UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES ACT OF 1933
FOR THE QUARTER ENDED SEPTEMBER 30, 2004
COMMISSION FILE NO. 0-21991
MEDIAWORX, INC.
(Name of small business issuer in its charter)
WYOMING 2750 98-0152226
(State or other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Classification Identification
Organization) Code Number) No.)
1895 PRESTON WHITE DRIVE, SUITE 250
RESTON, VIRGINIA 20191
(703) 860-6580
(Address and telephone number of principal executive offices and principal place
of business)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g)of the Exchange Act: Common Stock,
$.005 par value
Check whether the 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 [X] or [ ]
As of November 12, 2004, there were 30,348,404 shares of the Registrant's Common
Stock, par value $0.005, issued and outstanding.
Transitional Small Business Disclosure Format (check one). Yes [ ] No [X]
MEDIAWORX, INC.
FORM 10-QSB QUARTERLY REPORT
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED INCOME STATEMENTS
Consolidated Balance Sheets.......................................F-2
Consolidated Statements of Income.................................F-4
Consolidated Statements of Stockholders' Equity (Deficit) ........F-5
Consolidated Statements of Cash Flows ...........................F-9
Notes to Consolidated Financial Statements ......................F-11
..
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PART II: OTHER INFORMATION
MEDIAWORX, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
September 30, December 31,
ASSETS: 2004 2002
- ------- ----------- -----------
CURRENT ASSETS
Cash and Cash Equivalents $ -- $ 101,807
Accounts Receivable 424,707 35,513
Inventory 6,058 --
Prepaid Expenses 10,645 793
Other Receivables 7,377,087 --
----------- -----------
Total Current Assets 7,818,497 138,113
----------- -----------
FIXED ASSETS
Furniture, Fixtures, and Equipment 20,415 7,362
Software 25,968 12,045
Less Accumulated Depreciation . (11,109) (1,200)
----------- -----------
Net Fixed Assets 35,274 18,207
----------- -----------
OTHER ASSETS
Notes Receivable - Related Party 62,385 59,171
----------- -----------
Total Other Assets 62,385 59,171
----------- -----------
TOTAL ASSETS $ 7,916,156 $ 215,491
=========== ===========
F-2
MEDIAWORX, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(Continued)
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY: 2004 2003
- ------------------------------------ ----------- -----------
CURRENT LIABILITIES
Accounts Payable $ 279,574 $ 41,373
Factoring Line Payable 204,825 --
Bank Overdraft 12,638 --
Accrued Expenses 77,140 40,369
Accrued Interest 33,514 23,408
Notes Payable - Related party 375,000 275,000
Short Term Notes Payable 100,000 100,000
Current Portion Long Term Note Payable 148,956 --
----------- -----------
Total Current Liabilities 1,231,647 480,150
----------- -----------
NON-CURRENT LIABILITIES
Convertible Debenture 240,000 --
Long Term Note Payable 446,867 544,333
----------- -----------
Total Long Term Liabilities 686,867 544,333
----------- -----------
TOTAL LIABILITIES 1,918,514 1,024,483
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock - 10% Cumulative, $.10 par value,
4,000,000 Authorized; 0 and 3,500,000 Issued and
Outstanding at September 30, 2004 and
December 31, 2003 -- 350,000
Common Stock - $.005 par value, 150,000,000
Authorized, 30,098,404 and 6,819,259 Issued and
Outstanding at September 30, 2004 and
December 31, 2003 150,492 34,097
Common Stock to be Issued, 250,000 and 250,000 1,250 1,250
Paid in Capital 9,044,564 763,136
Accumulated Deficit (3,198,664) (1,957,475)
----------- -----------
Total Stockholders' Equity (Deficit) 5,997,642 (808,992)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,916,156 $ 215,491
=========== ===========
See accompanying notes to financial statements.
F-3
MEDIAWORX, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenue $ 666,711 $ 69,415 $ 990,938 $ 69,415
Cost of Revenues 251,290 52,276 502,705 52,276
Operating Expenses
Selling and Marketing 289,189 36,021 591,190 36,021
Printing Services 21,751 21,758 66,589 21,578
General and Administrative 204,002 164,108 583,143 213,198
----------- ----------- ----------- -----------
Total Operating Expenses 514,942 221,707 1,240,922 270,797
----------- ----------- ----------- -----------
Operating Income (Loss) (99,521) (204,568) (752,689) (253,658)
----------- ----------- ----------- -----------
Other Income (Expense)
Miscellaneous Income -- -- -- 8,745
Finance Fees (40,000) (293,250) --
Interest Income (Expense) (25,860) (24,353) (195,250) (45,524)
Permanent Impairment of
Marketable Securities -- -- -- (14,331)
Gain on Forgiveness of Debt -- -- -- 947,637
Write-down of Investment -- (1,190,583) -- (1,190,583)
Total Other Income (Expense) (65,860) (1,214,936) (488,500) (294,056)
----------- ----------- ----------- -----------
Net Income (Loss) $ (165,381) $(1,419,504) $(1,241,189) $ (547,714)
=========== =========== =========== ===========
Basic Earnings Per Shares $ (0.01) $ (0.25) $ (0.08) $ (0.27)
=========== =========== =========== ===========
Diluted Earnings Per Share $ (0.01) $ (0.06) $ (0.08) $ (0.07)
=========== =========== =========== ===========
See accompanying notes to financial statements
F-4
MEDIAWORX, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
-----------
Accumulated Retained
Preferred Stock Common Stock Paid in Comp. Earnings/
Shares Par Value Shares To be Issued Par Value Capital Income (Deficit)
--------- --------- --------- ------------ --------- --------- ----------- -----------
Balance at December 31, 2002 -- $ -- 214,306 -- $ 1,072 $ 106,081 $ 2,500 $(1,120,356)
Issuance of Stock for Services
June 17, 2003 -- -- 10,000 -- 50 19,950 -- --
Issuance of Stock for Services
June 30, 2003 -- -- 800,000 -- 4,000 12,000 -- --
Issuance of Shares in
Connection with MediaWorx
Merger, July 1, 2003 3,500,000 350,000 4,000,000 1,250 20,000 -- -- --
Shares Issued For Cash
July 31, 2003 -- -- 263,016 1,315 87,987 -- --
Shares Issued For Cash
August 15, 2003 -- -- 160,647 803 62,746 -- --
Shares Issued For Cash
September 2, 2003 -- -- 398,318 1,992 145,916 -- --
Shares Issued For Cash
September 17, 2003 -- -- 288,323 1,441 100,811 -- --
Shares Issued For Cash
October 3, 2003 -- -- 73,296 366 24,371 -- --
October 15, 2003 -- -- 69,298 347 23,041 -- --
F-5
MEDIAWORX, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
-----------
(Continued)
Accumulated Retained
Preferred Stock Common Stock Paid in Comp. Earnings/
Shares Par Value Shares To be Issued Par Value Capital Income (Deficit)
----------- ----------- ----------- ------------ ----------- ----------- ----------- ---------
Shares Issued for Cash
November 1, 2003 -- $ -- 192,309 $ -- $ 962 $ 63,942 $ -- $ --
Shares Issued for Cash
November 18, 2003 -- -- 105,572 -- 528 35,103 -- --
Shares Issued for Cash
December 1, 2003 -- -- 113,868 -- 569 37,861 -- --
Shares Issued for Cash
December 15, 2003 -- -- 130,306 -- 652 43,327 -- --
Other Comprehensive Loss (2,500)
Net Loss
(837,119)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------
Balance December 31, 2003 3,500,000 350,000 6,819,259 1,250 34,097 763,136 -- (1,957,475)
Shares Issued For Cash
January 7, 2004 -- -- 173,520 -- 867 57,695 -- --
Shares Issued For Cash
January 19, 2004 -- -- 139,601 -- 698 46,417 -- --
Shares Issued For Cash
February 5, 2004 -- -- 207,309 -- 1,037 68,930 -- --
Shares Issued For Cash
February 28, 2004 -- -- 150,452 -- 752 50,026 -- --
Shares Issued for Cash
March 1, 2004 8,000 40 3,543
F-6
MEDIAWORX, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
-----------
(Continued)
Accumulated Retained
Preferred Stock Common Stock Paid in Comp. Earnings/
Shares Par Value Shares To be Issued Par Value Capital Income (Deficit)
----------- ----------- ----------- ------------ --------- ---------- -------- -----------
Shares Issued for Cash
March 2, 2004 -- $ -- 207,309 -- $ 1,037 $ 68,930 $ -- $ --
Shares Issued for Cash
March 15, 2004 -- -- 28,290 -- 141 9,407 -- --
Shares Issued for Cash
April 1, 2004 144,215 721 47,951
Shares Issued for Cash
April 15, 2004 6,563 33 2,182
Warrants Issued April 30, 2004 126,000
Shares Issued for Cash
May 10, 2004 20,625 103 6,858
Shares Issued for Cash
June 9, 2004 15,471 77 5,144
Preferred Stock Converted into
Common Shares June 10, 2004 (3,500,000) (350,000) 17,500,000 87,500 262,500
Shares Issued for Finance Fees
June 30, 2004 4,762 24 9,977
Net Loss (1,075,808)
----------- ----------- ----------- ----------- --------- ---------- -------- -----------
Balance at June 30, 2004
(Unaudited) -- $ -- 25,425,376 $ 1,250 $ 127,127 $1,534,550 $ -- $(3,033,283)
=========== =========== =========== =========== ========= ========== ======== ===========
See accompanying notes to financial statements.
F-7
MEDIAWORX, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
(Continued)
Accumulated Retained
Preferred Stock Common Stock Paid in Comp. Earnings/
Shares Par Value Shares To be Issued Par Value Capital Income (Deficit)
Shares Issued for Cash
July 1, 2004 -- $ -- 18,733 -- $ 94 $ 6,218 $ -- $ --
Shares Issued in Connection with
Investment Contract
July 1, 2004 -- -- 850,000 4,250 2,333,250 -- --
Shares Issued For Cash
July 16, 2004 -- -- 750,000 3,750 146,250 -- --
Shares Issued in Connection With
Investment Contract
September 10, 2004 3,054,295 15,271 5,024,296
Net Loss -- -- -- -- -- -- -- (1,241,189)
----------- ----------- ----------- ----------- ----------- ----------- --------- -----------
Balance at September 30, 2004
(Unaudited) -- $ -- 30,098,404 $ 1,250 $ 150,492 $ 9,044,564 $ -- $(3,198,664)
=========== =========== =========== =========== =========== =========== ========= ===========
See accompanying notes to financial statements
F-8
MEDIAWORX, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Nine Months Ended
September 30,
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(1,241,189) $ 547,714
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation 9,909 324
Gain on Forgiveness of Debt -- (947,637)
Grant of Stock Based Compensation -- 36,000
Stock Issued for Payment of Expenses 10,001 --
Stock Issued for Investment 7,377,087
Permanent Impairment of Marketable Securities -- 14,331
Write-Down of Investment -- 1,190,583
Change in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (389,194) (37,126)
(Increase) Decrease in Inventory (6,058)
(Increase) Decrease in Prepaid Expenses (9,861) (3,778)
(Increase) Decrease in Related Party Receivable (3,214) (40,776)
(Increase) Decrease in Other Receivables (7,377,087) --
Increase (Decrease) in Accounts Payable 238,201 19,653
Increase (Decrease) in Factoring Line Payable 204,825 --
Increase (Decrease) in Accrued Payroll & Taxes 36,771 51,938
Increase (Decrease) in Bank Overdraft 12,638 --
Increase (Decrease) in Accrued Interest 10,106 28,118
----------- -----------
Net Cash Used in Operating Activities (1,127,065) (236,084)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Short Term Loan to Related Party -- 5,331
Purchase of Marketable Securities -- (5,331)
Purchase of Property and Equipment (13,053) --
Purchase of Software (13,923) (10,048)
----------- -----------
Net Cash Used in Investing Activities (26,976) (10,048)
----------- -----------
F-9
MEDIAWORX, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(Continued)
For the Nine Months Ended
September 30,
2004 2003
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Convertible Debenture $ 245,854 --
Warrants Issued in Connection with Debt Restructuring 126,000 --
Restructuring of Debt 51,490 --
Proceeds from Related Party 100,000 --
Proceeds from Sale of Common Stock 528,890 403,011
----------- -----------
Net Cash Used in Financing Activities 1,052,234 403,011
----------- -----------
Net (Decrease) Increase in Cash and Cash Equivalents (101,807) 156,879
Cash and Cash Equivalents at Beginning of Period 101,807 10,759
----------- -----------
Cash and Cash Equivalents at End of Period $ 0 $ 167,638
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ -- $ --
Franchise and income taxes $ 110 $ --
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the three months ended June 30, 2003, accrued interest and note payable
of $105,565 and $840,939 respectively, were forgiven as well as a payable of
$1,133.
See accompanying notes to financial statements
F-10
MEDIAWORX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------
This summary of accounting policies for MediaWorx, Inc. is presented to assist
in understanding the Company's financial statements. The accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Interim Reporting
- -----------------
The unaudited financial statements as of September 30, 2004 and for the three
and nine month period then ended, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to fairly state the
financial position and results of operations for the three and nine months.
Operating results for interim periods are not necessarily indicative of the
results which can be expected for full years.
Organization and Basis of Presentation
- --------------------------------------
The Company was incorporated under the laws of the State of Wyoming in 1963
under the name MacTay Investment Co. The Company changed its name to Advanced
Gaming Technology, Inc. in 1991. In June 2002, the Company ceased its primary
operating activities, developing and marketing technology for the casino and
hospitality industry.
On July 1, 2003, the Company completed a reverse triangular merger involving
Advanced Capital Services, LLC, a Nevada limited liability company, The
MediaWorx, Inc. a wholly owned subsidiary of Solar Satellite Communications,
Inc. and the Company and it's newly formed wholly owned subsidiary MediaWorx
Acquisition Company, LLC. As a result of the merger the Company acquired the
assets of The MediaWorx, Inc., which consisted primarily of a business plan and
the people involved in the management and procurement of print, packaging, and
cross-media services and changed its name to MediaWorx, Inc. See Note 8 for
detailed description of merger.
Nature of Operations
- --------------------
MediaWorx, Inc. is a media production and management business. The services that
the Company provides include print, audio/video, digital asset management,
graphic design, production and fulfillment for traditional and web-based
marketing and communications products and services. MediaWorx provides the
Company's sales representatives with the support and leverage of a strong
customer service culture, in-house pre-press capabilities, e-business solutions,
and a base of production partners that can fulfill the complexity of any
Customer order. The Company is a virtual media and printing company- it neither
owns nor has its capital tied up in printing equipment or facilities but has
access to an established network of the most capable, technologically advanced
printers and production houses.
F-11
MEDIAWORX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------------------------
Use of Estimates
- ----------------
The financial statements are prepared in conformity with accounting principles
generally accepted in the United States of America. In preparing the financial
statements, management is required to make estimates and assumptions that effect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the date of the balance sheet and statement of
operations for the year then ended. Actual results may differ from these
estimates. Estimates are used when accounting for allowance for bad debts,
collectibility of accounts receivable, amounts due to services providers,
depreciation, and litigation contingencies, among others.
Principals of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of MediaWorx, Inc and
its wholly owned subsidiary MediaWorx Company, LLC. All significant intercompany
accounts and transactions have been eliminated.
Cash Equivalents
- ----------------
For the purpose of reporting cash flows, the Company considers all highly liquid
debt instruments purchased with maturity of three months or less to be cash
equivalents to the extent the funds are not being held for investment purposes.
Concentration of Credit Risk
- ----------------------------
The Company has no significant off-balance-sheet concentrations of credit risk
such as foreign exchange contracts, options contracts or other foreign hedging
arrangements.
Revenue Recognition
- -------------------
The Company's revenues are derived from customized printing and cross media
services. Revenue is recognized when earned as the services are provided or the
product is delivered in accordance with the underlying purchase order. The
Company recognizes gross revenues under the provision of Emerging Issues Task
Force (EITF) Issue No. 99-19 "Recording Revenue Gross as Principal vs. Net as an
Agent". The Company acts as the principal, takes title to the products and has
the risk and rewards of ownership. When the Company generates revenue while
acting as an agent or broker, it records the revenue on a net basis.
F-12
MEDIAWORX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------------------------
Sale of Receivables
- -------------------
Effective May 21, 2004, the Company sells the majority of receivables to a third
party for collection. As of September 30, 2004, the Company sold receivables
with a carrying value of $416,800, in which the Company paid $7,596 in fees for
the three months ended September 30, 2004.
Property and Equipment
- ----------------------
Property and equipment is stated at cost. Depreciation is computed on the
straight-line method, based on the estimated useful lives of the assets of
generally three to five years. Expenditures for maintenance and repairs are
charged to operations as incurred. Major overhauls and improvements are
capitalized and depreciated over their useful lives. Upon sale or other
disposition of property and equipment, the cost and related accumulated
depreciation or amortization if removed from the accounts, and any gain or loss
is included in the determination of income or loss.
Reclassifications
- -----------------
Certain reclassifications have been made in the 2003 financial statements to
conform with the September 30, 2004 presentation.
Net Income (Loss) Per Common Share
- ----------------------------------
Basic earnings per share are computed by dividing earnings available to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted earnings per share reflect per share amounts that would have
resulted if dilutive potential common stock had been converted to common stock.
The following reconciles amounts reported in the financial statements:
For the Three Months Ended September 30,2004
Income Shares Per-Share
(Numerator) (Denominator) Amount
Loss Available to Common Stockholders $ (165,381) 27,568,209 $ (0.01)
Effect of Dilutive Securities:
Warrants -- 200,000
---------- ----------
Loss Available to Common Stockholders - Diluted
Earnings Per Share $ (165,381) 27,768,209 $ (0.01)
========== ========== ========
F-13
MEDIAWORX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------------------------
Net Income (Loss) Per Common Share (Continued)
For the Three Months Ended September 30,2003
Income Shares Per-Share
(Numerator) (Denominator) Amount
Income Available to Common Stockholders $(1,419,504) 5,695,568 $ (0.25)
Effect of Dilutive Securities:
Warrants - 100,000
Convertible Preferred Stock 17,500,000
--------------------- -----------------------
Income Available to Common Stockholders
- - Diluted Earnings Per Share $(1,419,504) 23,295,568 $(0.06)
===================== ======================= ==================
For the Nine Months Ended September 30,2004
Income Shares Per-Share
(Numerator) (Denominator) Amount
Loss Available to Common Stockholders $(1,241,189) 15,597,290 $ (0.08)
Effect of Dilutive Securities:
Warrants - 111,800
--------------------- ----------------------- ------------------
Loss Available to Common Stockholders
- - Diluted Earnings Per Share $ (1,241,189) 15,709,090 $ (0.08)
===================== ======================= ==================
For the Nine Months Ended September 30, 2003
Income Shares Per-Share
(Numerator) (Denominator) Amount
Income Available to Common Stockholders $(547,714) 2,044,837 $ (0.27)
Effect of Dilutive Securities:
Warrants - 35,531
Convertible Preferred Stock 5,833,333
--------------------- ----------------------
Income Available to Common Stockholders
- - Diluted Earnings Per Share $(547,714) 7,913,701 $(0.07)
===================== ======================= ==================
F-14
MEDIAWORX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - INCOME TAXES
- ---------------------
Deferred income taxes (benefits) are provided for certain income and expenses
which are recognized in different periods for tax and financial reporting
purposes. The Company had net operating loss carry forwards for income tax
purposes of approximately $36,459,114, expiring at various dates from December
31, 2015 through December 31, 2023. A loss generated in a particular year will
expire for federal tax purposes if not utilized within twenty years. The
Internal Revenue Code contains provisions that would reduce or limit the
availability and utilization of this net operating loss carry forwards if
certain ownership changes have been or will be taking place. In accordance with
SFAS No. 109, a valuation allowance is provided when it is more likely than not
that all or some portion of the deferred tax asset will not be realized. Due to
the uncertainty with respect to the ultimate realization of the loss carry
forwards, the Company established a valuation allowance for the entire net
deferred income tax asset as of December 31, 2003.
NOTE 3 - PREFERRED STOCK
- ------------------------
The Company has authorized 4,000,000 shares at $.10 par value convertible
preferred stock. Shares of the Series A Preferred Stock are convertible at the
option of the holder on a one-for-five basis, subject to adjustment for
dilution, into shares of common stock. Each share of Series A Preferred Stock
will be automatically converted into common stock upon a sale or transfer of all
or substantially all of MediaWorx's assets for cash or securities, or a
statutory share exchange in which stockholders of MediaWorx may participate.
Each share of Series A Preferred Stock has voting rights equal to the voting
rights of the common stock on an as if converted basis. Upon any liquidation,
dissolution or winding up of MediaWorx, whether voluntary or involuntary, the
holders of record of shares of Series A Preferred Stock shall be entitled,
before any distribution or payment is made upon outstanding shares of common
stock, to be paid an amount equal to the Original Issue Price. If, upon such
liquidation, the assets to be distributed among the holders of Series A
Preferred Stock shall be insufficient to permit such payment, then the entire
assets of MediaWorx to be so distributed shall be distributed ratably among the
holders of Series A Preferred Stock.
On July 1, 2003, the Company issued 3,500,000 shares of preferred stock in
connection with the merger between its wholly owned subsidiary, MediaWorx
Company, LLC and Advanced Capital Services, LLC.
On June 10, 2004, the 3,500,000 preferred shares were converted into 17,500,000
common shares. Thus as of September 30, 2004, there are no preferred shares
outstanding.
F-15
MEDIAWORX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - COMMON STOCK
- ---------------------
The Company has authorized 150,000,000 shares of $0.005 par value common stock.
On June 17, 2003, the Company issued 1,000,000 shares of common stock (10,000
shares after retroactive adjustment for the 100:1 stock split described below)
to a former officer in exchange for continued consulting for the Company. The
shares were valued at $.02 and the Company recorded $20,000 of consulting
expenses.
On June 23, 2003, the Board of Directors approved a proposal to effectuate a 100
to 1 reverse stock split of the Company's outstanding common shares with no
effect on the par value or on the number of authorized shares. As a result of
this action, the total number of outstanding shares of common stock was reduced
from 22,430,587 to 224,306 shares.
On June 30, 2003, the Company issued 800,000 shares of common stock to the Law
Offices of Henry S. Meyer under a legal services and consulting agreement
entered into February 1, 2003. The shares were valued at $.02 and the Company
recorded $16,000 of consulting expenses.
On July 1, 2003, the Company issued 4,000,000 shares of common stock in
connection with the merger between its wholly owned subsidiary, MediaWorx
Company, LLC and Advanced Capital Services, LLC.
Between July 31, 2003 and December 31, 2003, the Company issued 1,794,953 shares
of common stock in connection with a Regulation S offering. The shares were
issued from $.34 to $.40 per share.
During the first quarter ended March 31, 2004, the Company issued 914,481 shares
of common stock to various people in connection with a Regulation S offering.
The shares were issued from $.34 to $.45 per share.
During the second quarter ended June 30, 2004, the Company issued 186,874 shares
of common stock to various people in connection with a Regulation S offering.
The shares were issued from $.33 per share to $.40 per share.
On June 10, 2004, 3,500,000 preferred shares were converted into 17,500,000
common shares. On June 30, 2004, the Company issued 4,762 common shares for
finance fees of $10,000.
During the third quarter ended September 30, 2004, the Company issued 768,733
shares of common stock to various people in connection with a Regulation S
offering. The shares were issued between $.20 and $.37 per share.
On July 1, 2004 the Company issued 850,000 shares in connection with an
investment contract. The shares were valued at $2.75.
On September 10, 2004, the Company issued 3,054,295 common shares in connection
with a financing agreement for $1.65 per share.
F-16
MEDIAWORX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - NOTES PAYABLE
- ----------------------
A note payable to SDA List Brokers, Inc. (SDA), in the amount of $940,939,
accrued interest at 9%, and was due in monthly payments of $6,200 beginning
March 1, 2000. On June 25, 2003, as part of the negotiations for the purchase
and triangular merger described in Note 1 and Note 8 with Advanced Gaming
Technology, the Company received a release and cancellation of this note and the
accrued interest totaling $1,046,504 in return for issuing a promissory note to
SDA in the amount of $25,000, with 2% interest per annum, and a warrant to
purchase up to 100,000 shares of common stock of the Company. If the warrant is
not exercised by the expiration date of June 25, 2004 then the Company shall pay
SDA $75,000. As a result of this transaction, debt forgiveness income in the
amount of $946,504 was recognized during the year ended December 31, 2003. As of
September 30, 2004, the warrants were not exercised, thus the Company now owes a
total of $100,000 on the note, which is in default.
On April 30, 2004, the Company restructured its long-term note payable with
Private Investors Equity wherein the Company would pay sixteen quarterly
installments of $46,052.40 beginning August 30, 2004 at an interest rate of 12
percent per annum. In connection with this restructuring the Company issued
200,000 warrants to issue common stock with an exercise price of $0.60,
exercisable anytime through June 25, 2008. Interest expense of $126,000 was
recorded in connection with the issuance of the warrants.
Factoring Line of Credit
- ------------------------
In May 2004, the Company entered into an agreement with Mercantile Capital, L.P.
wherein Mercantile Capital will purchase the majority of the Company's accounts
receivable. Under the terms of the agreement, the Company would receive 80
percent of the purchase price up front and 20 percent would be held in reserves
until the receivables are collected. Mercantile has extended up to $500,000 of
credit.
Equity Line of Credit
- ---------------------
In February 2004, the Company entered into an equity line of credit with Cornell
Capital Partners, L.P. Under the terms of the agreement, the Company may sell up
to $5,000,000 of its common stock. The sale price is 95% of the lowest closing
bid price for the five days immediately following the notice date. The Company
also gave Cornell Capital Partners an unsecured convertible debenture in the
amount of $240,000 as compensation, as well as 5% of any proceeds from the
equity line of credit.
Unsecured Convertible Debenture
- -------------------------------
During February, 2004 the Company issued an unsecured convertible debenture in
connection with the Equity Line of Credit. The $240,000 is due and payable, with
5% interest, three years from the date of issuance, unless sooner converted into
shares of common stock. The debenture is convertible, subject to a maximum cap
of $50,000 per day any time up to the maturity at a conversion price equal to
100% of the lowest closing bid price of the common stock for the three
F-17
MEDIAWORX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - NOTES PAYABLE (Continued)
- ----------------------------------
Unsecured Convertible Debenture (Continued)
- -------------------------------------------
preceding trading days. At maturity, the Company has the option to pay the
principal balance and accrued interest in cash or convert the debenture into
common shares at a price equal to 100% of the lowest closing bid price for the
three prior trading days. The debentures have a beneficial conversion feature
that resulted in a debt discount of $5,854. Because the debentures were
convertible at the date of issuance the entire debt discount was charged to
interest expense immediately.
As of September 30, 2004 and December 31, 2003 the following amounts are due:
September 30, December 31,
2004 2003
Current Note Payable - Related Party
Note Payable, Interest at 2%, payable to shareholders of Company,
due upon request $ 375,000 $ 275,000
========= =========
Long Term Note Payable
Convertible Debenture $ 240,000 $ --
Note Payable, Interest at 12%, Due in 16 Quarterly payments of
$46,052.40, beginning August 30, 2004 595,823 544,333
--------- ---------
835,823 544,333
Less: Current Portion (148,956) --
--------- ---------
Total Long-Term Notes Payable $ 686,867 $ 544,333
========= =========
NOTE 6 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
The Company filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code in Las Vegas, Nevada on August 26, 1998. Under Chapter 11, certain claims
against the Debtor in existence prior to the filing of the petitions for relief
under the Federal Bankruptcy Laws are stayed while the Debtor continues business
operations as Debtor-in-possession. These claims were reflected in the March 31,
1999 balance sheet as "liabilities subject to compromise". The bankruptcy plan
was approved June 29, 1999 and became effective on August 19, 1999. On February
15, 2000, the Bankruptcy Court in the District of Las Vegas approved the final
decree of the Company closing the Chapter 11 bankruptcy case of the Company.
F-18
MEDIAWORX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 - COMMITMENTS AND CONTINGENCIES (Continued)
- --------------------------------------------------
The Company accounted for the reorganization using fresh-start reporting.
Accordingly, all assets and liabilities were restated to reflect their
reorganization value, which approximates fair value at the date of
reorganization.
NOTE 7 - GOING CONCERN
- ----------------------
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States, which
contemplates the Company as a going concern. However, the Company has sustained
substantial operating losses in recent years and has used substantial amounts of
working capital in its operations. Realization of a major portion of the assets
reflected on the accompanying balance sheet is dependent upon continued
operations of the Company, which, in turn, is dependent upon the Company's
ability to meet its financing requirements and succeed in its future operations.
Management believes that actions presently being taken to revise the Company's
operating and financial requirements provide them with the opportunity for the
Company to continue as a going concern.
NOTE 8 - MERGER
- ---------------
On July 1, 2003, the Company completed a reverse triangular merger ("the
Merger") whereby the Company acquired the assets of a subsidiary of Solar
Satellite Communication, Inc. ("SSCI"), a print and cross-media marketing and
management company. The Merger involved Advanced Capital Services, LLC, a Nevada
limited liability company ("ACLLC"), MediaWorx Acquisition Company, LLC, a newly
formed Nevada limited liability company and wholly owned subsidiary of the
Company ("MWAC"), and the Company.
ACLLC, owned by Diamond Capital LLC and Quest Capital Resources, LLC, purchased
the assets of The MediaWorx, Inc., a wholly owned subsidiary of Solar Satellite
Communication, Inc., a Colorado corporation, for 3,000,000 ACLLC membership
interests. The assets of SSCI were primarily the business plan and people
involved in the management and procurement of print, packaging, and cross-media
services.
On July 1, 2003, as part of the Merger, ACLLC was merged pursuant to Nevada law
into MWAC. As a consequence of the Merger, MWAC became the surviving entity and
continues to be a wholly owned subsidiary of the Company. A copy of the
associated Plan of Merger was filed with a Schedule 14C Information Statement on
July 1, 2003.
In the exchange, as described above, the original members of ACLLC received
4,000,000 of the Company's common shares and 3,500,000 preferred shares
convertible 1 to 5 into common shares with voting rights as if converted, i.e.,
17,500,000 common shares, and SSCI received 250,000 of the Company's shares. As
of December 31, 2003, the 250,000 common shares have not been issued to SSCI.
F-19
MEDIAWORX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - MERGER (Continued)
- ---------------------------
Additionally, ACLLC purchased a convertible promissory note held by Private
Investors Equity, LLC that was originated when SSCI received $500,000 from
Private Investors Equity, LLC. In lieu of exercising the default provisions,
ACLLC converted the Note and accrued interest into 27,216,650 SSCI common shares
and converted 250,000 Preferred C shares into shares with conversion rights of 1
to 40 into shares having conversion and voting rights of 1 to 360. These shares
were partially distributed to ACLLC and to the owners of ACLLC, Diamond Capital
LLC and Quest Capital Resources, LLC. As a result, MWAC now has 49% voting
control of SSCI and Diamond and Quest respectively each own 23% voting control
of SSCI. Furthermore as a result of this transaction, MWAC holds the note
payable of $500,000 and accrued interest due to Private Investors Equity, LLC.
The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition. The allocation of the
purchase price is subject to refinement when the valuation of certain intangible
assets are adjusted.
2003
Assets:
Investment in SSCI $ 1,191,333
================
Liabilities:
Accrued expenses $ 46,333
Long Term Debt 775,000
----------------
Total Liabilities 821,333
----------------
Equity:
Preferred Stock $ 350,000
Common Stock 20,000
---------------
Total Equity 370,000
===============
Total Liabilities and Equity $ 1,191,333
===============
The results of operations for MWAC have been included in the consolidated
financial statements since the inception of MWAC. The aggregate purchase price
was 4,000,000 common shares valued at par value (4,000,000 x $.005) and
3,500,000 preferred shares valued at par value (3,500,000 x $.10). Total value
of $370,000.
The acquired intangible assets of $1,199,333 was assigned to research and
development assets that were written off at the date of acquisition in
accordance with FASB interpretation No. 4, Applicability of FASB Statement No. 2
to Business Combinations Accounted for by the Purchase Method. Those write-offs
are included in Other Expense - Write Down of Investment.
F-20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This quarterly report on Form 10-QSB and the information incorporated by
reference herein contain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements include, but are
not limited to, declarations regarding the intent, belief or current
expectations of the Company and its management, projected sales, gross margin
and net income figures, the availability of capital resources, and plans
concerning products and market acceptance. Forward-looking statements are
inherently subject to risks and uncertainties, many of which cannot be predicted
with accuracy and some of which may not even be anticipated. Future events and
actual results, financial and otherwise, could differ materially from those set
forth in or contemplated by the forward-looking statements herein and any
forward looking statements should be considered accordingly.
The following discussion should be read in conjunction with the Financial
Statements and notes thereto:
OVERVIEW
MediaWorx, Inc. is a media production and management agency. The Company manages
the production of all of a Customer's marketing and communication materials,
including printing, packaging, signage, direct mail, fulfillment, promotional
specialties, audio/video, digital asset management, multi-media and Web
publications. The Company provides consultative input to insure that concepts
are turned into practical solutions. As a single source solution partner, we
simplify the process for our Customers and seek "best fit" solutions. MediaWorx
is targeting commercial and other organizations with annual media expenditures
of $50,000 or more.
MediaWorx recognizes that print and media buying encompasses a strong
relationship aspect between the provider and the Customer. MediaWorx's business
model is built on providing the Company's sales representatives with the support
and leverage of a strong customer service culture, in-house pre-press
capabilities, e-business solutions, and a base of production partners that can
fulfill the complexity of any Customer order. The Company is a virtual
printing/cross-media publishing company- it neither owns nor has its capital
tied up in printing/multi-media equipment or facilities but works with an
established network of the most capable, technologically advanced printers and
production houses. MediaWorx's Customer's benefit by getting superior customer
service - an end-to-end, single source solution from design and pre-press, to
production by the most cost-effective and time efficient production house,
through distribution and digital asset management.
The Company's business strategy is three-fold:
o Concentrate on commercial printing, a $110 billion business in the United
States. This is still a highly fragmented industry with more than 58,000
entities providing printing services. MediaWorx has identified and works
closely with a network of select printers with specific capabilities,
equipment and technology that can be matched with specific printing jobs.
21
o Hire high volume Account Representatives and acquire Print Brokers with
existing "books" of business. Account Representatives/Brokers recognize the
following benefits of joining MediaWorx: increased sales productivity as
the Company takes on the administrative and client management functions
freeing them to sell more; additional product offerings resulting from the
expanded list of printers available; and additional customer support and
customer continuity. Most importantly these benefits result in increased
earning potential for the Account Representatives/Brokers, as well as the
opportunity to participate in the upside growth of a public company.
o Expand into other media. The processes from design through fulfillment are
similar for electronic media. It is a relatively simple extension for
MediaWorx to offer other media products and services. Such services include
the production of videos, CDs, interactive CDs, web enabled publications,
e-newsletters, and websites with such capabilities as electronic shopping
carts, inventory control and other e-commerce capabilities. Furthermore,
because we are maintaining Customers' content across various media, we can
provide a central repository or digital asset library, thus providing
significant benefits to Customers in the management and control of their
intangible assets such as trademarks, logos, and service marks.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2003
REVENUES AND COST OF REVENUES
The Company had sales of $666,711 in the third quarter compared to sales of
$69,415 for the same period in 2003.
Fifty percent of the third quarter sales were generated by the four Company's
sales representatives from 29 customers. Twelve of these customers were new to
the Company. Of these new customers, we estimate that 60% fall within our target
customer segment, purchasing over $50,000 of printing and cross media products.
Fifty percent of revenue was accounted for on a net basis. This was income
generated by Sullivan Print Management, acting as an independent sales agent for
the Company. Sullivan Print Management's largest customer is America Online.
Cost of sales in the third quarter of 2004 was $251,290, or 38% of sales. This
compared to cost of sales of $52,276 or 75% for the same period of 2003. The
improvement is due to the fact that the revenue from Sullivan Print Management
was recorded on a net basis.
22
OPERATING EXPENSES
Operating expenses for the three months ended September 30, 2004 were $514,942
compared to $221,707 for the same period in 2003.
Third quarter 2004 operating expenses included $289,189 for sales and marketing
expense, $21,751 for printing services (pre-press department), and $204,002 for
general and administrative costs. Expenses associated with the Sullivan Print
Management contract resulted in increased sales and marketing expense over the
previous quarters. General and administrative expenses included a one-time
charge of $11,544 for legal expenses associated with the negotiation of the
Sullivan Print Management contract.
OTHER EXPENSES
Other expenses totaled $650,860 in the third quarter. This included $40,000 in
financing fees, associated with financing of the Sullivan Print Management
contract.
In the same period of 2003, other expenses were $1,214,936, including $1,190,583
write-down of investment associated with the Merger transaction.
NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2003
REVENUES AND COST OF REVENUES
Revenues for the nine months ending September 30, 2004 were $990,938 compared to
$69,415 of revenues in 2003.
Through the first six months of 2004, we provided our services to 72 customers.
The majority of customers are repeat customers, placing multiple orders
through-out the year, depending on their needs. These customers are 56%
commercial, 28% agencies, and 16% associations / government / educational
institutions. Approximately 70% of these customers are in our target category,
spending over $50,000 in printing and cross media products.
Cost of Revenues for the nine months ending September 30, 2004 was $502,705 or
51% of sales. Cost of revenues for the same period in 2003 was $52,276 or 75% of
sales. The 24% point improvement in cost of sales is largely attributable to
revenues being accounted for on a net basis for Sullivan Print Management.
OPERATING EXPENSES
Operating expenses for the nine months ended September 30, 2004 were $1,240,922
compared to $270,797 for the same period in 2003.
In 2004, operating expenses included $591,190 for sales and marketing expense,
$66,589 for printing services (pre-press department), and $583,143 for general
and administrative costs. Sales and marketing expenses included one-time charges
23
totaling $95,000 associated with acquiring sales representatives and independent
sales agents. General and administrative expenses included one-time charges
totaling $11,544 also associated with acquiring independent sales agents.
OTHER EXPENSES
In the nine months ending September 30, 2004, other expenses totaled $488,500.
Financing fees were $293,250, including $240,000 expense for a convertible
debenture associated with the Cornell Capital Equity Line of Credit (see
Liquidity and Capital Resources). Interest expense was $195,250, including a one
time charge of $126,000, associated with the restructure of the Private
Investors' Equity Debt (see Liquidity and Capital Resources).
In nine months ending September 30, 2003, other expense totaled $294,056. This
included other income of $947,637 from the settlement of the note payable with
SDA List Brokers, Inc. previously described. This was more than offset by the
write-down of investment of $1,190,583 associated with the merger transaction
described in Note 8 of the Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company will require additional capital to continue operations. There is no
assurance that capital will be available. In order to continue to facilitate the
Company's capital requirements, the Company borrowed $100,000 from current
shareholders.
The Company engaged an offshore licensed brokerage firm to raise on a best
efforts basis from $1.5 million to $3.0 million, depending on market price, for
11,000,000 of the Company's common stock. In the first nine months ending
September 30, 2004, the Company completed a placement of 1,870,088 shares of
common stock with investors located outside of the United States in exchange for
$525,320. The shares were offered pursuant to an exemption from registration
afforded by Regulation S to the Securities Act of 1933. Shares sold pursuant to
Regulation S are deemed restricted and may not be sold to any U.S. Person (as
that term is defined in the Regulation) for a period of one (1) year from date
of sale. Thereafter, the shares will be subject to the restrictions of Rule 144.
In February 2004, the Company entered into an equity line of credit with Cornell
Capital Partners, L.P. Pursuant to the equity line of credit, the Company may,
at it's discretion, periodically sell to Cornell Capital Partners shares of
common stock for a total purchase price of up to $5,000,000. For each share of
common stock purchased under the equity line of credit, Cornell Capital Partners
will pay 95% of the bid price on the Over-the-Counter Bulletin Board or other
principal market on which our common stock is traded for the five days
immediately following the notice date. The bid price is defined as the closing
bid price, as reported by Bloomberg L.P., of the common stock on the principal
market or if the common stock is not traded on a principal market, the highest
reported bid price as furnished by the National Association of Securities
Dealers, Inc. Cornell Capital Partners is a private limited partnership whose
business operations are conducted through its general partner, Yorkville
Advisors, LLC. The Company also gave Cornell Capital Partners a compensation
debenture in the amount of $240,000 upon execution of the equity line of credit.
Further, the Company has agreed to pay Cornell Capital Partners, L.P. 5% of the
proceeds that we receive under the Equity Line of Credit. In addition, the
24
Company engaged Newbridge Securities Corporation, a registered broker-dealer, to
advise the Company in connection with the equity line of credit. For its
services, Newbridge Securities Corporation received 4,762 shares of our common
stock.
The Note Payable to Private Investors' Equity, LLC, was restructured with the
interest payments for the months August 2003 through August 2004 capitalized.
The new principal balance is $595,823. Private Investor's Equity was granted
200,000 warrants in consideration for this restructuring.
In May 2004, the Company entered into an agreement with Mercantile Capital, LP
for a $500,000 line of credit secured by the Company's receivables. Under the
terms of the agreement, Mercantile advances the Company eighty percent of a
Customer invoice. The remaining 20% is held in reserve until the receivable is
collected. As of September 30, 2004, accounts receivable (including factoring
receivables) were 424,707, an increase of $389,194 since December 31, 2003. The
factoring line payable was $204,825.
In July 2004, the Company placed 850,000 newly issued common shares into a
guaranteed investment for a five year term. The Company expects to receive
income from its investment in the 4th quarter of 2004, and annually thereafter.
The stock is guaranteed to be returned at the end of the investment period.
In September 2004, the Company signed an agreement with a private investment
company for the purchase by the investment company of $5.2 million of
MediaWorx's common shares in exchange for shares of the investment company. The
investment company is a newly formed London-based company that has applied for
its shares to be admitted to trading on the London stock exchange as an
investment trust. The investment company has been established specifically to
invest in US micro cap companies with long term growth potential. The investment
company expects its shares to be trading on the London Stock Exchange in the 4th
quarter of 2004. The Company issued 3,054,295 common shares in connection with
this agreement.
INFLATION AND REGULATION
The Company's operations have not been, and in the near term are not expected to
be, materially affected by inflation or changing prices. The Company encounters
competition from a variety of firms offering similar products in its market
area. Many of these firms have long-standing customer relationships and are well
staffed and well financed. The Company believes that competition in the industry
is based on competitive pricing, although the ability, reputation and technical
support of a concern is also significant. The Company does not believe that any
recently enacted or presently pending proposed legislation will have a material
adverse effect on its results of operations.
25
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company may become involved in various lawsuits and legal
proceedings which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm our business. Currently the
Company is not aware of any such legal proceedings or claims that we believe
will have, individually or in the aggregate, a material adverse affect on the
business, financial condition or operating results.
ITEM 2. CHANGES IN SECURITIES
During the third quarter, the Company completed a placement of 768,733 shares of
common stock with investors located outside of the United States in exchange for
$156,312. For the first nine months ending September 30, 2004, the Company
completed a placement of 1,870,088 shares in exchange for $525,320. The shares
were offered pursuant to an exemption from registration afforded by Regulation S
to the Securities Act of 1933. Shares sold pursuant to Regulation S are deemed
restricted and may not be sold to any U.S. Person (as that term is defined in
the Regulation) for a period of one (1) year from date of sale. Thereafter, the
shares will be subject to the restrictions of Rule 144.
On July 1, 2004 the Company issued 850,000 shares in connection with an
investment contract.
On September 10, 2004, the Company issued 3,054,295 common shares in connection
with a financing agreement.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
Exhibit 32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
Form 8-K : None
26
SIGNATURES
In accordance with the requirements of the Exchange Act, the caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
MEDIAWORX, INC.
(Registrant)
DATE: By: /s/ LINDA A. BROENNIMAN
---------------------------------------
November 18, 2004 Linda A. Broenniman
Chief Executive Officer and Director
(Principal Executive and Financial Officer)
27
EXHIBIT 31.1
SECTION 302 CERTIFICATIONS
I, Linda Broenniman, certify that:
1. I have reviewed this quarterly report on form 10-QSB of MediaWorx,
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 report, fairly present in all material respects the
financial condition, results of operations and cash flows of the as of, and for,
the periods presented in this 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 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 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
control which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the 's internal controls.
6. The Registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of my most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 19, 2004
/s/ Linda Broenniman
- -------------------------------------------
Linda Broenniman
Chief Executive Officer and Director
(Principal Executive and Financial Officer)
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of MediaWorx, Inc. on Form
10-QSB for the period ending June 30, 2004, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Linda Broenniman,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of my knowledge and belief:
(1) the Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in
all material respects, the financial condition and result of
operations of the Company.
/s/ Linda Broenniman
- -------------------------------------------
Linda Broenniman
Chief Executive Officer and Director
(Principal Executive and Financial Officer)
November 19, 2004
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
has been provided to the Company and will be retained by the Company and
furnished to the Securities and Exchange Commission or its staff upon request.