SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
April 20, 2000
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Date of Report (Date of earliest event reported)
BLAGMAN MEDIA INTERATIONAL, INC.
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(Exact Name of Registrant as specified in Charter)
Commission File No. 0-27777
Nevada 95-4729314
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(State of Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
1901 Avenue of the Stars, Suite 1710 90067
Los Angeles, California (Zip Code)
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(Address of Principal Executive Office)
Registrant's Telephone Number, Including Area Code: (310) 788-5444
Registrant's Former Name: MNS Eagle Equity Group I
Table of Contents
Form 8-K Disclosures:
Page
----
Item 1. Change in Control 1
Item 2. Acquisition or Disposition of Assets
(Includes Form 10-SB Disclosures, Part I, Part II and Part F/S) 17
Item 3. Bankruptcy or Receivership 17
Item 4. Changes in Registrant's Certifying Accountant 17
Item 5. Other Events 17
Item 6. Resignations of Registrant's Directors 17
Item 7. Financial Statement, Proforma, Financial Information and Exhibits 17
i
Item 1. Change in Control
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(a) Pursuant to a Stock Exchange Agreement (the "Exchange Agreement") dated
as of April 20, 2000 between Blagman Media International, Inc (BMII), a Nevada
corporation, and the sole share holder of MNS Eagle Equity Group I, Inc.
("MNS"), a Nevada corporation, approximately 89.9% of the outstanding shares of
common stock of which is held by ten (10) MNS shareholders were exchanged for
50,000 shares of common stock of BMII and $100,000 cash in a transaction in
which BMII effectively became the parent corporation of MNS.
The Exchange Agreement was adopted by the unanimous consent of the Board of
Directors of MNS and BMII on April 20, 2000. NO approval of the shareholders of
either BMII or MNS is required under applicable state corporate law.
Prior to the merger, MNS had 687,000 shares of common stock outstanding of
which shares 613,794 or 89.9% of the outstanding shares were exchanged by MNS
for 100,000 shares of common stock of BMII. By virtue of the exchange, BMII
acquired 89.9% of the issued and outstanding common stock of MNS and, thus,
control.
Prior to the effectiveness of the Exchange Agreement, BMII had an aggregate
of 12,600,000 shares of common stock, par value $.001, issued and outstanding,
and 600,000 shares of Series "A" preferred stock outstanding.
Upon closing of the Exchange Agreement, BMII had an aggregate of 12,700,000
shares of common stock outstanding.
The officers of BMII continue as officers of BMII subsequent to the
Exchange Agreement. See "Management" below. The officers, directors, and by-laws
of BMII will continue without change.
A copy of the Exchange Agreement is attached hereto as an exhibit. The
foregoing description is modified by such reference.
(b) The following table sets forth certain information regarding beneficial
ownership of the common stock of BMII as of December 31, 1999 (prior to the
issuance of 100,000 shares pursuant to the Exchange Agreement) by:
o each person or entity known to own beneficially more than 5% of the
common stock;
o each of BMII directors;
o each of BMII named executive officers; and all executive officers and
directors of BMII as a group.
Name and Title Number of Shares
of Beneficial Owner Beneficially Owned Percentage
------------------- ------------------ ----------
Robert Blagman, President, 8,200,000 64.7%
Chairman of the Board and
Chief Executive Officer
Item 2. Acquisition or Disposition of Assets
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(a) The consideration exchanged pursuant to the Exchange Agreement was
negotiated between MNS and BMII.
In evaluating BMII as a candidate for the proposed acquisition, MNS used
criteria such as BMII's present stock price as set forth on the over-the-counter
bulletin board, its other businesses and other anticipated operations, and
BMII's business name and reputation. MNS and BMII each determined that the
consideration for the merger was reasonable.
1
(b) BMII intends to continue its historical businesses and proposed
businesses as set forth more fully immediately below in the format and with the
information set forth in Form 10-SB Part I, Part II, and Part F/S:
PART I
Description of Business
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Description of Property
Security Ownership of Certain Beneficial Owners and Management
Directors, Executive Officers, Promoters and Control Persons
Directors and Executive Officers
Certain Relationships and Related Transactions
Description of Securities
PART II
Market for Common Stock Equity and Related Stockholder Matters
Legal Proceedings
Changes In and Disagreements with Accountants
Recent Sales of Unregistered Securities
Indemnification of Officers and Directors
PART F/S
Financial Statements
2
PART I
Description of Business (Blagman Media International, Inc.)
Business development or overview of background information
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Blagman Media International, Inc. (BMII) is a growing direct response and
marketing media agency. The Company markets its clients through various media:
television, radio, Internet, print and outdoor advertising. The Company is
planning to expand its distribution in print and the Internet by either
acquisition or strategic alliances with outside marketing firms.
BMII started its operations in 1994 as a sole proprietorship and was
incorporated in Nevada on January 29, 1999. On August 2, 1999 the Company
completed a tax-free reverse acquisition with Unisat, Inc., a public
non-reporting shell company, formerly known as Combined Companies, Inc. Also on
August 2, 1999, Unisat, Inc. changed its name to Blagman Media International,
Inc. The transaction required BMII to exchange tax free as a recapitalization
one hundred percent of its outstanding common stock in exchange for 8,200,000
common shares of Unisat, Inc. The 8,200,000 shares went to Robert Blagman, who
became the new President and Chief Executive Officer. Also a new Board of
Directors was elected. Prior to the reverse acquisition, Unisat, Inc. and its
predecessor, Combined Companies, Inc., had a history of acquisitions in a few
different industries. Unisat was originally incorporated in Nevada on December
16, 1961. Prior to the acquisition date, Unisat, Inc. had 3,819,973 common
shares outstanding which were part of the recapitalization with BMII.
The primary goal of the BMII acquisition was to use common stock of a
publicly held company to seek to acquire substantially all advertising currently
contracted out to other agencies through select acquisitions within the
advertising industry. The strategic business purpose is to increase market share
and profitability from retention of the increased revenues to the Company
instead of continuing to share commissions on business referred to the Company
but subcontracted to other advertising and media agencies.
BMII will provide ongoing incentives to the principals of the enterprises
it acquires. Management believes that the resulting "network" of alliance
partners and acquired companies will be more capable of delivering a more
complete service, at a better price with product that is developed more
efficiently and marketed more effectively than presently possible, including:
o Centralizing accounts payable, accounts receivable, payroll,
human resources, and other back office accounting functions.
o Establishing and maintenance of a centralized interoffice
client/server computer network which will allow for collection of
information that BMII will use to improve the ratio of response
and concurrent profitability to be realized from longer running
campaigns and reduce the overhead expenses of each office.
BMII intends through the establishment of an "Exchange Portal" on the World
Wide Web similar to CommerceOne, Ariba and VerticalNet. The BMII "media
exchange" will provide international media sellers and buyers a common platform
from which broadcast and cable, network, system and local "avails" can be
merchandised and acquired. The activities of the "media exchange" will provide
BMII an additional stream of revenue via commissions and transactions.
An expanded network of companies will allow for economies of scale from the
consolidation of financial information and integrating media buys from all
disciplines, including but not exclusive to: Internet, Radio, Television,
Outdoor, Retail, Catalogue, Syndication, Upsells, Clubs, Lists, Direct Mail,
Viral Marketing, and Advanced Micro Demographic Advertising both domestically
and internationally.
3
Increased size will allow BMII to improve its negotiating power in buying
opportunities with networks, cable systems and television stations, enabling it
to gain access to the most effective media "avails" at better prices.
Principal Products or Services and Their Market
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Blagman Media International, Inc. (Media Buying and Direct Response)
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The principal business of the Company is media buying specifically focused
on direct response advertising. All aspects of direct response advertising are
available to the Company: creative, production, marketing, and account
management. Accounts of BMII have included: Kodak, Southern California Dodge,
Black and Decker, 21st Century Insurance, Met-Rx, Windmere, A Sure eCommerce,
Inc. and Play, Inc. Currently the Company provides broadcast, Internet, print
and outdoor media services.
Eicoff T.V. Infomercial (Shared Business)
-----------------------------------------
The Company is engaged in direct response long form media buying in
association with A. Eicoff & Company (subsidiary of Ogilvy & Mather). A. Eicoff
& Company's Infomercial division purchases all long form media for A. Eicoff.
Short form advertising is purchased on their behalf for some accounts. The
Company has an exclusive agreement with A. Eicoff & Company to place all long
form media for A. Eicoff & Company. A. Eicoff & Company is the number one short
form-advertising agency in the world with billing exceeding $135 million.
Infomercials are either long form or short form. The long form infomercial runs
30 minutes while the short form is typically 30, 60 or 120 seconds of air time.
Eicoff Radio (Shared Business)
------------------------------
The Company engages in direct response radio (long and short form) in
association with Eicoff Company. BMII has an exclusive agreement to place all
direct response radio for Eicoff. Clients have included: 21st Century Insurance,
The Phonics Game and Liberty Medical.
Blagman Media/Mercury Media Joint Venture
-----------------------------------------
The Company is party to a joint venture with Mercury Media to enhance media
acquisition of long form infomercial for television. Mercury Media was founded
in 1988,and has current billings now exceed $85 million. Mercury Media
represents the direct response industry's most prestigious companies, including
Guthy Renker, TriStar, Home Shopping Direct and GT Direct. Mercury Media is the
number one long form billing advertising agency in the world.
GSP/Blagman (Shared Business)
-----------------------------
Crain's Chicago Business Magazine has named GSP one of the top-marketing
firms of 1998. With annual billing exceeding $186 million, GSP is one of the
premier print media and marketing firms in the country. BMII has contracted with
GSP to act as its exclusive television and radio-buying partner for GSP's print
clients. Print clients include: Diners club, American Medical Association,
Anheuser-Busch, FTD direct, Hammacher Schlemmer, Lens Crafters, Nieman Marcus,
Sears, Windmere and The Sharper Image.
Operations
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The Company currently generates its revenue from direct response media
services as follows:
Radio 18%
Television 72%
Outdoor Bill Board 10%
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100%
4
The above represents approximately 76% of its revenues from media
transactions. The other 24% is generated from contracts for fees and commissions
for the Company to represent its advertising clients for exclusive placement of
services covering productions, advertising, marketing/media, telemarketing and
fulfillment activities. Usually there is a monthly fee for the complete
marketing strategy, tactics, and related market research to establish known
identity and demographic for TV, radio and outdoor placements. The Company
charges commissions to place media services. However, in the past, most of its
media placements are split 50/50 with strategic partners. The Company approves
media purchase orders and out of its gross billings pays for media and its full
or split commission based on negotiated contracts. All media is paid to BMII in
advance. All media will be billed approximately one month after it is placed and
commissions are payable after the media placement airs or is consummated.
Growth Strategies
-----------------
Starting in the year 2000, the Company plans to bring in house most of the
services it presently shares with its strategic partners. The Company plans to
perform in house services by acquiring other advertising media firms and
committing new personnel to open offices in New York and London. The above plans
will commence in April 2000 and success depends upon BMII's obtaining sufficient
financing.
The Company is also relying on hiring experienced people for its
headquarter office in Los Angeles and outside marketing representatives to
achieve its goals. In the next year or two the Company also plans to change its
service mix so that television revenues represent 50% of its media placement and
radio and other forms run 30% and 20% respectively. The other media forms will
be divided among outdoor, Internet and print placements. In time, Management
believes, Internet media placements will increase at a pace because of the
Company's recent involvement with Transactional Marketing Partners, Inc., one of
its marketing representatives.
Distribution Methods
--------------------
The Company's CEO, who is also in charge of sales and marketing is Robert
Blagman, who attracts business directly from customers or strategic alliances.
Mr. Blagman, at times in association with A. Eicoff & Company, makes
presentations to customers and shares fees or commissions from gross billings.
Mercury Media Marketing and GSP, a top marketing firm, share similar
arrangements. BMII has just retained an established marketing firm on a month to
month basis to get business in all forms of media. The marketing firm will be
paid a monthly fee of $10,000 and commissions of up to 5% of total receipts
derived by the Company from such business.
The firm, Transactional Marketing Partners, Inc., is a well established
marketer which acts as an expeditor helping various companies attain their
particular goals. Among their clients are Mercury Media, Home Shopping Network
and Amerinet. The intent is to package their clients needs with the Company's
ability to get direct response marketing results from broadcast, outdoor or
Internet media placements. They are also assisting BMII in identifying strategic
acquisitions. To the extent possible, the Company intends that almost all
acquisitions will be consummated with common stock shares of BMII.
In short, the Company has formed strategic alliances to grow its business.
These arrangements allow BMII to go to corporate clients and provide them with
the best access to long form media for infomercials to fully explain their story
and build a brand image.
BMII plans in the future to enter Internet advertising in alignment with
direct response techniques that will increase impulse buying. The Company also
plans to enter the medical marketing media area through a well known surgeon who
can help obtain a strong network of service providers than can use direct
response marketing approaches.
5
Competition
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The Company competes with much larger advertising agencies that have
greater financial and personnel resources to service their accounts. The Company
currently has identified 4 other advertising firms with aggregate gross billings
of $100 million. BMII plans to open a New York and London office, initially
subletting space. The Company performs extensive research in house and conducts
selective competitive intelligence on consumer and customer trends to enhance
sales and marketing results. The Company's main strength is the data thus
obtained as to what motivates people to buy, and the quality and reliability in
executing their client's direct response targeted programs. The direct response
market is approximately 1 billion dollars. No one competitor has more than a 15%
market share. The Company primarily plans to improve its market share, which is
presently less than 1%, by acquisitions. The Company is planning to enter new
markets with the help of outsourcing its sales and marketing functions to well
established marketing firms that can assist the Company expand in its target
markets.
The Company competes directly against such companies as Hawthorne Media,
Century Media and Fredrickson Television, all of which are considerably larger
than BMII. These three competitors sold approximately $370 million of the total
estimated one billion in gross billings in the direct response media advertising
niche market.
Dependence on a Few Major Customers
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The Company has one major customer, representing approximately 51% of its
revenue for the year ended December 31, 1999. Sixteen other customers represent
the balance of the Company's revenues.
As BMII brings more of its major business in house, the percentages of each
account will level out in a more favorable manner. Specifically, the one major
account in 1999 representing 51% will drop to around 20% due to new business
already contracted. With BMII's plan to pursue advanced media placement billings
will span TV, Radio, Internet, Outdoor and Direct Mail. BMII also plans to
acquire similar media companies to enhance its infrastructure and acquire
additional media billing per account. It is estimated that the decrease in split
commission revenues from the Strategic Partners will be more than offset by
bringing its business in house where it keeps all of its 15% commission versus
7 1/2% split commissions. Furthermore, all planned acquisition will involve full
commissions and the possibility of cross selling advertising, media or
production services. The above estimated strategies may mitigate the loss of key
customers.
The Company's suppliers are radio, television or outdoor billboard media.
Currently the Company does not rely on any one vendor to place its media on
behalf of its clients.
Intellectual Properties
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The Company has no patents, trademarks, licenses or any other intangible
assets that would impact its value or earnings.
Government Compliance
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The Company has no specific compliance issues with any federal or state
agency.
Research and Development of Advertising Activities
- --------------------------------------------------
The Company estimates it spends approximately 25% of its time on research
and development activities related to marketing strategies or techniques. The
Company believes research on consumer trends is one of its competitive
advantages.
6
Environmental Regulation
- ------------------------
The cost and effects of compliance with environmental laws for federal,
state or local governments are inconsequential.
Employees
- ---------
As of January 31, 2000, BMII had 5 full-time employees, including 3 in
Marketing and sales and 2 in operations and general management. None of the
employees is a member of any union or collective bargaining organization. BMII
considers its relationship with its employees to be excellent. A significant
portion of BMII's public relations and marketing is performed by independent
contractors from whom the Company expects to acquire new customer billings. As
of January 31, 2000, the Company had four independent contractors concentrating
primarily on marketing and public relations to improve the Company's visibility
in branding its names and services. All of these sales and marketing
representatives work on a month-to-month basis.
Compliance Issues
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BMII has voluntarily elected to include in the Form 8-K the information
required in the Form 10-SB registration statement under the Securities Exchange
Act of 1934. Following the effective date of this Form 8-K, BMII will be
required to comply with the reporting requirements of the Exchange Act. BMII
will file annual, quarterly and other reports with the Securities and Exchange
Commission. BMII will also be subject to the proxy solicitation requirements of
the Exchange Act and, accordingly, will furnish an annual report with audited
financial statements to its stockholders.
Available Information
- ---------------------
Copies of this Form 8-K may be inspected, without charge, at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0300 for further information on the
operation of its public reference rooms. In addition, copies of this material
also should be available through the Internet by using the SEC's Electronic Data
Gathering, Analysis and Retrieval System, which is located http://www.sec.gov.
You may also obtain information about us on the Over the Counter Bulletin
Board's web site which is located at http://www.otcbb.com.
Management Discussion and Analysis of Financial Condition and Results of
Operations
- ------------------------------------------------------------------------
The following discussion and analysis should be read in conjunction with
our financial statements and accompanying notes appearing elsewhere herein.
Overview
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History of Operations
- ---------------------
For the past two years the key growth strategy was to joint venture BMII's
sales with large well-established advertising agencies to help market and sell
its direct response media services. This co-partnering usually meant splitting
the fee equally for services rendered on behalf of clients.
In the foreseeable future, the strategy of the Company is to bring in house
services by acquiring other media entities and become a more full service
advertising agency. The Company will also outsource its marketing functions to
develop an Internet presence. The Company acquired another advertising company
in January 2000, Mullinger Media and Communications Limited which is the
7
publisher of a magazine about Visa Card services in the Middle East subscribed
for by over 400,000 persons. The Company also has a contract with a marketing
firm to develop its Internet business and to assist in increasing sales in areas
other than direct response advertising including identification of possible
acquisition candidates. The Company expects to lose a significant portion of its
major customers representing approximately 60% of its current business but is
confident based on new customer contracts that the effect will be positive for
the growth of the Company.
Results of Operations
- ---------------------
Management believes that period-to-period comparisons of the Company's
operating results are not necessarily indicators of future performance. You
should consider our prospects in light of the risks, expenses and difficulties
frequently encountered by companies experiencing rapid growth and, in
particular, rapidly growing companies that operate in evolving markets. The
Company may not be able to successfully address these risks and difficulties.
Although the Company has experienced net sales growth in recent years, net sales
growth may not continue, and the Company cannot assure future growth or
profitability.
Comparison of the Years Ended December 31, 1999 and December 31, 1998
- ---------------------------------------------------------------------
Net Sales
- ---------
The Company's sales grew by 98.1% to $3,182,000 in 1999 from $1,606,000 in
1998. Direct response revenue increased to $2,742,000 in 1999 as compared to
$1,256,000 in 1998, an increase of 118.3% for 1999. The balance of revenues came
from fees and commissions. In 1999, non-media revenue increased 25.7% to
$440,000 from $350,000 in 1998. Most of the media sales increases were in radio
and television short and long form infomercials. Short form ads are usually
thirty, sixty or ninety second commercials while long form infomercials run
thirty minutes.
Gross Profit
- ------------
The Company's gross profit grew 14.1% to $639,000 in 1999 from $560,000 in
1998. The gross profit as a percentage of net sales decreased 14.8% to 20.1% in
1999 from 34.9% in 1998. We believe the reduced gross profit was primarily the
result of the mix of sales between radio and television short and long form
infomercials. Part of the reduction also came from increased joint ventures
where revenues are split. In the future, Management anticipates improving gross
profit margins as more of our revenues are expected to be derived from sales
contracts with the Company as a sole provider of direct response media or other
types of advertising revenues. No assurance can be given that the Company's
revenues will in fact increase by reason of the Company increasing sales
contracts in which it is the sole provider.
Operating Expenses
- ------------------
General and administrative expenses grew to $755,000 in 1999 from $534,000
in 1998, an increase of 41.4%. The increase came primarily from a 98.1% increase
in net sales. The expenses to service this revenue increase were primarily
incurred in hiring more people and in increased travel. The officers'
compensation increased approximately $53,000 in 1999, and professional fees by
$25,000 because of the reverse acquisition. Management believes operating
expenses will continue to increase in future periods in both real dollars and as
a percentage of sales as the Company acquires more advertising agencies, brings
more business in house and outsources sales and marketing. In house staff will
increase to handle customer service. There will be the need for increased
financial and control services to handle acquisitions and to comply with the
responsibility of being a publicly held company including SEC reporting and
financial public relations.
8
Other Income (Expense)
- ----------------------
There was no change in net interest expense, which in both years totaled
$9,000. Although the amount borrowed to finance the operations increased
approximately $100,000, $66,000 was a non interest bearing note from a related
party. The Interest income increase of $1,000 offset the additional interest
expense related to increased borrowings.
Income Tax Expense
- ------------------
The Company's $16,000 of pre-tax income in 1998 was derived as a sole
proprietorship and income taxes are paid as an individual. The Company's loss
for 1999 of $126,000 will be carried forward to future years to offset taxable
income in compliance with IRS regulations. The carry forward is approximately
$32,000.
Net (Loss) Income
- -----------------
For the reasons described above, the decrease in pre-tax income was
approximately $142,000 in 1999 as net loss was $126,000 in 1999 compared to
pre-tax income of $16,000 in 1998.
Liquidity and Capital Resources
- -------------------------------
The Company's working capital was approximately negative $95,000 at
December 31, 1999 as compared to a negative working capital of approximately
$53,000 at December 31, 1998. Cash balances at December 31, 1999 were zero
compared to cash balance of $67,000 a year ago. Net cash flow from operating
activities was a negative $176,000 in 1999 compared to a positive net cash flow
from operating activities of $30,000 in 1998. Cash flow from investing
activities was zero in 1999 compared to purchasing office equipment of $4,000 in
1998. Cash flow provided from financing activities was $109,000 versus $13,000
provided in 1998. The primary change came from increase on new notes payable of
approximately $116,000 less the repayment of loans payable of $17,000 during
1999.
Management anticipates working capital requirements may go up in the future
as a result of increased accounts receivable and overhead for acquisitions and
SEC compliance. Increased working capital requirements may arise from
month-to-month fixed sales and marketing expenses.
The Company has a line of credit agreement with a bank that provided that
it may borrow up to $75,000 at 2% over prime rate quoted from time to time by
the Bank of America. At December 31, 1999, the Company had borrowed $74,713 and
$64,771 respectively under this agreement. The Line of Credit matured on
February 7, 2000 and all principal and interest due was paid at that time.
Management believes that liquidity will be adequate to meet capital
requirements for at least the next twelve (12) months as the result of a private
equity placement in February 2000, of $616,000 of the fully subscribed common
stock offering of 1,250,000 shares at $.80 per share totaling $1,000,000. The
offering was pursuant to Regulation D, promulgated under the Securities Act of
1933, as amended.
Inflation and Price Increases
- -----------------------------
Although Management cannot accurately anticipate the effect of inflation on
operations, Management does not believe that inflation has had or is likely in
the foreseeable future to have a materially adversely effect on results of
operations or financial condition. However, increases in inflation over
historical levels or uncertainty in the general economy could decrease
discretionary consumer spending for products in direct response media.
Consequently, none of the Company's revenue growth is attributable to price
increases.
9
Recent Accounting Pronouncements
- --------------------------------
Management does not believe any recently issued accounting pronouncements
have had a material impact on operations. Please see auditor's financial
statement footnote on recently issued Accounting Pronouncements.
Year 2000 Compliance
- --------------------
Management has completed a preliminary review of the Company's computer
systems and operations to determine the extent to which our business will be
vulnerable to potential errors and failures as a result of the year 2000
problem. Based on this limited review, Management has concluded that the
Company's computer programs and operations will not be materially affected by
the year 2000 problem.
The Company does not have any material contracts with external contractors
to assist in completing the year 2000 compliance effort. In addition, no
employees have been hired or reassigned to complete our year 2000 compliance. As
of the date hereof, the Company has not experienced any material year 2000
problems.
Description of Property
- -----------------------
The Company's principal executive facility is located at 1901 Avenue of the
Stars, Los Angeles, California. The Company leases approximately 3,700 square
feet of space pursuant to a thirty-seven (37) month lease that terminates on
April 30, 2003. In 1999, the rental cost for this space was $5,075 per month, of
which the Company paid 42% or $2,132. An unrelated private corporation paid the
remaining 58%, or $2,943, on a month-to-month basis. Starting with the year
ending December 31, 2000, the Company signed a new lease for $2.44 per square
foot with six months free rent, which comes out to $2.04 per square foot, or
averages $7600 per month for the three years ended April 30, 2003.
Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------
The following table sets forth information regarding the beneficial
ownership of BMII's common stock as of the date hereof. The information in this
table provides the ownership information for:
o each person known by us to be the beneficial owner of more than 5% of
our common stock;
o each of our directors;
o each of our executive officers; and
o our executive officers and directors as a group.
Beneficial ownership has been determined in accordance with the rules and
regulations of the Securities and Exchange Commission and includes voting or
investment power with respect to the shares and may exceed 100%. Unless
otherwise indicated, the persons named in the table have sole voting and
investment power with respect to the number of shares indicated as beneficially
owned by them. The number of shares of common stock outstanding used in
computing beneficial ownership of each person listed below includes shares of
common stock held by that person as of April 1, 2000. The percentage of
beneficial ownership is based on 12,669,873 shares of common stock outstanding
as of January 31, 2000.
Also in February 2000, 1,250,000 shares of common stock were offered as
part of a Regulation D offering and approximately 770,000 shares of common stock
were issued for $616,000.
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Directors, Executive Officers, Promoters and Control Persons
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TABLE I
Name and Title Number of Shares
Of Beneficial Owner Beneficially Owned Percentage
- ------------------- ------------------ ----------
Robert Blagman, President, 8,200,000 64.7%
Chairman of the Board, Chief
Executive Officer (1)
All Executive Officers and 8,200,000 64.7%
Directors as a group (1 person)
(1) The stock is restricted shares under Rule 144 of the Securities and Exchange
Act of 1933, as amended.
MANAGEMENT
Directors and Executive Officers
- --------------------------------
The names and ages of the Company's directors and executive officers are
set below. Biographical information for each of these persons is also presented
below. There are no existing family relationships between or among any of our
executive officers or directors except for Leslie Blagman, wife of Robert
Blagman.
Name Age Position
---- --- --------
Robert Blagman 43 President, Chief Executive Officer
Chairman of the Board
Leslie Blagman 43 Secretary and Treasurer, C.O.O.
Jeffrey Wald 42 Director
Toni Knight 36 Director
Walter Lubars 58 Director
Andy Given 41 Director
Pursuant to BMII's bylaws, directors are to be elected at each annual
meeting and serve until their successors have been elected. We have not held an
annual meeting since the reverse merger. Officers are appointed by the board of
directors and serve for one-year terms.
Robert Blagman has served as Chief Executive Officer and chairman of the
board since the reverse acquisition in August 1999. From July 1999 through June
1994, Mr. Blagman served as chief executive officer of Blagman Media
International, Inc., a company he founded to develop and market direct response
advertising and advertising media. Prior to starting his own advertising agency
he served from 1980 to 1994 as national sales manager for KATZ Communications,
KCOP TC/Los Angeles and the Walt Disney/KCAL TV/Los Angeles. Mr. Blagman has
been a featured speaker at several key direct response advertising and Trade
Association meetings. He graduated from Boston University, Cum Laude with a BS
in communications and advertising. Mr. Blagman spends 100% of his time on
Company affairs.
11
Leslie Blagman is the Chief operating officer and is principally in charge
of administration. She has worked in the advertising agency business since
joining Blagman International, Inc. in 1994. Prior experience includes ten years
(1978-1988) in sales and management positions at Katz Communications. From
1989-1994 she was self employed in event marketing.
Jeffrey Wald is the News Director for Tribune Broadcasting KTLA/Los Angeles
California. Mr. Wald is the recipient of seven Emmy awards, fourteen Golden Mike
awards and several Associated Press and United Press International awards. He
has appeared live on numerous radio and television programs concerning breaking
news stories: CNN, ABC, NBC, CBS, FOX, PBS, Larry King Live and Nightline. Mr.
Wald has been the News Director for the number one rated Los Angeles 10:00 PM
news for well over 11 years (1981-1990 and 1997-present).
Toni Knight is the President of Worldlink Incorporated. Ms. Knight, who
envisioned Worldlink as a one-stop solution for buyers and sellers of
infomercials and direct response programming, created the firm by "spinning out"
the infomercial/direct response department of the FOX Sports Network. Since its
inception Worldlink has grown fivefold and represents over 44% of all direct
response billing for cable networks worldwide. Ms. Knight has finalized
agreements with Lexus, Apple Computers, Dow Jones and Web TV for participation
on Worldlink represented networks. These companies represent a new direct
response revenue stream for Worldlink's networks.
Walter Lubars is a Professor Emeritus at Boston University. He was a
Professor of Communications from 1972 - 1994; Chairman of the Mass
Communications, Advertising & Public Relations Department for ten years; and
Dean ad interim of the College of Communication 1991-1992. He co-authored
Investigative Reporting and The Lessons of Watergate (1975); co-authored Guide
to Effective Writing (1978) and was researcher and co-author of a student and
teacher training guide, Critical TV Viewing (1980). Before joining Boston
University, he was senior copywriter at J. Walter Thompson and Doyl Dane
Bernbach.
Andy Givens is President of production for The Shooting Gallery and head of
Gun for Hire (Motion Picture/Television Production). [Former Senior Vice
President of Production, Universal Pictures.] Mr. Given has been with Universal
for 9 years, starting out as a production executive, and marching up the ranks
to Senior Vice President. Mr. Givens' unique ability to oversee and manage the
financial, planning and production aspects of movie making is vast. Mr. Given's
recent projects include Patch Adams, For the Love of the Game and Spike Lee's
Summer of Sam.
Officers and Directors Compensation
-----------------------------------
Stock Salary Other
Name Options Title Payouts Year Compensation Compensation
- ---- ------- ----- ------- ---- ------------ ------------
Robert Blagman 0 President, 0 1999 $ 240,000 $0
CEO
Leslie Blagman 0 COO 0 1999 $ 102,000 $0
Jeffrey Wald 0 Director 0 1999 $ 0 $0
Toni Knight 0 Director 0 1999 $ 0 $0
Walter Lubars 0 Director 0 1999 $ 0 $0
Andy Given 0 Director 0 1999 $ 0 $0
12
The Blagmans did not receive salary compensation in 1998. The Company was a
sole proprietorship. Robert Blagman and Leslie Blagman drew $225,307
collectively.
Perks and other benefits for 1998 and 1998 were less than 10% of their
annual compensation and need not be reported here.
Compensation of Directors and Officers
- --------------------------------------
BMII's directors do not presently receive any cash compensation from us for
their service as directors. However, commencing in the year 2000, officers and
directors will receive equity in the form of stock options in lieu of cash, at
the discretion of the Board of Directors. As of March 2000, no formal plan has
been adopted for incentive pay including stock options.
At present, BMII has no employment agreements with our other officers or
directors, although we intend to enter into such agreements with our full time
management executives.
Certain Relationships and Related Transaction
- ---------------------------------------------
BMII received in September 1999 a loan of $66,545 from a related party. Mr.
Flynn, a shareholder, loaned the Company the $66,545 and will be given a note
payable, principal due on demand without stated interest.
The Company has advanced net funds of $38,948 and $5,253 as of December 31,
1999 and 1998, respectively, to the principal stockholder, Mr. Blagman. The
funds are uncollateralized, and no interest has been accrued on these advances.
Furthermore, there was an indemnity agreement in April 1999 between Unisat,
Inc., the predecessor company, and Capital Associates Investment Partners, Ltd.
controlled by Mr. Flynn, to hold Unisat, Inc. (now BMII) harmless from a law
suit filed by a Nevada corporation. The entity alleged tortuous interference
with a business contract involving another entity that was negotiating an
acquisition with BMII. Mr. Flynn on behalf of Capital Associates Investment
Partners, Ltd. agreed to indemnify BMII prior to completing the reverse
acquisition of BMII and Unisat, Inc. In March 2000, the legal action was
dismissed with prejudice.
Description of Securities
- -------------------------
The Company's authorized common stock consists of 100,000,000 shares of common
stock, par value $.001 per share and 5,000,000 shares of preferred stock, par
value $.001. Each holder of BMII common stock is entitled to one vote for each
share held on all matters to be voted upon by our stockholders. Holders of BMII
common stock have no cumulative voting rights. Holders of BMII common stock are
entitled to receive ratably dividends, if any, as may be declared from time to
time by the board of directors out of legally available funds, except that
holders of preferred stock may be entitled to receive dividends before the
holders of the common stock.
In the event of a liquidation, dissolution or winding up of company
business, holders of BMII's common stock would be entitled to share in our
assets remaining after the payment of liabilities and the satisfaction of any
liquidation preference granted the holders of any then outstanding shares of
preferred stock. Holders of BMII common stock have no preemptive or conversion
rights or other subscription rights. In addition, there are no redemption or
sinking fund provisions applicable to our common stock. All outstanding shares
of BMII common stock are duly authorized, validly issued, fully paid and
nonassessable.
13
The rights, preferences and privileges of the holders of common stock may
be adversely affected by the rights of the holders of shares of any series of
preferred stock that we designate in the future.
Preferred Stock
- ---------------
The Company's Board of Directors is authorized to issue 5,000,000 shares of
preferred stock in series with the rights, privileges and preferences determined
from time to time. The Company has issued 600,000 shares of Series A Preferred
Stock as part of the consideration for the purchase of Mullinger Media &
Communications Limited. The Series A Preferred Stock has rights of conversion
based on earnings before interest, taxes, debt and administration, right of
redemption at the price of $1.00 per share or an aggregate of $600,000, and
other rights set forth on the Certificate of Designation of Rights, Preferences
and Privileges filed with the Secretary of State of Nevada and attached hereto
as Exhibit 2.
Transfer Agent
- --------------
Signature Stock Transfer of Dallas, Texas is the transfer agent and
registrar for BMII's share of common stock. Phone No. (972) 788-4193. Address:
14675 Midway Road, Suite 221, Dallas, Texas 75244
PART II
Market for Common Equity and Related Stockholder Matters
- --------------------------------------------------------
The principal market where the Company trades its common stock shares is
Over the Counter Bulletin Board; there are approximately four market makers. The
trading symbol is BB: BMII. The Company has approximately 12,600,000 shares
outstanding, of which 3,800,000 are in the public float. The Company went public
through a reverse acquisition on August 2, 1999.
The highs and lows on bid are prices for sales of the Company's common
stock shares during the past two years ended December 31, as follows:
Bid Prices Ask Prices
1998 High Low High Low
---- ---- --- ---- ---
First quarter $ 4.5 1.5 $ 8.0 5.0
Second Quarter 4.5 1.5 8.0 5.0
Third Quarter 6.68 2.25 7.0 3.43
Fourth Quarter 5.37 2.25 5.62 2.5
Bid Prices Ask Prices
1999 High Low High Low
---- ---- --- ---- ---
First quarter $ 4.75 1.12 $ 4.87 1.25
Second Quarter 2.62 0.37 2.87 0.56
Third Quarter 0.30 0.12 0.87 0.37
Fourth Quarter 3.12 0.20 3.25 0.24
High and low bid information for BMII's common stock reflects inter-dealer
quotes, without retail markup, markdown or commission and may not represent
actual transactions. Prior to the third quarter of 1999 bid prices were not
researched and is believed that high and low bid prices were trading less than
$1.00 per share.
BMII is filing this Form 8-K with Form 10-SB disclosures included for the
purpose of enabling its shares to continue to trade on the OTC Bulletin Board.
If BMII's Form 8-K has not been declared effective by the Securities and
Exchange Commission prior to May 3, 2000, then BMII may be required to file
appropriate documentation with NASDAQ in order for BMII's shares to be quoted on
the 'pink sheets' and following the effective date of the Form 8-K, BMII will
then file to have BMII's shares quoted again on the OTC Bulletin Board.
14
Approximate Number of Holders
- -----------------------------
As of January 31, 2000, BMII had approximately 324 registered holders of
record of BMII common stock. Some of those registered holders are brokers who
are holding shares for multiple clients in street name. Accordingly, BMII
believes the number of actual shareholders of its common stock exceeds the
number of registered holders of record.
Dividends
- ---------
BMII has never paid any cash or stock dividends. BMII presently intends to
reinvest earnings, if any, to fund the development and expansion of its business
and therefore, does not anticipate paying dividends on our common stock in the
foreseeable future. The declaration of dividends will be at the discretion of
our board of directors and will depend upon our earnings, capital requirements,
financial position, general economic conditions and other pertinent factors.
Legal Proceedings
- -----------------
BMII is not currently subject to any legal proceedings. BMII may from time
to time become a party to various legal proceedings arising in the ordinary
course of business. Recently, a legal action against Unisat, Inc., the
predecessor company, was dismissed with prejudice. No further action on this
matter is required.
Changes in and Disagreement with Accountants
- --------------------------------------------
On February 10, 2000, BMII appointed Weinberg & Company, PA as our
independent accountants for the purpose of conducting an audit. There are no
disagreements to report.
Recent Sales of Unregistered Securities
- ---------------------------------------
During the past three years, and subsequent to the reverse acquisition
transaction through which BMII came to be, we have issued securities in the
following transactions:
(1) As of the date hereof, BMII has agreed to issue 1,250,000 shares of common
stock at $.80 per share and repriced warrants to three accredited investors
for a total sum of $1,000,000. As of March 2000, 770,000 shares have been
issued for which the Company has received $616,000. The balance of $389,000
has been fully subscribed but not yet paid and the 480,000 shares subject
to the subscription agreement been issued. The Company issued warrants with
this offering which can be converted into common stock based on the
following conditions: The number of repricing shares shall be equal to the
number of purchased common shares multiplied by a fraction (a) the
numerator, which is the closing bid price on the closing date, minus the
average market price and (b) the denominator, which is the average market
price. Average market price is the average of the closing bid prices for
common stock for each trading day in a 20-day trading period commencing on
the closing date. This offering is pursuant to Regulation D promulgated
under of the Securities Act of 1933, as amended.
(2) In January 2000, BMII acquired another advertising company, Mullinger Media
& Communications Limited, by issuing 600,000 shares of Series A Preferred
stock in exchange for 100% of that Company's common stock outstanding.
15
(3) On December 2, 1999, the Company negotiated with Chris Kurstin for public
relations advice. According to the contract he was to receive 50,000 shares
of common stock. The contract was terminated on March 12, 2000 and the
50,000 shares have been issued.
(4) On August 2, 1999, as a result of a reverse acquisition and a tax free
recapitalization of its common stock, Unisat, Inc. exchanged 8,200,000 of
its common stock for Blagman's outstanding stock. The Entity who arranged
the acquisition received 50,000 shares of common stock at $.25 per share
based on quoted market prices for BMII stock or a total of $12,500 for
services rendered. Prior to the above reverse acquisition, Unisat, Inc. had
3,819,973 shares of common stock outstanding.
Indemnification of Officers and Directors
- -----------------------------------------
Our certificate of incorporation and bylaws contain provisions indemnifying
our directors and executive officers against liabilities. In our certificate of
incorporation, we have to the extent permitted by Nevada law eliminated the
personal liability of our directors and executive officers to Blagman Media
International, Inc. and our stockholders for monetary damages for breach of
their fiduciary duty, including acts constituting gross negligence. However, in
accordance with Nevada law, a director will not be indemnified for a breach of
his/her duty of loyalty, acts or omissions not in good faith or involving
intentional misconduct or a knowing violation or any transaction from which the
director derived improper personal benefit. In addition, our bylaws further
provide that we may advance to our directors and officers expenses incurred in
connection with proceedings against them for which they are entitled to
indemnification.
We do not currently maintain Directors and Officers Liability Insurance,
although we plan to obtain such insurance within the next three months.
We have also agreed to indemnify, defend, and hold harmless each of our
officers and directors to the fullest extent permissible by law with regard to
any and all loss, expense or liability, including payment and advancement of
reasonable attorney's fees, arising out of or relating to claims of any kind,
whether actual or threatened, relating in any way to their service to us. We
plan to memorialize these agreements as written contracts.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted for directors, officers and controlling
persons of the Company, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy and is therefore,
unenforceable.
16
Continuation of Form 8-K
------------------------
Item 3. Bankruptcy or Receivership
- ----------------------------------
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant
- -----------------------------------------------------
Not Applicable.
Item 5. Other Events
- --------------------
(a) Successor Issuer Election. In accordance with Rule 12g-3(a) of the
General Rules and Regulations of the Securities and Exchange Commission, Blagman
became the successor issuer to MNS for reporting purposes under the Securities
Exchange Act of 1934 and elects to report under the Act effective with the
filing of this 8-K report.
(b) Important Information about the Registrant. The information reported in
this item is the same information that is reported in a Form 10-SB Registration
Statement under the Securities Exchange Act of 1934, as amended. This
information may be found in Item 2 of this Form 8-K.
Item 6. Resignations of Registrant's Directors
- ----------------------------------------------
Not Applicable.
Item 7. Financial Statement, Proforma, Financial Information and Exhibits
- -------------------------------------------------------------------------
(a) The financial statements of Blagman Media International, Inc. and MNS
Eagle Equity Group I, Inc.
(b) Exhibits
Exhibit number
--------------
2.0 Exchange Agreement
3.1 Amended Articles
3.2 Certificate of Designation
3.3 Bylaws
Item 8. Change in Fiscal Year
- -----------------------------
Not Applicable.
17
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 hereunto duly authorized.
BLAGMAN MEDIA INTERNATIONAL, INC.
By: /s/ Robert Blagman
----------------------
Name: Robert Blagman
Title: Chief Executive Officer
Dated: April 25, 2000
18
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARY
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 (CONSOLIDATED)
AND 1998
CONTENTS
PAGE 1 INDEPENDENT AUDITORS' REPORT
PAGE 2 BALANCE SHEETS AT DECEMBER 31, 1999
(CONSOLIDATED) AND 1998
PAGE 3 STATEMENTS OF OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 1999 (CONSOLIDATED) AND 1998
PAGE 4 STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 1999 (CONSOLIDATED) AND 1998
PAGE 5 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999
(CONSOLIDATED) AND 1998
PAGES 6 - 14 NOTES TO FINANCIAL STATEMENTS
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Blagman Media International, Inc.
We have audited the accompanying balance sheets of Blagman Media International,
Inc. and Subsidiary and the pre-incorporated sole proprietorship owned by Robert
Blagman as of December 31, 1999 (consolidated) and 1998 and the related
statements of operations, changes in stockholders' deficiency and cash flows for
the years ended December 31, 1999 (consolidated) and 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Blagman Media International, Inc.
and Subsidiary and the pre-incorporated sole proprietorship owned by Robert
Blagman as of December 31, 1999 (consolidated) and 1998 and the results of their
operations and their cash flows for the years ended December 31, 1999
(consolidated) and 1998 in conformity with generally accepted accounting
principles.
/s/ WEINBERG & COMPANY, P.A.
- ----------------------------
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
March 23, 2000
F-2
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARY
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
--------------------------
ASSETS
------
(Consolidated)
1999 1998
--------- ---------
CURRENT ASSETS
Cash $ -- $ 67,342
Accounts receivable 479,054 19,974
Other current assets 1,918 --
Loan receivable - stockholder 38,948 5,253
--------- ---------
Total Current Assets 519,920 92,569
PROPERTY & EQUIPMENT - NET 6,942 11,893
--------- ---------
TOTAL ASSETS $ 526,862 $ 104,462
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
Notes and loans payable - current portion $ 80,152 $ 30,985
Line of credit 74,713 64,771
Accounts payable and accrued expenses 460,587 49,848
--------- ---------
Total Current Liabilities 615,452 145,604
LONG-TERM LIABILITIES
Notes and loans payable 50,000 --
--------- ---------
Total Liabilities 665,452 145,604
--------- ---------
STOCKHOLDERS' DEFICIENCY
Common stock, $.001 par value, 100,000,000 shares
authorized, 12,069,873 and 8,200,000 shares issued
and outstanding in 1999 and 1998, respectively 12,070 8,200
Additional paid in capital 24,630 --
Accumulated deficit (175,290) (49,342)
--------- ---------
Total Stockholders' Deficiency (138,590) (41,142)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY
$ 526,862 $ 104,462
========= =========
See accompanying notes to financial statements
F-3
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARY
STATEMENTS OF OPERATIONS
------------------------
(CONSOLIDATED)
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
REVENUES - NET $ 3,182,099 $ 1,605,957
COST OF REVENUES 2,543,241 1,046,167
----------- -----------
GROSS PROFIT 638,858 559,790
----------- -----------
OPERATING EXPENSES
Officers' compensation 278,700 225,307
Consulting and commissions 131,859 117,192
Employee compensation and taxes 84,293 34,336
Travel and entertainment 80,020 59,208
Other general and administrative 50,628 24,551
Professional fees 28,809 2,579
Rent 28,356 21,653
Utilities 18,074 18,592
Advertising 17,975 15,573
Loan fee 16,000 --
Auto 15,799 9,926
Depreciation 4,951 5,322
----------- -----------
Total Operating Expenses 755,464 534,239
----------- -----------
(LOSS) INCOME FROM OPERATIONS (116,606) 25,551
----------- -----------
OTHER INCOME (EXPENSE)
Interest expense (10,812) (9,885)
Interest income 1,470 564
----------- -----------
Total Other (Expense) (9,342) (9,321)
----------- -----------
NET (LOSS) INCOME $ (125,948) $ 16,230
=========== ===========
Net (loss) Income per common share - basic and
diluted $ (0.013) $ 0.002
=========== ===========
Weighted average number of common shares
outstanding - basic and diluted 9,800,961 8,200,000
=========== ===========
See accompanying notes to financial statements
F-4
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARY
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 1999 (CONSOLIDATED) AND 1998
-------------------------------------------------------------
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------- ------- -----
Balance, January 1, 1998 8,200,000 $ 8,200 $ -- $ (65,572) $ (57,372)
Net Income 1998 -- -- -- 16,230 16,230
---------- ---------- ---------- ---------- ----------
Balance, December 31,1998 8,200,000 8,200 -- (49,342) (41,142)
Recapitalization 3,819,873 3,820 (3,820) -- --
Stock issued for services 50,000 50 12,450 -- 12,500
Stock options issued as a loan
fee -- -- 16,000 -- 16,000
Net Loss 1999 -- -- -- (125,948) (125,948)
---------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1999 12,069,873 $ 12,070 $ 24,630 $ (175,290) $ (138,590)
========== ========== ========== ========== ==========
See accompanying notes to financial statements.
F-5
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
------------------------
(CONSOLIDATED)
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (Loss) Income $(125,948) $ 16,230
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating
activities:
Depreciation 4,951 5,322
Stock issued for services 12,500 --
Stock options issued as a loan fee 16,000 --
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (459,081) (13,233)
Other current assets (1,918) --
Loan receivable - stockholder (33,695) (5,253)
Increase (Decrease) in:
Accounts payable and accrued expenses 410,739 26,478
--------- ---------
Net cash (used in) provided by operating
activities (176,452) 29,544
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment -- (3,890)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan proceeds 116,546 --
Repayment of loans (17,378) (51,564)
Line of credit - net 9,942 64,771
--------- ---------
Net cash provided by financing activities 109,110 13,207
--------- ---------
NET (DECREASE) INCREASE IN CASH (67,342) 38,861
CASH - BEGINNING OF YEAR 67,342 28,481
--------- ---------
CASH - END OF YEAR $ -- $ 67,342
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for - Interest $ 10,812 $ 9,885
========= =========
See accompanying notes to financial statements
F-6
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
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 partnership. 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)
All capital stock quantities, amounts, and per share data in the
accompanying financial statements have been retroactively restated for the
effects of the above.
(B) Principles of Consolidation
-------------------------------
The accompanying 1999 consolidated financial statements include the
accounts of the Company and its wholly owned inactive subsidiary. All
significant inter-company transactions and balances have been eliminated in
consolidation.
(C) 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.
(D) 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-7
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
(E) 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.
(F) 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.
(G) 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.
(H) Income Taxes
----------------
The Company accounts for income taxes under the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" ("Statement 109"). Under Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
F-8
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
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.
(I) 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.
(J) Earnings (Loss) Per Share
-----------------------------
Net income (loss) per common share for the years ended December 31, 1999
and 1998 is computed based upon the weighted average common shares
outstanding as defined by Financial Accounting Standards No. 128, "Earnings
Per Share". There were no common stock equivalents outstanding at December
31, 1998 common stock equivalents have not been included in the computation
of diluted earnings per share since the effect would be anti-dilutive. At
December 31, 1999 there were 100,000 common stock options outstanding which
could potentially dilute future earnings per share.
(K) Segment Information
-----------------------
The Company follows Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information."
During 1999 and 1998, the Company only operated in one segment, therefore,
segment disclosure has not been presented.
(L) 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 Statement No. 137,
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, will not have a material effect on the Company's financial
position or results of operations.
F-9
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
(M) 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 LOAN RECEIVABLE - STOCKHOLDER
- --------------------------------------
The loans are uncollateralized and non-interest bearing.
NOTE 3 PROPERTY AND EQUIPMENT
- -------------------------------
The following is a summary of property and equipment at December 31:
1999 1998
---- ----
Computer equipment $ 8,514 $ 8,514
Furniture and fixtures 9,770 9,770
Office equipment 12,217 12,217
-------- --------
30,501 30,501
Less: Accumulated depreciation (23,559) (18,608)
-------- --------
Property and equipment - net $ 6,942 $ 11,893
======== ========
Depreciation expense was $4,951 and $5,322 in 1999 and 1998, respectively.
NOTE 4 NOTES AND LOANS PAYABLE
- --------------------------------
The following schedule reflects notes and loans payable at December 31:
1999 1998
---- ----
Note payable, interest at 6% due March 31, 2001. In
addition, the Company provided an option to purchase
up to 100,000 shares of common stock, at $0.25 per
share, at any time until September 1, 2000.
(See Note 6) $ 50,000 $ --
Note payable - related party, due on demand with no
interest. 66,545 --
Loan payable, interest at 9.5%, due on demand. 13,607 30,985
-------- --------
130,152 30,985
Less current portion 80,152 30,985
-------- --------
Notes and loans payable $ 50,000 $ --
======== ========
F-10
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
Future maturities of the notes and loans payable in each of the next two
years are as follows:
Year ending December 31
-----------------------
2000 $ 80,152
2001 50,000
-----------
$ 130,152
===========
NOTE 5 LINE OF CREDIT
- -----------------------
The Company had a line of credit agreement with a bank that provides that
it may 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 50,000 shares of common stock as consideration for
services. The shares were valued, for financial accounting purposes, at
$.25 per share, based upon the quoted trading price at the grant date,
resulting in a consulting expense of $12,500.
(B) 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 during the year ended December 31, 1999.
For financial statement disclosure purposes and for purposes of valuing
stock options issued to new employees, the fair market value of each stock
option granted estimated on the date of grant using the Black-Scholes
Options-Pricing Model in accordance SFAS 123, using the following
weighted-average assumptions: expected dividend yield of 0%, risk-free rate
of 5.2%, volatility of 180% and expected term of one year.
F-11
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
A summary of the options under the loan guarantee agreement as of December
31, 1999 is presented below:
Number of Weighted Average
Options Exercise Price
------- --------------
Stock Options
-------------
Balance at beginning of year -- $ --
Granted 100,000 0.25
Exercised -- --
Forfeited -- --
------- --------
Balance at end of year 100,000 $ 0.25
======= ========
Options exercisable at end of year 100,000 $ 0.25
Weighted average fair value of options
granted during the year -- $ 0.16
The following table summarizes information about stock options outstanding
at December 31, 1999:
Options Outstanding Options Exercisable
---------------------------------------------- -----------------------
Number Weighted
Outstanding Average Weighted Number Weighted
Range of at Remaining Average Exercisable Average
Exercise December Contractual Exercise at December Exercise
Price 31, 1999 Life Price 31, 1999 Price
----- -------- ---- ----- -------- -----
$ 0.25 100,000 0.75 Year $ 0.25 100,000 $ 0.25
NOTE 7 COMMITMENTS AND CONTINGENCIES
- --------------------------------------
(A) Operating Leases
--------------------
On December 31, 1999 the Company entered into a new lease agreement for
corporate office space. The lease term is a month - to - month lease
tenancy with monthly base rent of $9,313 commencing January 1, 2000 (See
subsequent Note 11 for Long Term Lease Agreement).
F-12
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
Rent expense under operating leases for the years ended December 31, 1999
and 1998 was $28,356 and $21,653, respectfully.
(B) Consulting Agreement
------------------------
On December 2, 1999, the Company entered into a six-month agreement with a
consulting firm to provide management consulting, business advisory,
shareholder information and public relations advice. The agreement calls
for compensation based on proposed fees for services to be rendered.
On December 1, 1999, the Company entered into a five-year agreement with a
consultant where the consultant will provide advisory business services.
The agreement called for the consultant to receive 25,000 shares of the
Company's common stock upon execution of the agreement, and an additional
25,000 shares upon expiration of each quarter year during the first year
term to an aggregate of 100,000 shares. None of the above shares were
issued. On March 21, 2000, the parties entered into a settlement agreement
and mutual release and the Company issued 50,000 shares of common stock as
consideration.
(C) Legal Actions
-----------------
On April 1, 1999, a Nevada Corporation filed suit against the Company, its
former Chairman of the Board and a former director in the Second Judicial
District Court of the State of Nevada, in and for the County of Washoe. In
the complaint, the plaintiff alleged intentional interference with
contractual relations between the Company and a third party, intentional
interference with prospective economic advantage, conspiracy, unfair
business practices, breach of fiduciary duty, unjust enrichment, rescission
of contract, incomplete accounting and permanent injunction. On February 7,
2000, the parties to the legal action stipulated that the alleged
complaints in the lawsuit be dismissed without prejudice.
NOTE 8 CONCENTRATIONS
- -----------------------
Approximately 51% and 47% of revenues were derived from four customers for
the years 1999 and 1998, respectively. Approximately 68% of accounts
receivable was due from one during 1999.
NOTE 9 INCOME TAXES
- ---------------------
In 1998, the Company was a sole-proprietorship and the proprietor was
responsible for all taxes personally.
F-13
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
There was no income tax (benefit) for the year ended December 31, 1999 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 December 31, 1999 are
as follows:
Deferred tax assets:
Net operating loss carryforward $ 32,370
--------
Total gross deferred tax assets 32,370
Less valuation allowance (32,370)
--------
Net deferred tax assets $ --
========
At December 31, 1999, the Company had a net operating loss carryforward of
approximately $126,000 for U.S. federal income tax purposes available to
offset future taxable income expiring on various dates beginning in 2016
through 2018.
There was no valuation allowance at January 1, 1999. The net change in the
valuation allowance during the year ended December 31, 1999 was an increase
of approximately $32,370.
NOTE 10 ACQUISITION AND RECAPITALIZATION
- ------------------------------------------
Under a Stock Exchange Agreement (the "Agreement") consummated on August 2,
1999, Unisat, Inc., ("Unisat"), a non-reporting public shell with no
operations at that time, acquired one hundred percent of the issued and
outstanding common stock (9,000,000 shares) of Blagman Media International,
Inc. ("Blagman") in exchange for 8,200,000 shares of the $0.001 par value
common stock of Unisat. As a result of the exchange, the Company became a
wholly owned subsidiary of Unisat and the stockholders of Blagman become
stockholders of approximately sixty-eight percent of Unisat. Generally
Accepted Accounting Principles require that the Company whose shareholders
retain a majority interest in a business combination be treated as the
acquiror for accounting purposes. As a result, the exchange was treated as
an acquisition of Unisat by Blagman, and a recapitalization of Blagman. The
Company's consolidated financial statements immediately following the
acquisition were as follows: (1) The Balance Sheet consists of Blagman's
net assets at historical cost and Unisat's net assets at historical cost
and (2) the Statement of Operations includes Blagman's operations for the
period presented and Unisat's operations from the date of acquisition. The
Company filed an amendment to its articles of incorporation to change its
name from Unisat, Inc. to Blagman Media International, Inc.
F-14
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
NOTE 11 SUBSEQUENT EVENTS
- ---------------------------
(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 December 31 Amount
------------------------ ------
2000 $ 90,890
2001 109,068
2002 109,068
2003 27,267
(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 March 23, 2000 and $616,000 of the total
subscription of $1,000,000 had been received.
(C) Acquisition
---------------
Under a Stock Exchange Agreement (the "Agreement) consummated in January
2000, the Company purchased 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 became a wholly owned subsidiary of the
Company.
In connection with the acquisition, the Company is in the process of
amending its State of Nevada Articles of Incorporation calling for the
authorization of 10,000,000 shares of preferred stock at $.001 par value.
As of March 23, 2000, that has not been files with the state.
F-15
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
2.0 Exchange Agreement
3.1 Amended Articles
3.2 Certificate of Designation
3.3 Bylaws