U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-QSB
Quarterly Report Pursuant To Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarterly Period Ended January 31, 2004.
Commission File Number 000-28761.
JAG MEDIA HOLDINGS, INC.
(Exact name of Registrant as specified in its Charter)
Nevada 88-0380546
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6865 SW 18th Street
Suite B-13
Boca Raton, Florida 33433
(Address of Principal Executive Offices)
(561) 393-0605
(Issuer's Telephone Number, Including Area Code)
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
As of March 11, 2004, the Registrant had 41,939,277 shares of Class A Common
Stock, 1,002,682 shares of Series 1 Class B Common Stock, 376,601 shares of
Series 2 Class B Common Stock and 21,500 shares of Series 3 Class B Common Stock
issued and outstanding.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
Jag Media Holdings, Inc. and Subsidiaries
Index to Financial Statements
PAGE
----
Condensed Consolidated Balance Sheet at January 31, 2004 (Unaudited) F-2
Condensed Consolidated Statements of Operations
Six and Three Months Ended January 31, 2004 and 2003 (Unaudited) F-3
Condensed Consolidated Statement of Changes in Stockholders' Deficiency
Six Months Ended January 31, 2004 (Unaudited) F-4
Condensed Consolidated Statements of Cash Flows
Six Months Ended January 31, 2004 and 2003 (Unaudited) F-5
Notes to Condensed Consolidated Financial Statements F-6/13
* * *
F-1
JAG Media Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
January 31, 2004
(Unaudited)
Assets
------
Current assets:
Cash and cash equivalents $ 131,060
Accounts receivable, net of allowance for doubtful accounts of $7,500 22,519
Other current assets 76,285
------------
Total current assets 229,864
Equipment, net of accumulated depreciation of $153,745 16,813
------------
Total $ 246,677
============
Liabilities and Stockholders' Deficiency
----------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 138,839
Deferred revenues 52,682
Notes payable to officers 400,000
------------
Total liabilities 591,521
------------
Mandatorily redeemable Class B common stock; par value $.00001 per share:
400,000 shares designated as Series 2; 380,829 shares issued
and outstanding 4
40,000 shares designated as Series 3; 21,500 shares issued and
outstanding -
------------
Total 4
------------
Commitments and contingencies
Stockholders' deficiency:
Preferred stock; par value $.00001 per share; 15,000,000 shares
authorized; none issued -
Class A common stock, par value $.00001 per share; 155,000,000
shares authorized; 40,844,311 shares issued and outstanding 408
Class B common stock, par value $.00001 per share; 30,000,000
shares authorized; 3,000,000 shares designated as Series 1;
1,013,818 shares issued and outstanding 10
Additional paid-in capital 41,621,516
Unearned compensation (44,479)
Accumulated deficit (41,922,303)
------------
Total stockholders' deficiency (344,848)
------------
Total $ 246,677
============
See Notes to Condensed Consolidated Financial Statements.
F-2
Jag Media Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Six and Three Months Ended January 31, 2004 and 2003 (Unaudited)
Six Months Three Months
Ended January 31, Ended January 31,
------------------------------ ------------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenues $ 120,936 $ 240,955 $ 74,563 $ 116,005
------------ ------------ ------------ ------------
Operating expenses:
Cost of revenues 135,350 428,121 54,260 229,936
Selling expenses 5,327 1,729 2,476 816
General and administrative
expenses 746,417 1,007,567 281,735 543,886
------------ ------------ ------------ ------------
Totals 887,094 1,437,417 338,471 774,638
------------ ------------ ------------ ------------
Loss from operations (766,158) (1,196,462) (263,908) (658,633)
Other income (expense):
Interest income 713 2,029 126 1,907
Interest expense (18,000) (5,424) (9,000) (2,713)
------------ ------------ ------------ ------------
Net loss $ (783,445) $ (1,199,857) $ (272,782) $ (659,439)
============ ============ ============ ============
Basic net loss per share $ (.02) $ (.03) $ (.01) $ (.02)
============ ============ ============ ============
Basic weighted average common
shares outstanding 41,643,418 35,199,788 41,680,972 37,653,562
============ ============ ============ ============
See Notes to Condensed Consolidated Financial Statements.
F-3
JAG Media Holdings, Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Stockholders' Deficiency
Six Months Ended January 31, 2004
(Unaudited)
Common Stock
--------------------------------------------
Class A Series 1 CLass B
---------------------- -------------------- Additional
Number of Number of Paid-in Unearned
Shares Amount Shares Amount Capital Compensation
---------- ------ --------- ------ ----------- ------------
Balance, August 1, 2003 40,212,882 $402 1,031,143 $10 $41,217,522 $(140,884)
Sale of Class A common stock and
1,500 shares of redeemable Series 3
Class B common stock through
private placement 35,000 - 50,000
Effects of issuance of common stock in
exchange for services 400,000 4 239,996 (57,000)
Amortization of unearned compensation 153,405
Sales of common stock pursuant to
equity financing agreement, net of
expenses of $6,000 179,104 2 113,998
Effects of conversion of Series 1 Class B
common stock into Class A common
stock 17,325 (17,325)
Net loss
---------- ---- --------- --- ----------- ----------
Balance, January 31, 2004 40,844,311 $408 1,013,818 $10 $41,621,516 $ (44,479)
========== ==== ========= === =========== ==========
Accumulated
Deficit Total
------------ ---------
Balance, August 1, 2003 $(41,138,858) $ (61,808)
Sale of Class A common stock and
1,500 shares of redeemable Series 3
Class B common stock through
private placement 50,000
Effects of issuance of common stock in
exchange for services 183,000
Amortization of unearned compensation 153,405
Sales of common stock pursuant to
equity financing agreement, net of
expenses of $6,000 114,000
Effects of conversion of Series 1 Class B
common stock into Class A common
stock
Net loss (783,445) (783,445)
------------ ---------
Balance, January 31, 2004 $(41,922,303) $(344,848)
============ =========
See Notes to Condensed Consolidated Financial Statements.
F-4
Jag Media Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Six Months Ended January 31, 2004 and 2003
(Unaudited)
2004 2003
----------- -----------
Operating activities:
Net loss $ (783,445) $(1,199,857)
Adjustments to reconcile net loss to net cash used in
operating activities:
Provision for doubtful accounts 2,750
Depreciation 8,679 17,886
Amortization of unearned compensation 153,405 375,267
Effects of issuance of common stock in exchange
for services 183,000 227,832
Changes in operating assets and liabilities:
Accounts receivable (17,359) (14,047)
Other current assets 7,500 (38,550)
Accounts payable and accrued expenses (15,890) (734,661)
Deferred revenues 7,953
----------- -----------
Net cash used in operating activities (456,157) (1,363,380)
----------- -----------
Financing activities:
Net proceeds from private placements of common stock 164,000 2,258,250
Proceeds from exercise of stock options 8,960
----------- -----------
Net cash provided by financing activities 164,000 2,267,210
----------- -----------
Net increase (decrease) in cash and cash equivalents (292,157) 903,830
Cash and cash equivalents, beginning of period 423,217 7,107
----------- -----------
Cash and cash equivalents, end of period $ 131,060 $ 910,937
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
F-5
JAG Media Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of presentation:
In the opinion of management, the accompanying unaudited
condensed consolidated financial statements reflect all
adjustments, consisting of normal recurring accruals, necessary
to present fairly the financial position of JAG Media Holdings,
Inc. ("JAG Media") and its subsidiaries as of January 31, 2004,
their results of operations for the six and three months ended
January 31, 2004 and 2003, their changes in stockholders'
deficiency for the six months ended January 31, 2004 and their
cash flows for the six months ended January 31, 2004 and 2003.
JAG Media and its subsidiaries are referred to together herein
as the "Company." Pursuant to rules and regulations of the
Securities and Exchange Commission (the "SEC"), certain
information and disclosures normally included in financial
statements prepared in accordance with accounting principles
generally accepted in the United States of America have been
condensed or omitted from these consolidated financial
statements unless significant changes have taken place since the
end of the most recent fiscal year. Accordingly, these condensed
consolidated financial statements should be read in conjunction
with the consolidated financial statements, notes to
consolidated financial statements and the other information in
the audited consolidated financial statements of the Company as
of July 31, 2003 and for the years ended July 31, 2003 and 2002
(the "Audited Financial Statements") included in the Company's
Annual Report on Form 10-KSB (the "10-KSB") for the year ended
July 31, 2003 that was previously filed with the SEC.
The results of the Company's operations for the six months ended
January 31, 2004 are not necessarily indicative of the results
of operations to be expected for the full year ending July 31,
2004.
As further explained in Note 1 to the Audited Financial
Statements, the Company gathers and compiles financial and
investment information from contacts at financial institutions,
experienced journalists, money managers, analysts and other Wall
Street professionals and generates revenues by releasing such
information to subscribers on a timely basis through facsimile
transmissions and a web site.
The accompanying condensed consolidated financial statements
have been prepared assuming that the Company will continue as a
going concern. However, as shown in the accompanying condensed
consolidated financial statements, the Company only generated
revenues of approximately $121,000 and $241,000, and it incurred
net losses of approximately $783,000 and $1,200,000 and cash
flow deficiencies from operating activities of approximately
$456,000 and $1,363,000 for the six months ended January 31,
2004 and 2003, respectively. The Company had a cash balance of
only $131,000, a working capital deficiency of $362,000 and a
stockholders' deficiency of approximately $345,000 as of January
31, 2004. These matters raise substantial doubt about the
Company's ability to continue as a going concern.
F-6
JAG Media Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of presentation (concluded):
Although the Company's net losses included net noncash charges
of approximately $345,000 and $624,000 for the six months ended
January 31, 2004 and 2003, respectively, primarily for the
amortization of unearned compensation and the issuance of common
stock and stock options in exchange for services, management
believes that, in the absence of a substantial increase in
subscription revenues, it is probable that the Company will
continue to incur losses and negative cash flows from operating
activities through at least January 31, 2005 and that the
Company will need to obtain additional equity or debt financing
to sustain its operations until it can market its services,
expand its customer base and achieve profitability.
As further explained in Note 4 herein, the Company entered into
an agreement with an investment partnership pursuant to which it
has, in effect, "put" options whereby, subject to certain
conditions, it is able to require the investment partnership to
purchase shares of its common stock from time to time at prices
based on the market value of its shares. The maximum aggregate
purchase price under this equity line is $10,000,000. This
equity line became available in August 2002 and expires in
August 2004. As of January 31, 2004 and March 11, 2004, the
Company had received gross proceeds of $2,005,000 and
$2,860,000, respectively, from the exercise of "put" options.
Although the timing and amount of the required purchases under
the agreement are at the Company's discretion, the purchases are
subject to certain conditions as also explained in Note 4 herein
and the ability of the investment partnership to fund the
purchases.
Management believes that the Company will be able to generate
sufficient revenues from its remaining facsimile transmission
and web site operations and obtain sufficient financing from its
agreement with the investment partnership prior to its
expiration in August 2004 or through other financing agreements
to enable it to continue as a going concern through at least
January 31, 2005. However, if the Company cannot generate
sufficient revenues and/or obtain sufficient additional
financing, if necessary, by that date, the Company may be forced
thereafter to restructure its operations, file for bankruptcy or
entirely cease its operations.
The accompanying condensed consolidated financial statements do
not include any adjustments related to the recoverability and
classification of assets or the amount and classification of
liabilities that might be necessary should the Company be unable
to continue as a going concern.
F-7
JAG Media Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2 - Net earnings (loss) per share:
The Company presents "basic" earnings (loss) per share and, if
applicable, "diluted" earnings per share pursuant to the
provisions of Statement of Financial Accounting Standards No.
128, "Earnings per Share". Basic earnings (loss) per share is
calculated by dividing net income or loss by the weighted
average number of common shares outstanding during each period
(see Notes 1, 2 and 7 to the Audited Financial Statements). The
calculation of diluted earnings per share is similar to that of
basic earnings per share, except that the denominator is
increased to include the number of additional common shares that
would have been outstanding if all potentially dilutive common
shares, such as those issuable upon the exercise of outstanding
stock options and warrants, were issued during the period and
the treasury stock method had been applied to the proceeds from
their exercise.
As of January 31, 2004, there were options and warrants
outstanding for the purchase of a total of 3,585,000 shares of
Class A and Series 1 Class B common stock (see Note 4 herein).
However, diluted per share amounts have not been presented in
the accompanying condensed consolidated statements of operations
because the Company had a net loss in the six and three months
ended January 31, 2004 and 2003 and the assumed effects of the
exercise of the Company's stock options and warrants that were
outstanding during all or part of those periods would have been
anti-dilutive.
Note 3 - Income taxes:
As of January 31, 2004, the Company had net operating loss
carryforwards of approximately $26,058,000 available to reduce
future Federal and state taxable income which will expire from
2019 through 2024.
As of January 31, 2004, the Company's deferred tax assets
consisted of the effects of temporary differences attributable
to the following:
Deferred revenues, net $ 21,000
Unearned compensation 2,123,000
Net operating loss carryforwards 10,407,000
-----------
12,551,000
Less valuation allowance (12,551,000)
------------
Total $ -
============
Due to the uncertainties related to, among other things, the
changes in the ownership of the Company, which could subject its
net operating loss carryforwards to substantial annual
limitations, and the extent and timing of its future taxable
income, the Company offset its net deferred tax assets by an
equivalent valuation allowance as of January 31, 2004.
F-8
JAG Media Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 3 - Income taxes (concluded):
The Company had also offset the potential benefits from its net
deferred tax assets by an equivalent valuation allowance during
the year ended July 31, 2003. As a result of the increases in
the valuation allowance of $251,000 and $81,000 during the six
and three months ended January 31, 2004, respectively, and
$182,000 and $179,000 during the six and three months ended
January 31, 2003, respectively, there are no credits for income
taxes reflected in the accompanying condensed consolidated
statements of operations to offset pre-tax losses.
Note 4 - Issuances of common stock and stock options:
Equity financing agreement:
As further explained in Note 4 to the Audited Financial
Statements, on April 9, 2002, the Company entered into an
equity line purchase agreement (the "2002 Equity Line
Agreement") with Cornell Capital Partners L.P. ("Cornell
Capital") pursuant to which the Company has, in effect, put
options whereby, subject to certain conditions, it can
require Cornell Capital to purchase shares of its Class A
common stock from time to time at an aggregate purchase
price of $10,000,000. The 2002 Equity Line Agreement became
available on August 28, 2002 and will extend for 24 months
unless it is terminated earlier at the discretion of the
Company. The purchase price will be 95% of the lowest
closing bid price of the Company's Class A common stock over
a specified number of trading days commencing on specified
dates. Cornell Capital shall be entitled to a cash fee equal
to 5% of the gross proceeds received by the Company from
Cornell Capital in connection with each put.
The timing and amount of the required purchases shall be at
the Company's discretion subject to certain conditions
including (i) a maximum purchase price to be paid by Cornell
Capital for each put of $500,000; (ii) at least five trading
days must elapse before the Company can deliver a new put
notice to Cornell Capital; (iii) the registration statement
covering the shares issuable to Cornell Capital pursuant to
the equity line must remain effective at all times and (iv)
on any given closing date, there shall be at least one bid
for the Class A common stock on the Nasdaq OTC Bulletin
Board. In addition, the obligation of Cornell Capital to
complete its purchases under the 2002 Equity Line Agreement
is not secured or guaranteed and, accordingly, if Cornell
Capital does not have available funds at the time it is
required to make a purchase, the Company may not be able to
force it to do so.
During the six months ended January 31, 2004, Cornell
Capital was required to pay $120,000 and it received 179,104
shares of Class A common stock and the Company received
proceeds of $114,000, net of $6,000 of placement fees, as a
result of the exercise by the Company of put options
pursuant to the 2002 Equity Line Agreement. As of January
31, 2004, the Company had the ability to require Cornell
Capital to purchase shares of its common stock pursuant to
the 2002 Equity Line Agreement at an aggregate purchase
price of $7,995,000 through August 28, 2004. (See Note 8).
F-9
JAG Media Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4 - Issuances of common stock and stock options (continued):
Shares sold through private placement:
During the six months ended January 31, 2004, the Company
sold 35,000 shares of its Class A common stock and 1,500
shares of its Series 3 Class B common stock through a
private placement intended to be exempt from registration
under the Securities Act of 1933 and it received proceeds of
$50,000.
Stock dividend:
During the six months ended January 31, 2004, the Company
issued an additional 6,709 shares of mandatorily redeemable
Series 2 Class B common stock based on required adjustments
to the number of shares originally issued in connection with
a stock dividend affected during the year ended July 31,
2003 (see Note 5 to the Audited Financial Statements).
Shares issued to pay salaries:
During the six months ended January 31, 2004, the Company
agreed to issue a total of 300,000 shares of its Class A
common stock with an aggregate fair value of $183,000 to pay
salaries, all of which was charged directly to expense.
Shares issued to consultants:
During the six months ended January 31, 2004, the Company
issued a total of 100,000 shares of its Class A common stock
with an aggregate fair value of $57,000 to pay for
consulting services. The fair value of the shares was
originally charged to unearned compensation and is being
amortized to expense over the terms of the consulting
agreements.
Options and warrants issued for services:
As explained in Note 5 to the Audited Financial Statements,
the Company has issued, from time to time, stock options and
warrants for the purchase of common stock to employees as
compensation and to other nonemployees, including investment
analysts and commentators that have entered into agreements
to provide the Company with financial information that is
released to subscribers, as consideration for consulting,
professional and other services. As explained in Note 2 to
the Audited Financial Statements, the Company recognizes the
cost of such issuances based on the fair value of the equity
instruments issued over the periods in which the related
services are rendered in accordance with the provisions of
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123").
As of August 1, 2003, the Company had 3,420,454 shares of
Class A common stock and 164,546 shares of Series 1 Class B
common stock that were subject to outstanding options and
warrants issued to employees and nonemployees as
compensation for services. These options and warrants had
exercise prices ranging from $.02 to $6.00 and will expire
at various dates from July 2005 through March 2012. There
were no options or warrants issued, canceled or exercised
during the six months ended January 31, 2004.
F-10
JAG Media Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4 - Issuances of common stock and stock options (concluded):
Options and warrants issued for services (concluded):
The cost of the options and warrants, determined based on
their aggregate estimated fair values at the respective
dates of issuance, was initially charged directly to expense
or to unearned compensation and subsequently amortized to
expense.
These options and warrants also include options for the
purchase of 1,750,000 shares of, effectively, Class A common
stock granted pursuant to the Company's 1999 Long-term
Incentive Plan (the "Incentive Plan") which provides for
individual awards to officers, employees, directors,
consultants and certain other individuals that may take the
form of stock options and certain other types of awards for
which the value is based in whole or in part upon the fair
market value of, effectively, the Company's Class A common
stock. The number of shares of Class A common stock that may
be subject to all types of awards under the Incentive Plan
as amended may not exceed 6,000,000 shares.
Note 5 - Notes payable to officers:
On April 1, 2002, two executive officers loaned the Company a
total of $400,000 subject to the terms and conditions of
unsecured promissory notes that, as amended, are payable on
April 30, 2004 and bear interest at an annual rate of 9%.
Note 6 - Legal proceedings:
The Company is involved in various legal proceedings. In the
opinion of management, these actions are routine in nature and
will not have any material adverse effects on the Company's
consolidated financial statements in subsequent periods.
Note 7 - Commitments and contingencies:
On August 12, 2003, the Company entered into an Asset Purchase
Agreement (the "Asset Purchase Agreement") with Vertex
Interactive, Inc. ("Vertex") and its wholly-owned subsidiary,
XeQute Solutions, Inc. ("XeQute"). Under the terms of the Asset
Purchase Agreement, the Company would establish a newly formed
wholly-owned subsidiary which would acquire the business of
XeQute through the purchase of its assets and the assumption of
its liabilities. XeQute is a provider of supply chain management
technologies and services, including enterprise software systems
and applications, software/hardware maintenance services and
consulting services, which enable its customers to more
effectively manage their order, inventory and warehouse
requirements.
F-11
JAG Media Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 7 - Commitments and contingencies (concluded):
Closing of the Asset Purchase Agreement was subject to the
satisfaction of various conditions by October 31, 2003,
including, among others, XeQute's ability to arrange financing
from which the Company would have obtained $8,000,000 of
proceeds upon terms and conditions satisfactory to the Company,
Vertex and XeQute, the provision of specified financial
information to the Company by XeQute and the ability of the
parties to agree upon various specific terms of the Asset
Purchase Agreement.
The Asset Purchase Agreement was not closed by October 31, 2003.
Accordingly, the parties were not required to close the
transaction unless they chose to waive the closing date
requirement. On January 17, 2004, the Company decided not to
pursue any further negotiations with XeQute.
On January 17, 2004, the Company entered into a Letter of Intent
(the "Letter of Intent") expiring March 31, 2004 to acquire
Great Eastern Securities, Inc. ("Great Eastern"), a privately
held broker/dealer based in Syosset, New York. Great Eastern
offers a cost-efficient trading platform for brokers and
traders, including direct access trading, with individually
tailored commission rates.
Pursuant to the terms of the Letter of Intent, as consideration
for the transfer of the assets and liabilities of Great Eastern,
the Company will issue shares of its common stock, which upon
issuance, will represent 57% of the Company's outstanding common
stock on a fully diluted basis. If the acquisition of Great
Eastern is consummated on or before December 31, 2004, the
Company will be required to pay Flow Capital Advisors, Inc. a
finder's fee in shares of the Company's common stock equal to 5%
of the aggregate consideration paid by the Company for Great
Eastern.
If the acquisition of Great Eastern is consummated, the primary
target market for the financial services that the Company has
been providing to subscribers will become professional traders
and brokers, and it will no longer offer subscriptions at retail
rates. In addition, all of the executive officers and directors
of the Company would resign from those positions. Although the
executive officers and directors of the Company would become
employees of or consultants to the combined companies, the
combined companies would be managed and, effectively, controlled
by the executive officers and directors of Great Eastern. In
addition, the acquisition of 57% of the outstanding common stock
of the Company on a fully diluted basis by Great Eastern would
result in a change in control of the Company and, accordingly,
the three senior executives of the Company would be entitled to
specified severance payments and additional stock options.
F-12
JAG Media Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 8 - Subsequent events:
On February 11, 2004, the stockholders of the Company approved
an amendment to the articles of incorporation that authorized
the implementation of changes related to a recapitalization plan
for the Company that will be consummated on April 9, 2004.
Pursuant to the recapitalization plan, (i) the total number of
shares of all classes of capital stock authorized for issuance
by the Company will increase from 200,000,000 shares to
300,440,000 shares with a par value of $.00001 per share, of
which 50,000,000 shares will be authorized for issuance as
preferred stock, 250,000,000 shares will be authorized for
issuance as common stock, 400,000 shares will be authorized for
issuance as Series 2 Class B common stock and 40,000 shares will
be authorized for issuance as Series 3 Class B common stock; and
(ii) the Company will issue 1 share of common stock in exchange
for every 1 share of Class A common stock and Series 1 Class B
common stock outstanding prior to the recapitalization.
The total number of Class A common shares and Series 1 Class B
common shares outstanding on a fully diluted basis will not be
affected by the recapitalization. Accordingly, the
recapitalization will not have any effect on the weighted
average number of common shares outstanding or any amounts per
common share in any of the Company's consolidated financial
statements before or after its consummation.
During the period from February 1, 2004 to March 11, 2004,
Cornell Capital was required to pay $855,000 and it received
1,031,447 shares of Class A common stock and the Company
received proceeds of $812,250, net of $42,750 of placement fees
as a result of the exercise by the Company of put options
pursuant to the 2002 Equity Line Agreement. As of March 11,
2004, the Company had the ability to require Cornell Capital to
purchase shares of its common stock pursuant to the 2002 Equity
Line Agreement at an aggregate purchase price of $7,140,000
through August 28, 2004.
F-13
Item 2. Management's Discussion and Analysis.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations
are based upon our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial statements filed with the
Securities and Exchange Commission. The preparation of these consolidated
financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, we
evaluate our estimates, including those related to accounts receivable,
equipment, stock-based compensation, income taxes and contingencies. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
The accounting policies and estimates used as of July 31, 2003, as outlined in
our previously filed Form 10-KSB, have been applied consistently for the six
months ended January 31, 2004.
Related party transactions
On April 1, 2002, two of our executive officers loaned JAG Media a total of
$400,000 subject to the terms and conditions of unsecured promissory notes that,
as amended, are payable on April 30, 2004 and bear interest at an annual rate of
9%.
Six months ended January 31, 2004 as compared to the six months ended January
31, 2003
Six Months
Ended January 31,
------------------------
2004 2003 $ Change
-------- ----------- ----------
Revenues $120,936 $ 240,955 $(120,019)
-------- ----------- ---------
Operating expenses:
Cost of revenues 135,350 428,121 (292,771)
Selling expenses 5,327 1,729 3,598
General and administrative
expenses 746,417 1,007,567 (261,150)
--------- ----------- ---------
Totals 887,094 1,437,417 (550,323)
--------- ----------- ---------
Loss from operations (766,158) (1,196,462) 430,304
Other income (expense):
Interest income 713 2,029 (1,316)
Interest expense (18,000) (5,424) (12,576)
--------- ----------- ---------
Net loss ($783,445) ($1,199,857) $ 416,412
========= =========== =========
Revenues:
Revenues primarily consist of subscription revenues from annual, semi-annual,
quarterly and monthly subscriptions relating to our product "JAGNotes." JAGNotes
is a daily consolidated investment report that summarizes newly issued research,
analyst opinions, upgrades, downgrades, and analyst coverage changes from
various investment banks and brokerage houses. Until May 1999, JAGNotes was
faxed to a limited audience of financial professionals at an average monthly
charge of $150. During the year ended July 31, 1999, we began the process of
changing our focus to also include the retail investor by providing a variety of
investment information including but not limited to JAGNotes through our web
site. The decrease in subscription revenues during the six months ended
January 31, 2004 was due primarily to a lack of advertising and continued
customer awareness.
While our revenues do include revenues from other sources, these other revenues
are not material to our operations as a whole. In addition, we did not generate
any revenues from our subsidiary, JAG Company Voice LLC ("Company Voice"),
during the six months ended January 31, 2004. Company Voice was formed to
provide production and distribution services to small and medium sized publicly
traded companies.
Cost of revenues:
Cost of revenues includes the cost to transmit the product over the telephone
and fax lines, on-line service charges for our web site, costs in connection
with the development and maintenance of the web site, and payments to
commentators and employees for their reports that are posted on our web site.
During the six months ended January 31, 2004, consulting fees were approximately
$118,000 as compared to approximately $428,000 for the six months ended January
31, 2003. Such fees included non-cash charges associated with the amortization
of unearned compensation arising from the issuance of shares in exchange for
services of approximately $108,000 and $342,000 for the six months ended January
31, 2004 and 2003, respectively. The decrease in consulting fees is a result of
the expiration of consulting contracts associated with commentators for our
jagnotes.com website.
In addition, costs associated with the transmission of our product over
telephone and fax lines and costs associated with the maintenance of our web
site decreased commensurate with our decrease in revenues.
Selling expenses:
Selling expenses consist primarily of advertising and other promotional
expenses. This increase results primarily from travel expense. This increase
results primarily from travel expenses incurred in connection with the proposed
XeQute transaction (described below) and other business development matters.
General and administrative expenses:
General and administrative expenses consist primarily of compensation and
benefits for the officers, other compensation, occupancy costs, professional
fees and other office expenses.
The decrease in general and administrative expenses is primarily attributable to
a decrease in professional fees of approximately $156,000 from the prior
comparable period during which larger legal and accounting expenses were
incurred in connection with proposed corporate transactions and restructurings.
The remainder of the decrease is attributable to our efforts to better contain
costs.
Interest expense:
The increase results from a retroactive increase in interest rates associated
with loans from two of our executive officers.
Three months ended January 31, 2004 as compared to three months ended January
31, 2003
Three Months
Ended January 31,
------------------------
2004 2003 $ Change
--------- --------- --------
Revenues $ 74,563 $ 116,005 $(41,442)
--------- --------- --------
Operating expenses:
Cost of revenues 54,260 229,936 (175,676)
Selling expenses 2,476 816 1,660
General and administrative
expenses 281,735 543,886 (262,151)
--------- --------- --------
Totals 338,471 774,638 (436,167)
--------- --------- --------
Loss from operations (263,908) (658,633) 394,725
Other income (expense):
Interest income 126 1,907 (1,781)
Interest expense (9,000) (2,713) (6,287)
--------- --------- --------
Net loss ($272,782) ($659,439) $386,657
========= ========= ========
Revenues:
The decrease in subscription revenues during the three months ended January 31,
2003 was due to a lack of advertising and continued customer awareness.
While our revenues do include revenues from other sources, these other revenues
are not material to our operations as a whole. As explained above, we did not
generate any revenues from our subsidiary, Company Voice, during the three
months ended January 31, 2004. Company Voice was formed to provide production
and distribution services to small and medium sized publicly traded companies.
Cost of revenues:
During the three months ended January 31, 2004, consulting fees were
approximately $49,000 as compared to approximately $205,000 for the three months
ended January 31, 2003. Such fees included non-cash charges associated with the
amortization of unearned compensation arising from the issuance of options and
warrants of approximately $46,000 and $178,000 for the three months ended
January 31, 2004 and 2003, respectively. The decrease in consulting fees is a
result of the expiration of consulting contracts associated with commentators
for our jagnotes.com website.
Selling expenses:
This increase in selling expenses results primarily from travel expenses
incurred in connection with the proposed XeQute transaction (described below)
and other business development matters.
General and administrative expenses:
The decrease in general and administrative expenses is primarily attributable to
a decrease in professional fees of approximately $143,000 from the prior
comparable period during which larger legal and accounting expenses were
incurred in connection with proposed corporate transactions and restructurings.
The remainder of the decrease is attributable to our efforts to better contain
costs.
Liquidity and Capital Resources:
We incurred cash flow deficiencies from operating activities of approximately
$456,000 and $1,363,000 for the six months ended January 31, 2004 and 2003,
respectively. We had a cash balance of only $131,000, a working capital
deficiency of $362,000 and a stockholders' deficiency of approximately $345,000
as of January 31, 2004. These matters raise substantial doubt about our ability
to continue as a going concern.
Although our net losses included net noncash charges of approximately $345,000
and $624,000 for the six months ended January 31, 2004 and 2003, respectively,
primarily for the amortization of unearned compensation and the issuance of
common stock and stock options in exchange for services, management believes
that, in the absence of a substantial increase in subscription revenues, it is
probable that the we will continue to incur losses and negative cash flows from
operating activities through at least January 31, 2005 and that we will need to
obtain additional equity or debt financing to sustain our operations until we
can market our services, expand our customer base and achieve profitability.
We believe that we will be able to generate sufficient revenues from our
remaining facsimile transmission and web site operations and obtain sufficient
financing from our 2002 Equity Line Agreement described below before it expires
in August 2004 or through other financing agreements to enable us to continue as
a going concern through at least January 31, 2005. However, if we cannot
generate sufficient revenues and/or obtain sufficient additional financing, if
necessary, by that date, we may be forced thereafter to restructure our
operations, file for bankruptcy or entirely cease our operations.
On August 12, 2003, we entered into an Asset Purchase Agreement (the "Asset
Purchase Agreement") with Vertex Interactive, Inc. ("Vertex") and its
wholly-owned subsidiary, XeQute Solutions, Inc. ("XeQute"). Under the terms of
the Asset Purchase Agreement, we would establish a newly formed wholly-owned
subsidiary which would acquire the business of XeQute through the purchase of
its assets and the assumption of its liabilities. XeQute is a provider of supply
chain management technologies and services, including enterprise software
systems and applications, software/hardware maintenance services and consulting
services, which enable its customers to more effectively manage their order,
inventory and warehouse requirements.
Closing of the Asset Purchase Agreement was subject to the satisfaction of
various conditions by October 31, 2003 including, among others, XeQute's ability
to arrange financing from which the Company would have obtained $8,000,000 of
proceeds upon terms and conditions satisfactory to the Company, Vertex and
XeQute, the provision of specified financial information to the Company by
XeQute and the ability of the parties to agree upon various specific terms of
the Asset Purchase Agreement.
The Asset Purchase Agreement was not closed by October 31, 2003. Accordingly,
the parties are not required to close the transaction unless they choose to
waive the closing date requirement. As of January 17, 2004, we decided not to
pursue any further negotiations with XeQute and, accordingly, we are currently
pursuing other strategic alternatives.
On January 17, 2004 we entered into a Letter of Intent (the "Letter of Intent")
expiring March 31, 2004 to acquire Great Eastern Securities, Inc. ("Great
Eastern"), a privately held broker/dealer based in Syosset, New York. Great
Eastern offers a cost-efficient trading platform for brokers and traders,
including direct access trading, with individually tailored commission rates.
Pursuant to the terms of the Letter of Intent, as consideration for the transfer
of the assets and liabilities of Great Eastern, we will issue shares of its
common stock, which upon issuance, will represent 57% of our outstanding common
stock on a fully diluted basis. If the acquisition of Great Eastern is
consummated on or before December 31, 2004, we will be required to pay Flow
Capital Advisors, Inc. a finder's fee in shares of our common stock equal to 5%
of the aggregate consideration paid by us for Great Eastern.
If the acquisition of Great Eastern is consummated, the primary target market
for the financial services that we have been providing to subscribers will
become professional traders and brokers, and we will no longer offer
subscriptions at retail rates. In addition, all of the executive officers and
directors of the Company would resign from those positions. Although the
executive officers and directors of the Company would become employees of or
consultants to the combined companies, the combined companies would be managed
and, effectively, controlled by the executive officers and directors of Great
Eastern. In addition, the acquisition of 57% of the outstanding common stock of
the Company on a fully diluted basis by Great Eastern would result in a change
in control of the Company and, accordingly, the three senior executives of the
Company would be entitled to specified severance payments and additional stock
options.
We declared a special stock dividend to our pre-merger stockholders. To effect
such dividend, we designated a new series of Class B common stock which is
issuable by dividend to our stockholders of record as of the close of business
on April 14, 2003, the stated record date, in the ratio of one share of Series 2
Class B common stock for every 100 shares of Class A common stock. Such shares
of Series 2 Class B common stock would be redeemable, which redemption by us
shall be mandatory to the fullest extent permitted by laws within six months
following final resolution of our pending lawsuit in Texas federal court against
various brokerage firms, at a redemption price which is the greater of (a) par
value or (b) 90% of the net proceeds to us of such lawsuit after payment of fees
and expenses incurred in connection with such lawsuit and all taxes on net
income accrued or paid with respect to such net amount. The stock dividend is
intended to insure that the principal benefits of our pending lawsuit accrue to
our pre-merger investors. As of January 31, 2004, we have recorded $4
representing the par value of the 380,829 shares of Series 2 Class B common
stock that are to be issued.
During the six months ended January 31, 2004, we issued an additional 6,709
shares of mandatorily redeemable Series 2 Class B common stock based on required
adjustments to the number of shares originally issued in connection with a stock
dividend affected during the year ended July 31, 2003.
Our cash and cash equivalent position of approximately $131,000 as of January
31, 2004 results primarily from sales of shares of our common stock pursuant to
an equity line agreement and a private placement completed during the six months
ended January 31, 2004 described below.
On April 9, 2002, we entered into an equity line purchase agreement (the "2002
Equity Line Agreement") with Cornell Capital Partners L.P. ("Cornell Capital")
pursuant to which we have, in effect, put options whereby, subject to certain
conditions, we can require Cornell Capital to purchase shares of our Class A
common stock from time to time at an aggregate purchase price of $10,000,000.
The 2002 Equity Line Agreement became available to us on August 28, 2002, and
will remain available through August 28, 2004 unless it is terminated earlier by
us in our sole discretion. The purchase price will be 95% of the lowest closing
bid price of our Class A common stock over a specified number of trading days
commencing on specified dates. Cornell Capital shall be entitled to a cash fee
equal to 5% of the gross proceeds received by the Company from Cornell Capital
in connection with each put. The timing and amount of the required purchases
shall be at our discretion subject to certain conditions including (i) a maximum
purchase price to be paid by Cornell Capital for each put of $500,000; (ii) at
least five trading days must elapse before we can deliver a new put notice to
Cornell Capital; (iii) the registration statement covering the shares issuable
to Cornell Capital pursuant to the equity line must remain effective at all
times and (iv) on any given closing date, there shall be at least one bid for
the Class A common stock on the Nasdaq OTC Bulletin Board. In addition, the
obligation of Cornell Capital to complete its purchases under the 2002 Equity
Line Agreement is not secured or guaranteed and, accordingly, if Cornell Capital
does not have available funds at the time it is required to make a purchase, we
may not be able to force it to do so. We have issued 10,000 shares of our Class
A common stock to a placement agent as of the effective date as consideration
for their services in connection with the 2002 Equity Line Agreement.
During the six months ended January 31, 2004, we issued 179,104 shares of Class
A common stock pursuant to the 2002 Equity Line Agreement for which we received
proceeds of $114,000, net of $6,000 of placement fees. As of January 31, 2004,
we had the ability to require Cornell Capital to purchase shares of our common
stock pursuant to the 2002 Equity Line Agreement at an aggregate purchase price
of $7,995,000 through August 28, 2004.
During the six months ended January 31, 2004, we thought it would be prudent to
diversify our sources of financing beyond our current private equity line. On,
September 25, 2003, we sold 35,000 shares of Class A common stock and 1,500
shares of Series 3 Class B common stock through a private placement intended to
be exempt from registration under the Securities Act of 1933 and received
proceeds of $50,000.
In addition, during the six months ended January 31, 2004, we issued 400,000
shares of Class A common stock with a fair value of $240,000 in exchange for
services.
On February 11, 2004, our stockholders approved an amendment to the articles of
incorporation that authorized the implementation of changes related to a
recapitalization plan that is expected to be consummated on April 9, 2004.
Pursuant to the recapitalization plan, (i) the total number of shares of all
classes of capital stock authorized for issuance by the Company will increase
from 200,000,000 shares to 300,440,000 shares with a par value of $.00001 per
share, of which 50,000,000 shares will be authorized for issuance as preferred
stock, 250,000,000 shares will be authorized for issuance as common stock,
400,000 shares will be authorized for issuance as Series 2 Class B common stock
and 40,000 shares will be authorized for issuance as Series 3 Class B common
stock; and (ii) the Company will issue 1 share of common stock in exchange for
every 1 share of Class A common stock and Series 1 Class B common stock
outstanding prior to the recapitalization.
On April 1, 2002, two of our executive officers loaned JAG Media a total of
$400,000 subject to the terms and conditions of unsecured promissory notes that,
as amended, are payable on April 30, 2004 and bear interest at an annual rate of
9%.
During the six months ended January 31, 2004, we used cash of approximately
$456,000 in our operations of which approximately $16,000 was used to reduce
accounts payable and accrued expenses and the remainder to primarily fund our
net loss.
During the period from February 1, 2004 to March 11, 2004, Cornell Capital was
required to pay $855,000 and it received 1,031,447 shares of Class A common
stock and the Company received proceeds of $812,250, net of $42,750 of placement
fees as a result of the exercise by the Company of put options pursuant to the
2002 Equity Line Agreement. As of March 11, 2004, the Company had the ability to
require Cornell Capital to purchase shares of its common stock pursuant to the
2002 Equity Line Agreement at an aggregate purchase price of $7,140,000 through
August 28, 2004.
We do not believe that our business is subject to seasonal trends or inflation.
On an ongoing basis, we will attempt to minimize any effect of inflation on our
operating results by controlling operating costs and whenever possible, seeking
to insure that subscription rates reflect increases in costs due to inflation.
The FASB and the Accounting Standards Committee of the American Institute of
Certified Public Accountants had issued certain accounting pronouncements as of
January 31, 2004 that will become effective in subsequent periods; however, we
do not believe that any of those pronouncements would have significantly
affected our financial accounting measurements or disclosures had they been in
effect during the six months ended January 31, 2004 and 2003 or that they will
have a significant effect at the time they become effective.
Item 3. Disclosure Controls and Procedures.
As of the end of the fiscal quarter ended January 31, 2004, our Chief Executive
Officer and Chief Financial Officer carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures that we have in place with respect to the accumulation and
communication of information to management and the recording, processing and
summarizing thereof. Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
are effective in alerting them in a timely manner to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in our periodic SEC filings.
In designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
During the fiscal quarter ended January 31, 2004, there has not occurred any
change in JAG Media's internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, JAG Media's
internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
As previously reported, JAG Media Holdings, Inc. (the "Company") and its
President and Chief Executive Officer, Gary Valinoti, have filed a complaint
against over 150 brokerage firms, alleging, among other things, a conspiracy
among the defendants to short sell the Company's stock (the "Lawsuit"). This
Lawsuit is pending in the United States District Court for the Southern District
of Texas (the "Court").
The following events relating to the Lawsuit occurred during the fiscal quarter
ended January 31, 2004:
o Pursuant to the Court's order dated October 1, 2003, plaintiffs filed their
third amended complaint, within the required period, addressing various
pleading issues raised in that order.
o Subsequent to such filing, the defendants filed a motion to dismiss the
third amended complaint.
o The motion to dismiss is currently pending before the Court. While that
motion is pending, discovery is stayed by court rule. In the interim, the
Company's attorneys are preparing for discovery and intend to commence
discovery immediately after they are permitted to do so.
Item 2. Changes in Securities and Use of Proceeds.
Pursuant to the terms and conditions of our Equity Line Purchase Agreement,
dated as of April 9, 2002, with Cornell Capital Partners, L.P. ("Cornell
Capital"), during our fiscal quarter ended January 31, 2004 we sold Cornell
Capital 179,104 shares of Class A Common Stock under the equity line at a price
per share of $0.67, and we received total proceeds of $114,000, net of $6,000 of
placement fees.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
On or about January 8, 2004, the Company mailed a Proxy Statement to
shareholders in connection with its annual meeting (the "Annual Meeting") which
was held on February 11, 2004 in the law offices of Jones Vargas located on the
Twelfth Floor of 100 West Liberty Street in Reno, Nevada. The following matters
were voted upon and approved at the Annual Meeting: (a) election of Gary
Valinoti, Thomas J. Mazzarisi and Stephen J. Schoepfer to serve as the directors
of the Company for the ensuing year; (b) the ratification of the selection of
J.H. Cohn LLP as the Company's independent public accountants for 2004; and (c)
the proposal to amend and restate Article Fourth of the Articles of
Incorporation of the Company to:
o increase the aggregate authorized number of shares of all classes of stock
from 200,000,000 to 300,440,000 of which (w) 250,000,000 shares shall be
designated common stock, par value $0.00001 per share ("Common Stock"), (x)
400,000 shares shall be designated Series 2 Class B common stock, par value
$0.00001 per share, (y) 40,000 shares shall be designated Series 3 Class B
common stock, par value $0.00001 per share and (z) 50,000,000 shares shall
be designated preferred stock, par value $0.00001 per share; and
o reclassify each outstanding share of the Company's existing Class A common
stock, par value $0.00001 per share ("Class A Common Stock") and Series 1
Class B common stock, par value $0.00001 per share ("Series 1 Class B
Common Stock") into one share of Common Stock upon surrender of physical
share certificates representing the existing Class A Common Stock and
Series 1 Class B Common Stock for new Common Stock certificates; and
As of January 5, 2004, the record date established by our Board of Directors for
the Annual Meeting, there were 40,545,778 shares of the Company's Class A Common
Stock, and 997,286 shares of Series 1 Class B Common Stock outstanding, the
holders of which were entitled to vote at the Annual Meeting. The holders of
34,197,283 shares of Class A Common Stock and Series 1 Class B Common Stock, or
more than a majority of Class A Common Stock and Series 1 Class B Common Stock
outstanding and entitled to vote at the Annual Meeting, were present in person
or represented by proxy at the Annual Meeting. The holders of 33,947,278 shares
of Class A Common Stock and Series 1 Class B Common Stock voted for the election
of the directors named in the Proxy Statement and the holders of 225,301 shares
of Class A Common Stock and Series 1 Class B Common Stock withheld their vote
for the nominated directors. No other directors were nominated by the
shareholders. The holders of 34,147,156 shares of Class A Common Stock and
Series 1 Class B Common Stock voted for the approval of the selection of J.H.
Cohn LLP as the Company's independent public accountants, the holders of 34,397
shares of Class A Common Stock and Series 1 Class B Common Stock voted against
approval, and the holders of 15,730 shares of Class A Common Stock and Series 1
Class B Common Stock abstained from voting on this matter. Lastly, the holders
of 23,310,466 shares of Class A Common Stock and Series 1 Class B Common Stock
voted for the approval of the amendment and restatement of Article Fourth of the
Articles of Incorporation of the Company, the holders of 500,411 shares of Class
A Common Stock and Series 1 Class B Common Stock voted against such Proposal,
and the holders of 63,896 shares of Class A Common Stock and Series 1 Class B
Common Stock abstained from voting on this matter.
Item 5. Other Information.
Loans from Officers of the Company.
As of January 31, 2004, Thomas J. Mazzarisi, our Executive Vice President, Chief
Financial Officer and General Counsel, agreed to extend the maturity date of
that certain $200,000 promissory note issued by us to Mr. Mazzarisi to the
earlier of (i)April 30, 2004 or (ii) the effective date of a "Change in Control"
of the Company, as such term is defined in our Long-Term Incentive Plan.
As of January 31, 2004, Stephen J. Schoepfer, our Executive Vice President and
Chief Operating Officer agreed to extend the maturity date of that certain
$200,000 promissory note issued by us to Mr. Schoepfer to the earlier of (i)
April 30, 2004 or (ii) the effective date of a "Change in Control" of the
Company, as such term is defined in our Long-Term Incentive Plan.
Recapitalization.
In a press release dated February 27, 2004, the Company announced that April 8,
2004 has been set as the effective date for its recently adopted
recapitalization, at which time the Company intends to file the approved
amendment of its articles of incorporation with the Secretary of State of the
State of Nevada. The amendment to the Company's articles of incorporation, which
was approved by the Company's stockholders at its annual meeting on February 11,
2004, provides for the reclassification of the Company's current shares of Class
A Common Stock and Series 1 Class B Common Stock into newly created "certificate
only" shares of Common Stock. The amendment also requires that the new
"certificate only" shares must bear the name of the beneficial owner on the face
of each stock certificate. After the effective date of the recapitalization,
certificates representing the old Class A Common Stock and Series 1 Class B
Common Stock will only represent the right to receive the shares of the new
common stock. The holder of old certificates not surrendered will not have the
right to vote or to receive any dividends or other distributions payable by the
Company after the effective date until the old certificates have been
surrendered.
The Company will notify stockholders shortly regarding the procedures for
implementing the mandatory exchange of their shares and make available to
stockholders and brokers the letter of transmittal to be used in the exchange.
Until such notification, stockholders should not send any certificates for
current Class A Common Stock or Series 1 Class B Common Stock to the Company or
its transfer agent for exchange.
In light of the inability of some stockholders to obtain their stock
certificates in connection with the Company's stock dividend in 2003, the
Company reminded stockholders in its press release that the only way
stockholders can assure themselves of receiving the new shares of the Company's
Common Stock is to obtain certificates for their current Class A Common Stock
and/or Series 1 Class B Common Stock. Stockholders who continue to hold their
shares in "street name" with their broker will be relying on their broker to
include their name in the beneficial owner list that the broker must submit to
the Company's transfer agent in connection with the exchange. The beneficial
owner lists submitted by brokers will enable the Company's transfer agent to
issue the new "certificate only" shares of common stock, but only to those
customers identified on the lists and only to the extent such lists are
consistent with the brokers' official DTC positions in the Company's stock.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
4.28 Amendment, dated as of January 31, 2004, to Promissory Note, dated
April 1, 2002 in the amount of $200,000 issued to Thomas J. Mazzarisi.
4.29 Amendment, dated as of January 31, 2004, to Promissory Note, dated
April 1, 2002 in the amount of $200,000 issued to Stephen J. Schoepfer.
10.40 Finder's Fee Agreement, dated as of January 5, 2004, between the
Company and Flow Capital Advisors, Inc. (1)
31.1 Section 302 Certification of Chief Executive Officer.
31.2 Section 302 Certification of Chief Financial Officer.
32.1 Section 906 Certification of Chief Executive Officer and Chief
Financial Officer.
99.2 Letter of Intent, dated January 16, 2004, by and among the Company,
Great Eastern and the stockholders of Great Eastern. (1)
- -----------
(1) Filed with the SEC as an exhibit to the Company's Current Report on
Form 8-K on January 20, 2004.
(b) Reports on Form 8-K.
The Company filed the following reports on Form 8-K during the three month
period ended January 31, 2004:
o Current Report on Form 8-K filed with the Commission on January 20, 2004,
disclosing the terms and conditions of that certain Letter of Intent, dated
January 16, 2004, relating to the proposed acquisition by the Company of
Great Eastern Securities, Inc., a privately held New York corporation and
broker/dealer based in Syosset, New York.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
JAG MEDIA HOLDINGS, INC.
Date: March 22, 2004 By: /s/ Gary Valinoti
-------------------
Name: Gary Valinoti
Title: President and Chief
Executive Officer
Date: March 22, 2004 By: /s/ Thomas J. Mazzarisi
-------------------------
Name: Thomas J. Mazzarisi
Title: Executive Vice President,
Chief Financial Officer and
General Counsel
EXHIBIT INDEX
4.28 Amendment, dated as of January 31, 2004, to Promissory Note, dated
April 1, 2002 in the amount of $200,000 issued to Thomas J. Mazzarisi.
4.29 Amendment, dated as of January 31, 2004, to Promissory Note, dated
April 1, 2002 in the amount of $200,000 issued to Stephen J. Schoepfer.
31.1 Section 302 Certification of Chief Executive Officer.
31.2 Section 302 Certification of Chief Financial Officer.
32.1 Section 906 Certification of Chief Executive Officer and Chief
Financial Officer.