... 32,130
Accrued interest payable (Note D) .............................................. 1,072
Unearned revenue ............................................................... 14
Capital lease obligations ...................................................... 5,768
------------
Total liabilities ... 269,306
------------
Shareholders' equity (Note E):
Preferred stock ................................................................ --
Common stock ................................................................... 31,009
Outstanding common stock options ............................................... 223,308
Outstanding warrants ........................................................... 293,250
Additional paid-in capital ..................................................... 3,420,613
Deficit accumulated during development stage ................................... (4,188,112)
------------
Total shareholders' deficit ... (219,932)
------------
$ 49,374
============
</Table>
See accompanying notes to condensed financial statements.
F-1
OPUS MEDIA GROUP, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<Table>
<Caption>
June 17,
1999
Three Months Ended Nine Months Ended (Inception)
September 30, September 30, Through
------------------------------ ------------------------------ September 30,
2002 2001 2002 2001 2002
------------- ------------- ------------- ------------- -------------
Revenue, net ................................ $ 31 $ 481 $ 303 $ 1,841 $ 2,421
Operating expenses:
Stock-based compensation (Note E) ....... 360,966 108,500 1,495,616 108,500 1,919,090
Selling, general and administrative ..... 18,880 147,840 177,957 437,761 1,563,229
Cost for rescission of Plan of
Reorganization (Note F) .............. -- -- 150,000 -- 150,000
Record label inducement fee (Note G) .... -- -- 400,000 -- 400,000
Depreciation and amortization ........... 3,538 32,788 10,615 101,046 166,073
------------- ------------- ------------- ------------- -------------
Total operating expenses .... 383,384 289,128 2,234,188 647,307 4,198,392
------------- ------------- ------------- ------------- -------------
Operating loss .... (383,353) (288,647) (2,233,885) (645,466) (4,195,971)
Interest income ............................. -- 356 21 4,310 16,719
Interest expense ............................ (804) (929) (2,225) (3,460) (8,860)
------------- ------------- ------------- ------------- -------------
Net loss before income taxes .... (384,157) (289,220) (2,236,089) (644,616) (4,188,112)
Income taxes (Note C) ....................... -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Net loss .... $ (384,157) $ (289,220) $ (2,236,089) $ (644,616) $ (4,188,112)
============= ============= ============= ============= =============
Basic loss per common share ................. $ (0.01) $ (0.03) $ (0.10) $ (0.06)
============= ============= ============= =============
Basic weighted average common
shares outstanding ...................... 30,365,647 10,164,833 22,214,710 10,009,278
============= ============= ============= =============
</Table>
See accompanying notes to condensed financial statements.
F-2
OPUS MEDIA GROUP, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
June 17,
1999
Nine Months Ended (Inception)
September 30, Through
---------------------------- September 30,
2002 2001 2002
------------ ------------ ------------
Net cash used in operating activities ............................. $ (608,704) $ (454,210) $ (1,401,340)
------------ ------------ ------------
Cash flows from investing activities:
Cash paid for copyright ....................................... -- -- (485)
Cash paid for trademark ....................................... -- -- (2,460)
Cash paid for web site ........................................ -- (123,549) (345,935)
Cash paid for patent .......................................... -- (2,657) (29,457)
Cash paid for leasehold improvements .......................... -- -- (2,802)
Equipment purchases ........................................... -- (2,400) (19,054)
------------ ------------ ------------
Net cash used in investing activities ..... -- (128,606) (400,193)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from sale of common stock, net of
offering costs ............................................. 620,000 -- 1,778,150
Proceeds from exercise of stock options ....................... -- -- 6,100
Lease payments ................................................ (13,100) (5,116) (23,524)
Proceeds from director loans .................................. -- 30,000 30,000
Repayment of director loans (Note B) .......................... (30,000) -- (30,000)
Proceeds from short-term loans (Note D) ....................... 32,130 -- 32,130
Contributed capital ........................................... -- -- 10,000
------------ ------------ ------------
Net cash (used in) provided by financing activities ........ 609,030 24,884 1,802,856
------------ ------------ ------------
Net change in cash ..... 326 (557,932) 1,323
Cash, beginning of period ......................................... 997 566,709 --
------------ ------------ ------------
Cash, end of period ..... $ 1,323 $ 8,777 $ 1,323
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ................................................... $ 1,153 $ 3,460 $ 7,788
============ ============ ============
Income taxes ............................................... $ -- $ -- $ --
============ ============ ============
Non-cash financing activities:
Equipment acquired under capital lease ..................... $ -- $ 29,967 $ 29,967
============ ============ ============
</Table>
See accompanying notes to condensed financial statements.
F-3
OPUS MEDIA GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE A: BASIS OF PRESENTATION
The financial statements presented herein have been prepared by the Company in
accordance with the accounting policies in its Form 10-KSB dated December 31,
2001, and should be read in conjunction with the notes thereto.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim period presented have been made. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
The Company is in the development stage in accordance with Statements of
Financial Accounting Standards (SFAS) No. 7 "Accounting and Reporting by
Development Stage Enterprises". As of September 30, 2002, the Company has
devoted substantially all of its efforts to financial planning, raising capital
and developing markets and its web site. However, on October 19, 2001, the
Company entered into an Agreement and Plan of Reorganization with ToolTrust
Corporation ("ToolTrust"), a Nevada corporation (see Note F).
Financial data presented herein are unaudited.
NOTE B: RELATED PARTY TRANSACTIONS
On August 23, 2001, three directors each advanced the Company $10,000 for
working capital. The advances were non-interest bearing and due on demand. The
Company repaid the advances in February 2002.
NOTE C: INCOME TAXES
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". The Company incurred
net operating losses during the three and nine months ended September 30, 2002
resulting in a deferred tax asset, which was fully allowed for; therefore, the
net benefit and expense resulted in $-0- income taxes.
NOTE D: SHORT-TERM LOANS
In May 2002, a shareholder loaned the Company $32,130 for working capital. The
loan carries an interest rate of 10 percent and matures on May 31, 2003. Accrued
interest on the loan totaled $1,072 at September 30, 2002.
NOTE E: SHAREHOLDERS' EQUITY
COMMON STOCK
On January 10, 2002, the Company issued 280,000 shares of its common stock to
its attorney in exchange for legal services. The market value of the common
stock on the transaction date was $.75 per share. Stock-based compensation
expense of $210,000 was recognized in the accompanying condensed financial
statements for the nine months ended September 30, 2002.
F-4
OPUS MEDIA GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
On January 10, 2002, the Company issued 150,000 shares of its common stock in
exchange for consulting services. The market value of the common stock on the
transaction date was $.75 per share. Stock-based compensation expense of
$112,500 was recognized in the accompanying condensed financial statements for
the nine months ended September 30, 2002.
During February 2002, the Company sold 173,333 shares of its $.001 par value
common stock for $120,000 in a private offering pursuant to an exemption from
registration under Rule 506 (a) of Regulation D of the Securities Act of 1933,
as amended.
On February 5, 2002, the Company issued 20,000,000 shares of its common stock as
part of a Plan of Reorganization (see Note E). Pursuant to the Share Exchange
Agreements in May 2002, 9,300,000 of the common shares were rescinded.
On February 27, 2002, the Company issued 251,000 shares of its common stock to
its attorney in exchange for legal services. The market value of the common
stock on the transaction date was $.17 per share. Stock-based compensation
expense of $42,670 was recognized in the accompanying condensed financial
statements for the nine months ended September 30, 2002.
On March 8, 2002, the Company issued 400,000 shares of its common stock to its
attorney in exchange for legal services. The market value of the common stock on
the transaction date was $.13 per share. Stock-based compensation expense of
$52,000 was recognized in the accompanying condensed financial statements for
the nine months ended September 30, 2002.
On March 22, 2002, the Company issued 2,675,000 shares of its common stock in
exchange for consulting services. The market value of the common stock on the
transaction date was $.14 per share. Stock-based compensation expense of
$374,500 was recognized in the accompanying condensed financial statements for
the nine months ended September 30, 2002.
On May 28, 2002, the Company sold 1,000,000 shares of its common stock to an
individual for $500,000. The Company believes this private placement was exempt
from registration under Section 4(2) and Rule 506 of the Securities Act of 1933.
On June 3, 2002, the Company issued 439,897 shares of its common stock to its
attorney in exchange for legal services. The market value of the common stock on
the transaction date was $.20 per share. Stock-based compensation expense of
$87,980 was recognized in the accompanying condensed financial statements for
the nine months ended September 30, 2002.
On July 16, 2002, the Company issued 233,885 shares of its common stock to its
attorney in exchange for legal services. The market value of the common stock on
the transaction date was $.08 per share. Stock-based compensation expense of
$18,711 was recognized in the accompanying condensed financial statements for
the nine months ended September 30, 2002.
F-5
OPUS MEDIA GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
On July 23, 2002, the Company issued 725,000 shares of its common stock to
officers and directors in exchange for consulting services. The market value of
the common stock on the transaction date was $.075 per share, resulting in
stock-based compensation expense of $54,375.
On July 23, 2002, the Company issued 3,250,000 shares of its common stock in
exchange for consulting services. The market value of the common stock on the
transaction date was $.075 per share, resulting in stock-based compensation
expense of $243,750.
On August 8, 2002, the Company issued 393,278 shares of its common stock to its
attorney in exchange for legal services. The market value of the common stock on
the transaction date was $.06 per share. Stock-based compensation expense of
$21,984 was recognized in the accompanying condensed financial statements for
the nine months ended September 30, 2002.
On September 3, 2002, the Company issued 267,917 shares of its common stock to
its attorney in exchange for legal services. The market value of the common
stock on the transaction date was $.05 per share. Stock-based compensation
expense of $13,557 was recognized in the accompanying condensed financial
statements for the nine months ended September 30, 2002.
On September 20, 2002, the Company issued 268,440 shares of its common stock to
its attorney in exchange for legal services. The market value of the common
stock on the transaction date was $.03 per share. Stock-based compensation
expense of $7,140 was recognized in the accompanying condensed financial
statements for the nine months ended September 30, 2002.
STOCK OPTIONS
There were 619,000 options outstanding under the Company's non-qualified stock
option plan as of December 31, 2001. The Company granted options to purchase an
additional 9,237,500 shares of common stock during the nine months ended
September 30, 2002. According to the Company's policy, options granted to
non-employees are accounted for under the fair value method, while options
granted to employees and directors are accounted for using the intrinsic method.
The fair value of the Company's common stock was determined by the market value
of the common stock.
The fair value of each option granted has been estimated as of the grant date
using the Black-Scholes option pricing model. The following weighted-average
assumptions were used for the nine months ended September 30, 2002: risk-free
interest rate of 2.0 percent, expected volatility of 60 percent, expected life
ranging from two to three years, and no expected dividends.
The weighted average exercise price and fair value of options granted were $.65
and $.02, respectively on the date of grant for options granted with an exercise
price greater than the fair value of the stock. There were no options granted
with exercise prices that equaled or were less than the fair value of the
underlying stock on the date of grant.
F-6
OPUS MEDIA GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
STOCK WARRANTS
There were 2,250,000 warrants outstanding as of December 31, 2001. The Company
granted warrants to purchase an additional 1,500,003 shares of common stock
during the nine months ended September 30, 2002.
The fair value of each warrant granted has been estimated as of the grant date
using the Black-Scholes option pricing model. The following weighted-average
assumptions were used for the nine months ended September 30, 2002: risk-free
interest rate of 2.0 percent, expected volatility of 60 percent, expected life
of two years, and no expected dividends.
The weighted average exercise price and fair value of options granted were $1.17
and $.03, respectively on the date of grant for options granted with an exercise
price greater than the fair value of the stock. There were no options granted
with exercise prices that equaled or were less than the fair value of the
underlying stock on the date of grant.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options and warrants, which have no vesting restrictions
and are fully transferable. Option valuation models also require the input of
highly subjective assumptions such as expected option life and expected stock
price volatility. Because the Company's stock-based awards have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, the
Company believes that the existing option valuation models do not necessarily
provide a reliable single measure of the fair value of its stock-based awards.
OPTIONS GRANTED TO NON-EMPLOYEES, ACCOUNTED FOR UNDER THE FAIR VALUE METHOD
On March 22, 2002, the Company entered into agreements with thirteen unrelated
third party consultants to provide consulting and advisory services to the
Company. The Company granted certain of the consultants fully vested options to
purchase an aggregate of 6,950,000 shares of the Company's common stock. On
March 22, 2002 the market value of the stock was $.14. The exercise prices on
the options range from $.25 to $1.50 and expire on May 31, 2005. The Company
determined the fair value of the options in accordance with SFAS 123 to be $.03
per share and have recorded stock based compensation expense of $205,000.
OPTIONS GRANTED TO EMPLOYEES, ACCOUNTED FOR UNDER THE FAIR VALUE METHOD (PRO
FORMA)
Employees of the Company were granted options to purchase 2,187,500 and 50,000
shares of common stock on March 22, 2002 and July 23, 2002, respectively. Had
compensation expense been recorded based on the fair value at the grant date,
consistent with the provisions of SFAS 123, the Company's net loss and net loss
per share would have increased to the pro forma amounts indicated below:
F-7
OPUS MEDIA GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
<Table>
<Caption>
June 17, 1999
Nine Months Ended (Inception)
September 30, Through
---------------------------- September 30,
2002 2001 2002
------------ ------------ ------------
Net loss, as reported ........................ $ (2,174,698) $ (644,616) $ (4,126,721)
Decrease due to:
Employee stock options ................ (110,200) -- (110,200)
------------ ------------ ------------
Pro forma net loss ........................... $ (2,284,898) $ (644,616) $ (4,236,921)
============ ============ ============
As reported:
Net loss per share - basic and diluted ... $ (0.10) $ (0.06)
============ ============
Pro Forma:
Net loss per share - basic and diluted ... $ (0.10) $ (0.06)
============ ============
</Table>
SUMMARY
Following is a summary of the Company's stock option and stock warrant awards to
purchase shares of common stock as of September 30, 2002, and the changes since
inception:
<Table>
<Caption>
Fixed Options Options Warrants
- --------------------------------------------- ------------ ------------
Outstanding at June 17, 1999 (inception) .... -- --
Granted ..................................... 250,000 --
Exercised ................................... -- --
Canceled .................................... -- --
------------ ------------
Outstanding at December 31, 1999 ............ 250,000 --
Granted ..................................... 230,000 2,250,000
Exercised ................................... (61,000) --
Canceled .................................... -- --
------------ ------------
Outstanding at December 31, 2000 ............ 419,000 2,250,000
Granted ..................................... 200,000 --
Exercised ................................... -- --
Canceled .................................... -- --
------------ ------------
Outstanding at December 31, 2001 ............ 619,000 2,250,000
Granted ..................................... 9,537,500 1,500,003
Exercised ................................... -- --
Canceled .................................... (300,000) --
------------ ------------
Outstanding at September 30, 2002 ........... 9,856,500 3,750,003
============ ============
</Table>
F-8
OPUS MEDIA GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Following is a statement of changes in shareholders' deficit for the nine months
ended September 30, 2002:
<Table>
<Caption>
Deficit
Outstanding Outstanding Accumulated
Common stock Common Common Additional During the
----------------------- Stock Stock Paid-in Development
Shares Par Value Options Warrants Capital Stage Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, January 1, 2002 ............... 10,501,500 $ 10,501 $ 16,858 $ 243,250 $ 1,581,955 $(1,952,023) $ (99,459)
January 2002, stock issued to
attorney in exchange for services .... 280,000 280 -- -- 209,720 -- 210,000
January 2002, stock issued to
consultant in exchange for
services ............................. 150,000 150 -- -- 112,350 -- 112,500
February 2002, sale of common
stock ................................ 173,333 174 -- -- 119,826 -- 120,000
February 2002, stock issued in
Plan of Reorganization, net of
rescinded shares ..................... 10,000,000 10,000 -- -- (10,000) -- --
February 2002, options granted
to purchase 9,137,500 shares
of common stock ...................... -- -- 205,000 -- -- -- 205,000
February 2002, warrants granted
to purchase 1,500,003 shares
of common stock ...................... -- -- -- 50,000 -- -- 50,000
February 2002, stock issued to
attorney in exchange for services .... 251,000 251 -- -- 42,419 -- 42,670
March 2002, stock issued to
attorney in exchange for services .... 400,000 400 -- -- 51,600 -- 52,000
March 2002, stock issued to
consultants in exchange for
services ............................. 2,675,000 2,675 -- -- 371,825 -- 374,500
May 2002, sale of common stock ......... 1,000,000 1,000 -- -- 499,000 -- 500,000
June 2002, stock issued to
attorney in exchange for services .... 439,897 440 -- -- 87,540 -- 87,980
July 2002, stock issued to
consultants in exchange for
services ............................. 3,250,000 3,250 -- -- 240,500 -- 243,750
July 2002, stock issued to
officers in exchange for services .... 725,000 725 -- -- 53,650 -- 54,375
July 2002, options granted
to purchase 100,000 shares
of common stock ...................... -- -- 1,450 -- -- -- 1,450
</Table>
F-9
OPUS MEDIA GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Statement of changes in shareholders' deficit, continued:
<Table>
<Caption>
Deficit
Outstanding Outstanding Accumulated
Common stock Common Common Additional During the
------------------------ Stock Stock Paid-in Development
Shares Par Value Options Warrants Capital Stage Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
July 2002, stock issued to
attorney in exchange for services .... 233,885 234 -- -- 18,477 -- 18,711
August 2002, stock issued to
attorney in exchange for services .... 393,278 393 -- -- 21,591 -- 21,984
September 2002, stock issued to
attorney in exchange for services .... 536,357 536 -- -- 20,160 -- 20,696
Net loss for the nine months
ended September 30, 2002 ............. -- -- -- -- -- (2,236,089) (2,236,089)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30, 2002 ...... 31,009,250 $ 31,009 $ 223,308 $ 293,250 $ 3,420,613 $(4,188,112) $ (219,932)
=========== =========== =========== =========== =========== =========== ===========
</Table>
NOTE F: AGREEMENT AND PLAN OF REORGANIZATION AND SUBSEQUENT PARTIAL RESCISSION
On February 5, 2002, the Company acquired 100 percent of the issued and
outstanding common stock of ToolTrust Corporation, a private Nevada corporation,
in exchange for an aggregate of 20,000,000 shares of the Company's common stock
pursuant to an Agreement and Plan of Reorganization dated October 19, 2001 (the
"Reorganization"). At the time of the Reorganization, ClearDialog
Communications, Inc. ("ClearDialog") and LocalToolbox Corporation
("LocalToolbox") were wholly-owned subsidiaries of ToolTrust. In connection with
the Reorganization, the Company formed a wholly-owned subsidiary to operate the
on-line medical records business.
On May 9, 2002, the Company entered into share exchange agreements with certain
former shareholders of ClearDialog and LocalToolbox wherein the former
shareholders reacquired their shares of ClearDialog and LocalToolbox in exchange
for approximately 9,300,000 shares of the 20,000,000 shares of the Company's
common stock to be issued pursuant to the Reorganization. As a result of the
transactions, ToolTrust no longer has an interest in these entities. The Company
granted to LocalToolbox a license to utilize the Company's technology related to
on-line medical records. The Company is also obligated to pay LocalToolBox a
total of $150,000 in two $75,000 payments that are due on October 19, 2002 and
April 19, 2003. Payment of the settlement amount is secured by 1,500,000 shares
of the Company's restricted common stock and the Company's technology and
pending patent application related to its online medical records business.
Pursuant to an agreement dated May 9, 2002, Robert L. Evans, James K. Robbins
and Garrett J. Girvan resigned their respective positions as officers and
directors of the Company and its subsidiaries IDMedical, Inc. and ToolTrust
Corporation. Messrs. Evans, Robbins and Girvan will continue as
officers/directors of LocalToolbox and ClearDialog.
F-10
OPUS MEDIA GROUP, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE G: RECORD LABEL AGREEMENT
In May 2002, the Company sold 1,000,000 shares of its restricted common stock to
an individual for gross proceeds of $500,000. $400,000 of the proceeds were paid
to MJJ Ventures, Inc. ("MJJ") as an inducement fee pursuant to a Label Term
Sheet Agreement ("Label Agreement") dated May 11, 2002, between the Company's
subsidiary, ToolTrust Corporation ("ToolTrust"), and MJJ, as described below.
The Company intends to change its name to reflect its new business initiative.
The label Agreement contemplates that ToolTrust and MJJ will form a California
Limited Liability Company to operate a music label, tentatively called
"Neverland Records". The Label Agreement obligates ToolTrust to pay MJJ a total
of $3,800,000 as an inducement fee, which is non-refundable. Of this amount,
ToolTrust had paid MJJ $400,000. The label Agreement also obligates ToolTrust to
have a minimum of $1,500,000 in funds for the initial year of operation of the
music label. ToolTrust must also provide a minimum of $2,000,000 per year to
fund the overhead portion of the music label's annual budget for the remaining
six years of the term of the Label Agreement.
The Label Agreement contemplates the substantial involvement of Michael J.
Jackson, and provides Mr. Jackson with discretion to grant or deny approval of
any artist seeking to sign a recording agreement. Mr. Jackson also shall have
final approval of all creative elements in connection with master recordings and
videos. Ultimately, however, Mr. Jackson's level of participation with the music
label, if any, shall be determined at his sole discretion. MJJ may "opt-out" of
the Label Agreement if the music label is unable to secure a distribution deal
or the music label has not substantially satisfied any material goals set forth
in its business plan. Mr. Jackson may opt-out for any reason after three years.
In any such case, ToolTrust is obligated to but-out MJJ's interest in the music
label. All trademarks, label names, domain names, and logos associated with the
music label are to remain the property of Mr. Jackson, and while the parties may
negotiate ToolTrust's use of certain trademarks associated with the music label,
there is no obligation for Mr. Jackson to grant such rights to ToolTrust.
F-11
ITEM 2. PLAN OF OPERATION
The following discussion should be read in conjunction with the Company's
financial statements and notes thereto included elsewhere in this Form 10-QSB.
Except for the historical information contained herein, the discussion in this
Form 10-QSB contains certain forward looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Form 10-QSB
should be read as being applicable to all related forward-looking statements
wherever they appear herein. The Company's actual results could differ
materially from those discussed here.
The financial information furnished herein has not been audited by an
independent accountant; however, in the opinion of management, all adjustments
(only consisting of normal recurring accruals) necessary for a fair presentation
of the results of operations for the period ended September 30, 2002 have been
included.
FINANCIAL RESULTS
The Company has only recorded nominal revenues from its online medical records
business. The Company remains a development stage company for accounting
purposes. From inception on June 17, 1999 through September 30, 2002, the
Company has incurred a cumulative net loss of $4,126,721. The Company is in
immediate need of financing to execute its business plan, as described below.
REORGANIZATION
On February 5, 2002, the Company acquired 100 percent of the issued and
outstanding common stock of ToolTrust Corporation, a Nevada corporation, from
the shareholders of ToolTrust, in exchange for an aggregate of 20,000,000 shares
of the Company's common stock pursuant to an Agreement and Plan of
Reorganization dated October 19, 2001 (the "Reorganization"). At the time of the
Reorganization, ClearDialog Communications, Inc. ("ClearDialog") and
LocalToolbox Corporation ("LocalToolbox") were wholly-owned subsidiaries of
ToolTrust. As of May 9, 2002, the parties to the Reorganization had not actually
exchanged share certificates representing ownership of the respective entities.
On May 9, 2002, the Company entered into share exchange agreements with certain
former shareholders of ClearDialog and LocalToolbox, who were parties to the
reorganization. Pursuant to the share exchanges, the former shareholders are
deemed to have acquired their shares of ClearDialog and LocalToolbox in exchange
for 9,300,000 shares of the Company's common stock. As a result of the
transactions, ToolTrust no longer owns ClearDialog and LocalToolbox, and the
Company will only issue 10,700,000 shares of its common stock to ToolTrust
shareholders pursuant to the Reorganization. As of the date of this report,
10,000,000 shares had been issued.
Pursuant to an agreement dated May 9, 2002, the Company agreed to pay to
LocalToolbox $150,000 as full settlement of amounts owed to LocalToolbox by the
Company. Payment of the settlement amount is secured by 1,500,000 shares of the
Company's restricted common stock and the Company's technology and pending
patent application related to its online medical records business. Robert L.
Evans, James K. Robbins and Garrett J. Girvan resigned their respective
positions as officers and directors of the Company and its subsidiaries
IDMedical, Inc. and ToolTrust Corporation. Messrs. Evans, Robbins and Girvan
will continue as officers/directors of LocalToolbox and ClearDialog. As of the
date of this report, the 1,500,000 shares of common stock had not been issued.
MUSIC LABEL
In May 2002, the Company sold 1,000,000 shares of its restricted common stock to
one person, with gross proceeds to the Company of $500,000. $400,000 of the
proceeds were paid to MJJ Ventures, Inc. ("MJJ Ventures") pursuant to a Label
Term Sheet agreement ("Label Agreement") dated May 11, 2002, between the
Company's subsidiary, ToolTrust Corporation ("ToolTrust"), and MJJ Ventures, as
described below. The Company intends to change its name to reflect its new
business initiative.
The Label Agreement contemplates that ToolTrust and MJJ Ventures will form a
California Limited Liability Company to operate a music label, tentatively
called "Neverland Records." The Label Agreement obligates ToolTrust to pay to
MJJ Ventures $3,800,000, which is non-refundable. Of this amount, ToolTrust has
paid to MJJ
1
Ventures $400,000. The Label Agreement also obligates ToolTrust to have a
minimum of $1,500,000 in funds for the initial year of operation of the music
label. ToolTrust must also provide a minimum of $2,000,000 per year to fund the
overhead portion of the music label's annual budget for the remaining six years
of the term of the Label Agreement.
The Label Agreement provides recording artist Michael J. Jackson with discretion
to grant or deny approval of any artist seeking to sign a recording agreement.
Mr. Jackson also shall have final approval of all creative elements in
connection with master recordings and videos. Ultimately, however, Mr. Jackson's
level of participation with the music label (or none at all) shall be determined
at his sole discretion. MJJ Ventures may "opt-out" of the Label Agreement if the
music label is unable to secure a distribution deal or the music label has not
substantially satisfied any material goals set forth in its business plan. Mr.
Jackson may opt-out for any reason after three years. In any such case,
ToolTrust is obligated to buy out MJJ venture's interest in the music label. All
trademarks, label names, domain names and logos associated with the music label
are to remain the property of Michael Jackson, and while the parties may
negotiate ToolTrust's use of certain trademarks to be associated with the music
label, there is no obligation for Mr. Jackson to grant such rights to ToolTrust.
ONLINE MEDICAL RECORDS BUSINESS
The Company's subsidiary, IDMedical, Inc., which operates an online medical
records database for use by physicians and patients, has generated minimal
revenues to date, and the Company continues to evaluate its business plan.
The Company is in immediate need of funding to complete the music label venture
described above and to carry out day-to-day operations, including funding of the
online medical records business. If the Company does not secure financing to
sufficiently fund operations, it may lose all amounts paid to MJJ Ventures.
There can be no assurance that financing will be available when needed or on
terms acceptable to the Company. There can be no assurance that the Company will
be able to continue as a going concern, or achieve material revenues and
profitable operations.
ITEM 3. CONTROLS AND PROCEDURES.
Based on their most recent evaluation, which was completed within 90 days of the
filing of this Form 10-QSB, the Company's Chief Executive Officer and Chief
Financial Officer believe the Company's disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) are effective to ensure that
information required to be disclosed by the Company in this report is
accumulated and communicated to the Company's management, including its
principal executive officer and principal financial officer, as appropriate, to
allow timely decisions regarding required disclosure. There were no significant
changes in the Company's internal controls or other factors that could
significantly affect these controls subsequent to the date of their evaluation
and there were no corrective actions with regard to significant deficiencies and
material weaknesses.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on September 12, 2002.
Proxies were solicited and the election of directors was uncontested. A quorum
was present. The matters voted upon and the results thereof were as follows:
2
1. Election of directors to serve until the next annual meeting of
stockholders and until their successors are duly elected and qualified:
<Table>
<Caption>
Director For Against Abstain
-------- --- ------- -------
Robert P. Gordon 13,649,001 75,000 5,000
Joseph R. King 13,724,001 0 5,000
Craig Stout 13,724,001 0 5,000
</Table>
2. Ratification of the appointment of Cordovano & Harvey, P.C. as
independent auditors for 2002:
<Table>
<Caption>
For Against Abstain
--- ------- -------
13,676,501 52,500 0
</Table>
3. Ratification of the IDMedical.com, Inc. 2002 Stock Plan:
<Table>
<Caption>
For Against Abstain
--- ------- -------
13,586,501 142,500 0
</Table>
4. Amendment of the Articles of Incorporation to change the Company's name
to Opus Media Group, Inc.:
<Table>
<Caption>
For Against Abstain
--- ------- -------
13,711,001 0 18,000
</Table>
The Company's name change to Opus Media Group, Inc. became effective
October 1, 2002. The Company's common stock is quoted on the Over the Counter
Bulletin Board system under the new symbol "OPUS."
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
2.1 Agreement and Plan of Reorganization dated October 25, 2001 by and
among the Company, ToolTrust Corporation ("ToolTrust") and certain
shareholders of ToolTrust (Incorporated by reference to Exhibit 2.1 to
the Registrant's quarterly report on Form 10-QSB filed November 19,
2001).
2.2 Share Exchange Agreement dated May 9, 2002, by and among the Company,
ToolTrust Corporation, and certain former shareholders of LocalToolbox
Corporation (Incorporated by reference to Exhibit 2.2 to the
Registrant's quarterly report on Form 10-QSB filed June 5, 2002.).
2.3 Share Exchange Agreement dated May 9, 2002, by and among the Company,
ToolTrust and certain former shareholders of ClearDialog
Communications, Inc. (Incorporated by reference to Exhibit 2.3 to the
Registrant's quarterly report on Form 10-QSB filed June 5, 2002.).
3
3.3 The Company's Articles of Incorporation, as amended and currently in
effect (filed herewith).
3.4 The Company's Bylaws, as amended and currently in effect (filed
herewith).
10.2 Form of Common Stock Purchase Warrant, exercise price $1.10
(Incorporated by reference to Exhibit 10.2 of the Company's
Registration Statement on Form SB-2, filed October 13, 2000).
10.3 Form of Common Stock Purchase Warrant, exercise price $2.00
(Incorporated by reference to Exhibit 10.3 of the Company's
Registration Statement on Form SB-2, filed October 13, 2000).
10.8 Consulting Agreement with Juliard Communications, Inc. dated April 1,
2001 and as amended July 10, 2001 (Incorporated by reference to Exhibit
10.8 of the Company's Quarterly Report on Form 10-QSB filed August 14,
2001).
10.9 Agreement dated May 9, 2002, by and among the Company, ToolTrust,
LocalToolbox, ClearDialog, Robert P. Gordon, Robert L. Evans, Garrett
J. Girvan, and James K. Robbins (Incorporated by reference to Exhibit
10.9 to the Registrant's quarterly report on Form 10-QSB filed June 5,
2002.).
10.10 Perpetual Software License Agreement dated May 9, 2002, by and between
LocalToolbox and the Company (Incorporated by reference to Exhibit
10.10 to the Registrant's quarterly report on Form 10-QSB filed June 5,
2002.)
10.11 IDMedical.com, Inc. 2002 Stock Plan (Incorporated by reference to
Exhibit 10.11 of the Company's Registration Statement on Form S-8 filed
March 8, 2002).
(b) Reports on Form 8-K
There were no reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OPUS MEDIA GROUP, INC.
(Registrant)
DATE: November 25, 2002 By: /s/ Robert P. Gordon
----------------------------------------
Robert P. Gordon
CEO, Treasurer and Chairman of the Board
4
CERTIFICATION
Solely for the purposes of complying with, and the extent required by 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned certifies, in his capacity as an officer of Opus Media Group, Inc.
("Opus"), that, to his knowledge, the Quarterly Report of Opus on Form 10-QSB
for the period ended September 30, 2002, fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934 and that the information
contained in the report fairly presents, in all material respects, the company's
financial condition and results of operations.
By: /s/ Robert P. Gordon
---------------------------------------------
Robert P. Gordon, Chief Executive Officer and
Chief Financial Officer
DATE: November 25, 2002
CERTIFICATION PURSUANT TO
18 U.S.C. SS.1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert P. Gordon, Chief Executive Officer and Chief Financial
Officer of Opus Media Group, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Opus Media
Group, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
5
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
November 25, 2002
/s/ Robert P. Gordon
- ---------------------------------------
Robert P. Gordon, Chief Financial Officer and Chief Executive Officer
6
EXHIBIT INDEX
<Table>
<Caption>
Exhibit
Number Description
2.1 Agreement and Plan of Reorganization dated October 25, 2001 by and among the Company, ToolTrust
Corporation ("ToolTrust") and certain shareholders of ToolTrust (Incorporated by reference to
Exhibit 2.1 to the Registrant's quarterly report on Form 10-QSB filed November 19, 2001).
2.2 Share Exchange Agreement dated May 9, 2002, by and among the Company, ToolTrust Corporation,
and certain former shareholders of LocalToolbox Corporation (Incorporated by reference to
Exhibit 2.2 to the Registrant's quarterly report on Form 10-QSB filed June 5, 2002.).
2.3 Share Exchange Agreement dated May 9, 2002, by and among the Company, ToolTrust and certain
former shareholders of ClearDialog Communications, Inc. (Incorporated by reference to Exhibit
2.3 to the Registrant's quarterly report on Form 10-QSB filed June 5, 2002.).
3.3 The Company's Articles of Incorporation, as amended and currently in effect (filed herewith).
3.4 The Company's Bylaws, as amended and currently in effect (filed herewith).
10.2 Form of Common Stock Purchase Warrant, exercise price $1.10 (Incorporated by reference to
Exhibit 10.2 of the Company's Registration Statement on Form SB-2, filed October 13, 2000).
10.3 Form of Common Stock Purchase Warrant, exercise price $2.00 (Incorporated by reference to
Exhibit 10.3 of the Company's Registration Statement on Form SB-2, filed October 13, 2000).
10.8 Consulting Agreement with Juliard Communications, Inc. dated April 1, 2001 and as amended July
10, 2001 (Incorporated by reference to Exhibit 10.8 of the Company's Quarterly Report on Form
10-QSB filed August 14, 2001).
10.9 Agreement dated May 9, 2002, by and among the Company, ToolTrust, LocalToolbox, ClearDialog,
Robert P. Gordon, Robert L. Evans, Garrett J. Girvan, and James K. Robbins (Incorporated by
reference to Exhibit 10.9 to the Registrant's quarterly report on Form 10-QSB filed June 5,
2002.).
10.10 Perpetual Software License Agreement dated May 9, 2002, by and between LocalToolbox and the
Company (Incorporated by reference to Exhibit 10.10 to the Registrant's quarterly report on
Form 10-QSB filed June 5, 2002.)
10.11 IDMedical.com, Inc. 2002 Stock Plan (Incorporated by reference to Exhibit 10.11 of the
Company's Registration Statement on Form S-8 filed March 8, 2002).
</Table>