U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 4 TO
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FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Digiblue Media, Inc.
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(Exact name of registrant as specified in its charter)
Nevada 7371 75-3016844
- ------ ---- ----------
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
32946 Dana Spruce, Suite A, Dana Point, California 92629
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(Address of registrant's principal executive offices) (Zip Code)
714.460.2717
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(Registrant's Telephone Number, Including Area Code)
Michael J. Muellerleile
MC Law Group
4100 Newport Place, Suite 830
Newport Beach, California 92660
949.250.8655
Facsimile 949.250.8656
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public: As soon as practicable after
this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
====================================== ======================== ==================== ======================= ===============
Title of each class Amount Proposed maximum Proposed maximum Amount of
of securities to be offering price aggregate registration
to be registered registered per share offering price fee
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Common Stock, $.001 par value 2,000,000 (1) $0.10 $200,000 $18.40
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Common Stock, $.001 par value 200,000 (2) $0.10 $20,000 $1.84
====================================== ======================== ==================== ======================= ===============
Total Registration Fee: $20.24
(1)Represents shares offered for sale by Digiblue Media, Inc. This offering is
being made in reliance on Rule 415.
(2)Represents shares held by Format, Inc., one of our shareholders, which
intends to distribute its shares of our common stock to its own shareholders as
a dividend.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
1
Preliminary Prospectus
Digiblue Media, Inc., a Nevada corporation
2,200,000 Shares of Common Stock
We intend to provide software design and development services to small
companies. We are offering for sale 2,000,000 shares of our common
stock in a direct public offering. The purchase price is $0.10 per
share. No underwriter is involved in the offering and distribution of
the shares. We are offering the shares without any underwriting
discounts or commissions. Our president, Brian Eddo, will offer and
sell the shares on our behalf. If all of the shares offered are
purchased, the proceeds to us will be $200,000. There is no minimum
amount required to be raised in this offering, though we believe we
require approximately $50,000 to pay for the costs of this offering and
continue operating according to our business plan. Subscriptions for
shares of our common stock are irrevocable once made, and funds will
only be returned upon rejection of the subscription. This is our
initial public offering and no public market currently exists for
shares of our common stock.
This offering is being made in reliance on Rule 415. This offering will
terminate six months following the effective date of this registration
statement, and will not be extended. The actual termination date will
be six months after the date that this registration date is declared
effective.
No public market currently exists for shares of our common stock. We do
not know if a market will develop, if at all.
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Title of securities Number of offered Offering price Proceeds
to be offered shares per share
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Common Stock(1) 2,000,000 $0.10 $200,000
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(1)Represents shares offered for sale by Digiblue Media, Inc.
Additionally, we are registering the shares held by Format Inc., or
Format, one of our shareholders, which wants to distribute its 200,000
shares of our issued and outstanding common stock as a dividend to its
shareholders ^. Shares of our common stock are not currently eligible
for quotation on any quotation exchange, nor is there any guarantee
that our shares will ever become eligible for quotation on any medium
or exchange. We will not receive any of the proceeds from the sale of
those shares being offered by the selling shareholder^.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON
PAGES 5 TO 7 FOR FACTORS TO BE CONSIDERED BEFORE PURCHASING SHARES OF
OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE WILL NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE OR OTHER
JURISDICTION WHERE THE OFFER OR SALE OF THESE SECURITIES IS NOT
PERMITTED.
The date of this prospectus is August 1, 2003.
Subject to completion.
2
TABLE OF CONTENTS
Prospectus Summary ...........................................................4
Risk Factors..................................................................5
Forward Looking Statements....................................................8
Use of Proceeds...............................................................8
Determination of Offering Price...............................................9
Dilution.....................................................................10
Selling Security Holders.....................................................11
Plan of Distribution.........................................................11
Legal Proceedings............................................................13
Directors, Executive Officers, Promoters and Control Persons.................13
Security Ownership of Certain Beneficial Owners and Management...............14
Description of Securities....................................................14
Interest of Named Experts and Counsel........................................15
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities...................................................15
Organization Within Last Five Years..........................................15
Description of Business......................................................15
Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................18
Description of Property......................................................20
Certain Relationships and Related Transactions...............................20
Market for Common Equity and Related Stockholder Matters.....................20
Executive Compensation ......................................................21
Financial Statements.........................................................24
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.........................................................47
Legal Matters................................................................47
Experts......................................................................47
Additional Information.......................................................47
Indemnification of Directors and Officers....................................47
Other Expenses of Issuance and Distribution..................................48
Recent Sales of Unregistered Securities......................................48
Exhibits.....................................................................49
Undertakings.................................................................50
Signatures...................................................................51
Outside Back Cover Page
Dealer Prospectus Delivery Obligation
Until _______, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be
required to deliver a prospectus. This is in addition to the dealers'
obligations to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
3
PROSPECTUS SUMMARY
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OUR BUSINESS: We were incorporated in Nevada on December 10,
2001. Our principal business address is 32946 Dana
Spruce, Suite A, Dana Point, California 92629. Our
telephone number is (714)460-2717. Our auditors
have expressed substantial doubt about our ability
to continue as a going concern. We are a
development stage company. Our current operations
are limited to providing software development
services to our first customer and developing our
own website.
We are a software development and design company
that specializes providing customized software
applications to small businesses and
entrepreneurs. We seek to understand our clients'
software application needs and tailor
off-the-shelf software to our clients' business
requirements, or where situations warrant, design
original software applications to achieve the same
goal for our clients. The only revenues we have
generated to date have been from a related party,
Format, Inc., or Format, who is one of our
shareholders.
We propose to market our services beginning in the
southern California area by means of personal
contacts, networking with providers of related
computer products and services, and eventually,
through our proposed website. We expect to incur
significant net losses in the future as we develop
our business. We believe that we will need to
raise a total of $50,000 to pay the costs of this
offering and continue current operations, $100,000
to expand our operations and $200,000 in order to
fully achieve the following:
|X| pay for the costs of this offering;
|X| fund expanded operations;
|X| develop our proposed website; and
|X| begin marketing our services.
If we generate significant revenues, we hope to
expand the area of our operations to the greater
West Coast area.
SUMMARY FINANCIAL The summary financial information set forth below
INFORMATION: is derived from the more detailed financial
statements appearing elsewhere in this Form SB-2.
We have prepared our financial statements
contained in this Form SB-2 in accordance with
accounting principles generally accepted in the
United States. All information should be
considered in conjunction with our financial
statements and the notes contained elsewhere in
this Form SB-2.
Period from
For the three December 10, 2001
Income Statement months ended (inception) to
March 31, 2003 March 31, 2003
$ $
Revenue 13,800 36,800
Loss From Operations (5,630) (11,387)
Net Income (Loss) (5,630) (11,387)
Net Income (Loss) Per Share 0.00 0.00
Balance sheet March 31, 2003 (material omitted)
$
Total Assets 34,719
Total Liabilities (17,106)
Stockholders' Equity 17,613
4
PRIMARY OFFERING
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NUMBER OF SHARES We are offering for sale 2,000,000 shares of
BEING OFFERED: our common stock. We will sell the shares we
are registering only to those individuals who
have received a copy of the prospectus.
NUMBER OF SHARES OUTSTANDING 1,450,000 shares of our common stock are
AFTER THE OFFERING: currently issued and outstanding. After the
offering, there may be up to 3,450,000 shares
of our common stock issued and outstanding if
all of the offered shares are sold.
ESTIMATED USE OF We will receive $200,000 if all of the
PROCEEDS: offered shares are sold and $100,000 if half
the offered shares are sold. If half of the
shares are purchased, we intend to use
approximately $20,000 of the net proceeds for
marketing expenses, and $65,000 of the
proceeds for working capital and
approximately $15,000 for offering expenses.
If all of the shares are purchased, we intend
to use $40,000 of the proceeds for marketing
expenses, and $145,000 of the proceeds for
working capital and approximately $15,000 for
offering expenses. This is a best efforts
offering with no minimum offering amount.
There is no guarantee that we will even raise
enough funds to cover the expenses of this
offering.
SECONDARY OFFERING
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NUMBER OF SHARES BEING OFFERED: We are registering 200,000 shares of our
common stock which are held by Format, one of
our shareholders. Format wants to then
distribute those shares of our common stock
as a dividend to its own shareholders on a
pro rata basis.
RISK FACTORS
In addition to the other information in this prospectus, the following risk
factors should be considered carefully in evaluating our business before
purchasing any of our shares of common stock. A purchase of our common stock is
speculative in nature and involves a lot of risks. No purchase of our common
stock should be made by any person who is not in a position to lose the entire
amount of his investment.
RISKS RELATED TO OUR BUSINESS:
WE MAY NOT BE ABLE TO FURTHER IMPLEMENT OUR BUSINESS STRATEGY UNLESS SUFFICIENT
FUNDS ARE RAISED IN THIS OFFERING, WHICH COULD PREVENT US FROM BECOMING
PROFITABLE. WE BELIEVE THAT WE WILL REQUIRE AT LEAST $50,000 TO CONTINUE AT OUR
CURRENT LEVEL OF ACTIVITY. IF WE DO NOT RAISE AT LEAST $50,000 WE MAY HAVE TO
CEASE OPERATIONS, WHICH COULD CAUSE INVESTORS TO LOSE THEIR INVESTMENT IN US.
In order to expand our current level of operations by funding our proposed
marketing activities, we believe that we need proceeds of approximately $100,000
from this offering. We require a minimum of $50,000 in order to cover the costs
of this offering and to continue operations at our current level of activity. We
believe that $100,000 will be sufficient to pay for the expenses of this
offering and conduct our proposed marketing activities. Moreover, we hope to
raise $200,000, which would allow us to implement our business plan to the full
extent that we envision. We may not realize sufficient proceeds to complete
further development costs, or to provide adequate cash flow for planned
marketing expenses. Our inability to raise sufficient funds in this offering may
significantly hinder our growth. If we fail to raise sufficient funds in this
offering, investors may lose their entire cash investment.
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH AN EVALUATION OF OUR PROSPECTS
CAN BE MADE.
We were incorporated in December 2001. Our lack of operating history makes an
evaluation of our business and prospects very difficult. Our prospects must be
considered speculative, considering the risks, expenses, and difficulties
5
frequently encountered in the establishment of a new business. We cannot be
certain that our business will be successful or that we will generate
significant revenues.
WE HAVE ONLY GENERATED REVENUES FROM SERVICES PROVIDED TO A RELATED PARTY, AND
IF WE FAIL TO ENGAGE OTHER CLIENTS, WE MAY INCUR NET LOSSES IN THE FORESEEABLE
FUTURE.
As of March 31, 2003, we have only generated revenues from services provided to
a related party. Unless we are able to expand our client base and promote our
services to a wide range of potential customers, we may not generate sufficient
revenues to cover our operating costs or to operate profitably. As we develop
our business and undertake marketing activities to promote our services, we
expect to incur significant operating and capital expenditures and, as a result,
we expect significant net losses in the future. We will need to generate
significant revenues to achieve and maintain profitability. We may not be able
to generate sufficient revenues to achieve profitable operations.
TECHNOLOGICAL IMPROVEMENTS AND LOWER PRICES IN THE COMPUTER INDUSTRY MAY
UNDERCUT THE NEED FOR OUR SERVICES.
The software development industry is constantly undergoing rapid changes and
improvements in technology that have historically lowered the prices of computer
software, while shortening the lifespan of a given technology. As such, further
improvements or more frequent changes in technology may result in less expensive
but more capable off-the-shelf software becoming available to consumers and
businesses, which would greatly reduce the demand for comparable customized
software development services such as ours.
STARTING A COMPUTER SOFTWARE DESIGN BUSINESS IS ESPECIALLY DIFFICULT DURING THE
CURRENT ECONOMIC DOWNTURN, AND IF WE ARE NOT ABLE TO SUCCESSFULLY MARKET OUR
SERVICES, OUR BUSINESS WILL FAIL.
Our industry is significantly competitive. We have competitors that provide some
or all of the services we provide and who are larger and have more resources
than we do. Many of our competitors have significantly greater financial, human
and marketing resources than we have. As a result, such competitors may be able
to respond more quickly to new trends and changes in customer demands. Such
competitors may also be able to devote greater resources to the development,
promotion, sale, and support of their services than we do. If we do not compete
effectively with current and future competitors, we may be unable to secure new
and renewed client contracts, or we may be required to reduce our rates in order
to complete effectively. This could result in a reduction in our revenues,
resulting in lower earnings or operating losses.
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY WITH OTHER PROVIDERS OF COMPUTER
SOFTWARE DESIGN THAT HAVE MORE RESOURCES AND EXPERIENCE THAN WE HAVE.
Our industry is significantly competitive. We have competitors that provide some
or all of the services we provide and who are larger and have more resources
than we do. Many of our competitors have significantly greater financial, human
and marketing resources than we have. As a result, such competitors may be able
to respond more quickly to new trends and changes in customer demands. Such
competitors may also be able to devote greater resources to the development,
promotion, sale, and support of their services than we do. If we do not compete
effectively with current and future competitors, we may be unable to secure new
and renewed client contracts, or we may be required to reduce our rates in order
to complete effectively. This could result in a reduction in our revenues,
resulting in lower earnings or operating losses.
OUR OFFICERS, DIRECTORS AND PRINCIPAL SHAREHOLDERS, CONTROL OUR OPERATIONS AND
MATTERS REQUIRING SHAREHOLDER APPROVAL.
Our officers, directors and principal shareholders own approximately 86.2% of
our outstanding shares of common stock. Even if all the offered shares are sold,
they will still own 36.2% of our outstanding shares of common stock. As a
result, our officers, directors and principal shareholders will have the ability
to control or significantly influence all matters requiring approval by our
shareholders, including the election and removal of directors. Such control will
allow our officers, directors and principal shareholders to control the future
course of the company. Our officers, directors and principal shareholders do not
intend to purchase any of the shares in this offering.
6
WE DEPEND ON THE EFFORTS AND ABILITIES OF BRIAN EDDO, OUR PRESIDENT, TO CONTINUE
OPERATIONS AND GENERATE REVENUES.
Brian Eddo is a key employee with experience relevant to business. Mr. Eddo is
currently our only employee. The demands on Mr. Eddo's time as our only employee
may prevent him from devoting sufficient time to his duties as our chief
executive officer; the demands on his time will increase because of our status
as a public company. The interruption of the services of Mr. Eddo could
significantly hinder our operations, profits and future development, if a
suitable replacement is not promptly obtained. We do not currently have any
executive compensation agreements. We cannot guaranty that Mr. Eddo will remain
with us. In addition, our success depends, in part, upon our ability to attract
and retain other talented personnel. We may not be able to attract and retain
qualified personnel.
WE ANTICIPATE THAT WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO MARKET OUR
PRODUCTS AND SERVICES. OUR FAILURE TO RAISE ADDITIONAL CAPITAL WILL
SIGNIFICANTLY AFFECT OUR ABILITY TO FUND OUR PROPOSED MARKETING ACTIVITIES.
We are currently not engaged in any sophisticated marketing program to market
and distribute our products because we lack sufficient capital and revenues to
justify the expenditure. We need to raise at least $50,000 to pay for the costs
of this offering and continue operating at our current activity level. We need
to raise approximately $100,000 to expand our current level of operations. We
believe that we will need to raise $200,000 in this offering to fully implement
our expansion plans. However, we may need to spend more funds on marketing and
promotion than we have initially estimated. Therefore, if we need additional
funds, we will need to raise additional capital in addition to the funds raised
in this offering. We do not know if we will be able to acquire additional
financing at commercially reasonable rates. Our failure to obtain additional
funds would significantly limit or eliminate our ability to fund our sales and
marketing activities.
OUR AUDITORS HAVE EXPRESSED SUBSTANTIAL DOUBT REGARDING OUR ABILITY TO CONTINUE
OPERATIONS AS A "GOING CONCERN." INVESTORS MAY LOSE ALL OF THEIR INVESTMENT IF
WE ARE UNABLE TO CONTINUE OPERATIONS AND GENERATE REVENUES, OR IF WE DO NOT
RAISE SUFFICIENT FUNDS IN THIS OFFERING.
We hope to obtain revenues from future software development contracts, but
currently we have only one customer who is a related party. In the absence of
significant sales and profits, we may seek to raise additional funds to meet our
working capital needs principally through the additional sales of our
securities. However, we cannot guaranty that we will be able to obtain
sufficient additional funds when needed, such as the funds we are attempting to
raise in this offering, or that such funds, if available, will be obtainable on
terms satisfactory to us. If we do not raise sufficient funds in this offering,
we may not be able to continue in business. As a result, our auditors believe
that substantial doubt exists about our ability to continue operations.
RISKS RELATED TO OWNING OUR COMMON STOCK:
THE CONCURRENT OFFERING OF SHARES BY FORMAT WITH THE OFFERING OF SHARES TO BE
SOLD BY US MAY MAKE IT MORE DIFFICULT FOR US TO SELL OUR SHARES.
We are selling 2,000,000 shares concurrently with the sale of 200,000 shares
that may be sold by ^ Format. We agreed to register the 200,000 shares of our
issued and outstanding common stock held by Format. ^ To the extent that the
shares being sold by ^ Format are sold concurrently with the shares by us, each
sale of shares by Format may reduce the number of investors willing to buy our
shares as well as the demand for our shares. As a result, we may not be able to
raise sufficient funds from this offering to implement our business strategy and
our ability to raise capital may be hampered.
WE ARBITRARILY DETERMINED THE OFFERING PRICE OF THE SHARES OF COMMON STOCK.
THEREFORE, INVESTORS MAY LOSE ALL OR PART OF THEIR INVESTMENT IF THE OFFERING
PRICE IS HIGHER THAN THE CURRENT MARKET VALUE OF THE OFFERED SHARES.
The offering price of the shares of common stock being offered by us has been
determined primarily by our capital requirements and has no relationship to any
established criteria of value, such as book value or earnings per share.
Additionally, because we have no significant operating history and have only
generated minimal revenues to date, the price of the shares of common stock is
not based on past earnings, nor is the price of the shares indicative of current
market value for the assets owned by us. Investors could lose all or a part of
their investment if the offering price has been arbitrarily set too high. Even
if a public trading market develops for our common stock, the shares may not
attain market values commensurate with the offering price.
7
BECAUSE WE MAY BE SUBJECT TO THE "PENNY STOCK" RULES, THE LEVEL OF TRADING
ACTIVITY IN OUR STOCK MAY BE REDUCED WHICH MAY MAKE IT DIFFICULT FOR INVESTORS
TO SELL THEIR SHARES.
Broker-dealer practices in connection with transactions in "penny stocks" are
regulated by certain penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks, like shares of our common stock, generally are equity
securities with a price of less than $5.00, other than securities registered on
certain national securities exchanges or quoted on NASDAQ. The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and, if the broker-dealer
is the sole market maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market, and monthly account statements
showing the market value of each penny stock held in the customer's account. In
addition, broker-dealers who sell these securities to persons other than
established customers and "accredited investors" must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. Consequently,
these requirements may have the effect of reducing the level of trading
activity, if any, in the secondary market for a security subject to the penny
stock rules, and investors in our common stock may find it difficult to sell
their shares.
WE LACK A PUBLIC MARKET FOR SHARES OF OUR COMMON STOCK, WHICH MAY MAKE IT
DIFFICULT FOR INVESTORS TO SELL THEIR SHARES.
There is no public market for shares of our common stock. We cannot guaranty
that an active public market will develop or be sustained. Therefore, investors
may not be able to find purchasers for their shares of our common stock. Should
there develop a significant market for our shares, the market price for those
shares may be significantly affected by such factors as our financial results
and introduction of new products and services. Factors such as announcements of
new services by us or our competitors and quarter-to-quarter variations in our
results of operations, as well as market conditions in our sector may have a
significant impact on the market price of our shares. Further, the stock market
has experienced extreme volatility that has particularly affected the market
prices of stock of many companies and that often has been unrelated or
disproportionate to the operating performance of those companies.
FORWARD LOOKING STATEMENTS
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INFORMATION IN THIS PROSPECTUS CONTAINS "FORWARD LOOKING STATEMENTS" WHICH CAN
BE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS SUCH AS "BELIEVES",
"ESTIMATES", "COULD", "POSSIBLY", "PROBABLY", "ANTICIPATES", "ESTIMATES",
"PROJECTS", "EXPECTS", "MAY", "WILL", OR "SHOULD" OR OTHER VARIATIONS OR SIMILAR
WORDS. NO ASSURANCES CAN BE GIVEN THAT THE FUTURE RESULTS ANTICIPATED BY THE
FORWARD-LOOKING STATEMENTS WILL BE ACHIEVED. THE FOLLOWING MATTERS CONSTITUTE
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS WITH RESPECT TO THOSE
FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THE FUTURE RESULTS ANTICIPATED BY
THOSE FORWARD-LOOKING STATEMENTS. AMONG THE KEY FACTORS THAT HAVE A DIRECT
BEARING ON OUR RESULTS OF OPERATIONS ARE THE COSTS AND EFFECTIVENESS OF OUR
OPERATING STRATEGY. OTHER FACTORS COULD ALSO CAUSE ACTUAL RESULTS TO VARY
MATERIALLY FROM THE FUTURE RESULTS ANTICIPATED BY THOSE FORWARD-LOOKING
STATEMENTS.
USE OF PROCEEDS
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We will receive up to $200,000 if all of the shares of common stock offered by
us at $0.10 per share are purchased. We cannot guaranty that we will sell any or
all of the shares being offered by us. This is a best efforts offering with no
minimum offering amount. The table below estimates our use of proceeds, given
the varying levels of success of the offering. None of the proceeds will be used
to reimburse the expenses that were previously paid by our president including
office rent or compensation for services provided prior to the offering.
8
=========================== ==================== ======================== ======================= =================================
Offered Shares Sold Offering Proceeds Approximate Offering Total Net Offering Principal Uses of Net Proceeds
Expenses Proceeds
- --------------------------- -------------------- ------------------------ ----------------------- ---------------------------------
Rent/Office Expenses: $1,500
Website Development: $5,000
Computer Equipment: $3,750
Employees/Contractors: $7,500
Marketing/Printing: $11,080
500,000 shares (25%) $50,000 $15,170 $34,830 Working Capital: $6,000
- --------------------------- -------------------- ------------------------ ----------------------- ---------------------------------
Rent/Office Expenses: $3,000
Website Development: $12,000
Computer Equipment: $7,500
Employees/Contractors: $22,330
Marketing/Printing: $31,000
1,000,000 shares (50%) $100,000 $15,170 $84,830 Working Capital: $10,000
- --------------------------- -------------------- ------------------------ ----------------------- ---------------------------------
Rent/Office Expenses: $4,500
Website Development: $17,000
Computer Equipment: $12,500
Marketing/Printing: $34,330
Employees/Contractors: $37,500
1,500,000 shares (75%) $150,000 $15,170 $134,830 Working Capital: $29,000
- --------------------------- -------------------- ------------------------ ----------------------- ---------------------------------
Rent/Office Expenses: $6,000
Website Development: $25,000
Computer Equipment: $15,000
Marketing/Printing: $55,830
Employees/Contractors: $53,000
Working Capital: $30,000
- --------------------------- -------------------- ------------------------ ----------------------- ---------------------------------
=========================== ==================== ======================== ======================= =================================
Working capital will be used to pay general administrative expenses, legal
expenses and accounting expenses for the next twelve months. Those expenses may
increase if we are able to grow our operations and marketing activities.
Marketing expenses primarily include costs associated with travel and
entertainment expenses to meet potential clients for our software design and
development services. Marketing expenses also includes development, preparation
and printing of marketing materials, such as brochures and catalogs. Funds
projected above as allocated to the hiring of employees and independent
contractors, are those who would be engaged to help conduct our business
operations, and exclude compensation that would be paid to Mr. Eddo, our
president. The funds from this offering will not be used to pay our president,
Mr. Brian Eddo for any services related to activities undertaken to further the
success of this offering, whether provided prior to, during, or subsequent to
the offering.
None of the proceeds will be used to reimburse the expenses that were previously
paid by our president including office rent or compensation for services
provided prior to the offering. Additionally, none of the proceeds from the
offering will be used to pay compensation to our president for services provided
subsequent to the offering. If the offering proceeds are insufficient to pay the
offering expenses in full, then we intend to pay those expenses from our current
cash reserves.
DETERMINATION OF OFFERING PRICE
- -------------------------------
FACTORS USED TO DETERMINE SHARE PRICE. The offering price of the 2,000,000
shares of common stock being offered by us has been determined primarily by our
capital requirements and has no relationship to any established criteria of
value, such as book value or earnings per share. Additionally, because we have
no significant operating history and have not generated any revenues to date,
the price of the shares of common stock is not based on past earnings, nor is
the price of the shares indicative of current market value for the assets owned
by us. No valuation or appraisal has been prepared for our business and
potential business expansion.
9
To accomplish the steps listed below to implement our business plan, we estimate
that we will require approximately $200,000 in order to fully implement our plan
for growth. From that amount, we anticipate that our offering expenses will
total approximately $15,170, reducing the net proceeds to use to approximately
$184,830. We estimate that we require at least $50,000 to pay for the costs of
this offering and continue operations at our current level of activity. The
figures and steps listed below are estimates only, and our actual progress and
expenses may vary from these time and cost estimates.
======================================================= ========================
MILESTONES ESTIMATED COST
- ------------------------------------------------------- ------------------------
1. Develop and deploy website $25,000
- ------------------------------------------------------- ------------------------
2. Acquire computer equipment $15,000
- ------------------------------------------------------- ------------------------
3. Develop and implement marketing plan, including $55,830
printing costs for advertising materials
- ------------------------------------------------------- ------------------------
4. Hire and train staff as needed, including any $53,000
independent contractors needed
======================================================= ========================
DILUTION
We intend to sell 2,000,000 shares of our common stock. We were initially
capitalized by the sale of our common stock. The following table sets forth the
number of shares of common stock purchased from us, the total consideration paid
and the price per share. The table assumes all 2,000,000 shares of common stock
will be sold. The founding shareholder is our president Brian Eddo.
============================== ========================================== ===================================== ===================
Shares Issued Total Consideration Price
Number Percent Amount Percent Per Share
- ------------------------------ ----------------------- ------------------ ------------------ ------------------ -------------------
Founding Shareholder(1) 500,000 Shares 14.5% $10,000 4.37% $0.02
- ------------------------------ ----------------------- ------------------ ------------------ ------------------ -------------------
Shareholder(2) 750,000 Shares 21.7% $15,000 6.55% $0.02
- ------------------------------ ----------------------- ------------------ ------------------ ------------------ -------------------
Other Shareholder(3) 200,000 Shares 5.8% $4,000 1.75% $0.02
- ------------------------------ ----------------------- ------------------ ------------------ ------------------ -------------------
Purchasers of Shares 2,000,000 Shares 58.0% $200,000 87.34% $0.10
============================== ======================= ================== ================== ================== ===================
Total 3,450,000 Shares 100% $229,000 100%
============================== ======================= ================== ================== ================== ===================
(1) This founding shareholder was issued 500,000 shares of our common stock in
exchange for cash of $1,000 and services which were valued at $9,000.
(2) This shareholder was issued 750,000 shares of our common stock in exchange
for $15,000.
(3) The other shareholder, Format, Inc., was issued 200,000 shares of our common
stock in exchange for $4,000.
The following table sets forth the difference between the offering price of the
shares of our common stock being offered by us, the net tangible book value per
share, and the net tangible book value per share after giving effect to the
offering by us, assuming that 100%, 75%, 50% and 25% of the offered shares are
sold. Net tangible book value per share represents the amount of total tangible
assets less total liabilities divided by the number of shares outstanding as of
March 31, 2003.
- ------------------------------------------- ------------------- ---------------------- ---------------------- ------------------
100% of offered 75% of offered 50% of offered 25% of offered
shares are sold shares are sold shares are sold shares are sold
- ------------------------------------------- ------------------- ---------------------- ---------------------- ------------------
Offering Price $0.10 $0.10 $0.10 $0.10
per share per share per share per share
- ------------------------------------------- ------------------- ---------------------- ---------------------- ------------------
Net tangible book value at 3/31/03 $0.012 $0.012 $0.012 $0.012
per share per share per share per share
- ------------------------------------------- ------------------- ---------------------- ---------------------- ------------------
Net tangible book value after giving $0.059 $0.052 $0.042 $0.027
effect to the offering per share per share per share per share
- ------------------------------------------- ------------------- ---------------------- ---------------------- ------------------
Increase in net tangible book value per $0.047 $0.040 $0.030 $0.015
share attributable to cash payments made per share per share per share per share
by new investors
- ------------------------------------------- ------------------- ---------------------- ---------------------- ------------------
Per Share Dilution to New Investors $0.041 $0.048 $0.058 $0.073
per share per share per share per share
- ------------------------------------------- ------------------- ---------------------- ---------------------- ------------------
Percent Dilution to New Investors 41% 48% 58% 73%
- ------------------------------------------- ------------------- ---------------------- ---------------------- ------------------
10
SELLING SECURITY HOLDER
- -----------------------
We issued 200,000 shares of our common stock to Format, Inc., a Nevada
corporation, or Format, in exchange for $4,000. We agreed to register these
shares pursuant to an agreement with Format, which is attached as Exhibit 10.1.
Format intends to distribute those shares to its own shareholders as a dividend.
These shares constitute all of the shares known to us to be beneficially owned
by Format. Format has not held any position or office with us. The only material
relationship between us and Format is defined by the services and share purchase
agreement under which we issued shares to Format; we do not have any material
relationship with any of Format's shareholders. Format is not a broker-dealer or
an affiliate of a broker-dealer to our knowledge.
PLAN OF DISTRIBUTION
PRIMARY OFFERING. We are offering for sale 2,000,000 shares of our common stock
in a direct public offering on a best efforts basis with no minimum. There is no
minimum amount that must be sold, and we will receive any proceeds from this
offering immediately upon the acceptance of subscription agreements we receive.
We will accept or reject any subscription agreement within ten days of receipt,
and any checks submitted with rejected subscription agreements will be returned
promptly. The offering will not be extended after the date that is six months
from the date the registration becomes effective.
We have not conducted any discussions or negotiations for the sale of all or any
portion of those 2,000,000 shares of our common stock. There is no minimum
number of shares that must be purchased by each prospective purchaser and the
maximum number of shares we will sell is 2,000,000. We will not pay any
commissions or other fees, directly or indirectly to any person or firm in
connection with solicitation of sales of the common stock. We will not conduct
any aspect of this offering online, nor is any such online offering
contemplated. This offering will terminate six months following the effective
date of this registration statement.
Our officers and directors do not have any agreement or plan to purchase any
shares in this offering. Brian Eddo, our president, will participate in the
offer and sale of our shares of common stock, and rely on the safe harbor from
broker-dealer registration set out in Rule 3a4-1 under the Securities Exchange
Act of 1934. Although Mr. Eddo is an associated person of the company as that
term is defined in Rule 3a4-l under the Exchange Act, he believes he will not be
deemed to be a broker for the following reasons:
o Mr. Eddo is not subject to a statutory disqualification as that term is
defined in Section 3(a)(39) of the Exchange Act at the time of his
participation in the sale of our securities.
o Mr. Eddo will not be compensated for his participation in the sale of
company securities by the payment of commission or other remuneration
based either directly or indirectly on transactions in securities.
o Mr. Eddo is not an associated person of a broker or dealer at the time
of participation in the sale of company securities.
Mr. Eddo will restrict his participation to the following activities:
11
o preparing any written communication or delivering any communication
through the mails or other means that does not involve oral
solicitation by the president of a potential purchaser;
o responding to inquiries of potential purchasers in communication
initiated by the potential purchasers, provided, however, that the
content of responses are limited to information contained in a
registration statement filed under the Securities Act or other offering
document;
o performing ministerial and clerical work involved in effecting any
transaction.
We have not retained a broker for the sale of securities being offered. In the
event we retain a broker who may be deemed an underwriter, an amendment to the
registration statement will be filed.
The shares of common stock being offered by us have not been registered for sale
under the securities laws of any state as of the date of this prospectus. We
intend to register or qualify the offered shares in the following states: New
York, and Colorado.
Under the Securities Exchange Act of 1934 and the regulations thereunder, any
person engaged in a distribution of the shares of our common stock offered by
this prospectus may not simultaneously engage in market making activities with
respect to our common stock during the applicable "cooling off" periods prior to
the commencement of such distribution.
SECONDARY OFFERING. Format could have begun relying on Rule 144 to distribute
its shares on May 2, 2003. Otherwise, Format may distribute its shares as a
dividend to its own shareholders as soon as this registration statement is
declared effective. However, Format also could sell its shares of our common
stock at a price of $0.10 per share until the shares are quoted on the OTC
Bulletin Board and thereafter at prevailing market prices or privately
negotiated prices, if our shares are eventually quoted on the OTC Bulletin
Board. There is no assurance that our shares will ever be quoted on the OTC
Bulleting Board. The selling security holder may sell our common stock in the
over-the-counter market, or on any securities exchange on which our common stock
is or becomes listed or traded, in negotiated transactions or otherwise.
Currently, our shares do not meet the listing standards for any securities
exchange, and may never be listed on any exchange. The shares will not be sold
in an underwritten public offering. The shares may be sold directly or through
brokers or dealers. The methods by which the shares may be sold include:
o purchases by a broker or dealer as principal and resale by such broker or
dealer for its account;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o privately negotiated transactions.
The shares of common stock being offered by Format have not been registered for
sale under the securities laws of any state as of the date of this prospectus.
Brokers or dealers effecting transactions in the shares of our common stock
should confirm the registration thereof under the securities laws of the states
in which transactions occur or the existence of any exemption from registration
or qualification.
Brokers and dealers engaged by Format may arrange for other brokers or dealers
to participate. Brokers or dealers may receive commissions or discounts from the
selling security holder, or, if any such broker-dealer acts as agent for the
purchaser of such shares, from such purchaser, in amounts to be negotiated.
Broker-dealers may agree with the selling security holder to sell a specified
number of such shares at a stipulated price per share, and, to the extent such
broker-dealer is unable to do so acting as agent for a selling security holder,
to purchase as principal any unsold shares at the price required to fulfill the
broker-dealer commitment to such selling security holder. Broker-dealers who
acquire shares as principal may resell those shares from time to time in the
over-the-counter market or otherwise at prices and on terms then prevailing or
then related to the then-current market price or in negotiated transactions and,
in connection with such resales, may receive or pay commissions. In the event
that a broker-dealer is added as a formal participant to the marketing effort of
the selling security holder, we will file a post effective amendment to disclose
such event.
Format and any broker-dealers participating in the distributions of the shares
may be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act of 1933. Any profit on the sale of shares by the selling security
holder and any commissions or discounts given to any such broker-dealer may be
deemed to be underwriting commissions or discounts. The shares may also be sold
pursuant to Rule 144 under the Securities Act of 1933 beginning one year after
the shares were issued.
12
We have filed the registration statement, of which this prospectus forms a part,
with respect to the sale of the shares by the selling security holder. There can
be no assurance that the selling security holder will sell any or all of the
offered shares.
Under the Securities Exchange Act of 1934 and the regulations thereunder, any
person engaged in a distribution of the shares of our common stock offered by
this prospectus may not simultaneously engage in market making activities with
respect to our common stock during the applicable "cooling off" periods prior to
the commencement of such distribution. Also, the selling security holder is
subject to applicable provisions which limit the timing of purchases and sales
of our common stock by the selling security holder.
We will inform ^ Format^ that, during such time as^ it is
engaged in a distribution of any of the shares we are registering by this
registration statement, it is required to comply with Regulation M. In general,
Regulation M precludes any selling security holder, any affiliated purchasers
and any broker-dealer or other person who participates in a distribution from
bidding for or purchasing, or attempting to induce any person to bid for or
purchase, any security which is the subject of the distribution until the entire
distribution is complete. Regulation M defines a "distribution" as an offering
of securities that is distinguished from ordinary trading activities by the
magnitude of the offering and the presence of special selling efforts and
selling methods. Regulation M also defines a "distribution participant" as an
underwriter, prospective underwriter, broker, dealer, or other person who has
agreed to participate or who is participating in a distribution.
Regulation M prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security, except
as specifically permitted by Rule 104 of Regulation M. These stabilizing
transactions may cause the price of our common stock to be more than it would
otherwise be in the absence of these transactions. We will also inform the
selling security holder that stabilizing transactions will not be permitted by
Regulation M if a market for the shares develops. Regulation M specifically
prohibits stabilizing that is the result of fraudulent, manipulative, or
deceptive practices. Selling security holders and distribution participants are
required to consult with their own legal counsel to ensure compliance with
Regulation M.
LEGAL PROCEEDINGS
- -----------------
There are no legal actions pending against us nor are any legal actions
contemplated by us at this time.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
- ------------------------------------------------------------
EXECUTIVE OFFICERS AND DIRECTORS. OUR DIRECTORS AND PRINCIPAL EXECUTIVE
OFFICERS ARE AS SPECIFIED ON THE FOLLOWING TABLE:
========================== =============== =====================================
NAME AGE POSITION
- -------------------------- --------------- -------------------------------------
Brian Eddo 29 president, secretary and a director
- -------------------------- --------------- -------------------------------------
Tamara Woody 30 treasurer and a director
========================== =============== =====================================
BRIAN EDDO. Mr. Eddo is our president, secretary and one of our directors since
our inception. Mr. Eddo is responsible for our day-to-day operations and
establishing and maintaining relationships with our clients. Mr. Eddo has also
been a consultant for Addtech Mobile Devices since 2001. Prior to that, he was a
sales engineer for Cisco Systems, Inc. from 2000 to 2001. From 1999 to 2000, Mr.
Eddo was a network engineer for Pacific Data Technologies. Mr. Eddo graduated in
2000 from California State University, Fullerton with Bachelor of Science in
chemistry. Mr. Eddo also holds the following certifications: Cisco Certified
Network Associate, Cisco Certified Design Associate, and Cisco Certified Network
Professional. Mr. Eddo has experience in designing and modifying software
applications from training undertaken to earn his Cisco certificates and by
working as a consultant for Addtech Mobile Devices. Mr. Eddo has not been a
director of any other reporting company.
TAMARA WOODY. Ms. Woody has been our treasurer and one of our directors since
our inception. Ms. Woody is our principal financial officer and is responsible
for our financial reporting and record keeping. Ms. Woody has been a human
resource manager for Contessa Food Products since 2001, where she is responsible
for the development, implementation and administration of that company's
policies. From 1994 to 2001, Ms. Woody was the Vice President for Human
Resources at First Entertainment Credit Union. Also since 2000, she has served
as an instructor for the Los Angeles Community Colleges in Human Resources
certification programs. Ms. Woody graduated in 1994 with a Bachelor of Science
degree in business administration, with an emphasis in human resources
management, and graduated in 1998 with a Master of Business Administration
degree, both from California State University, Northridge. Ms. Woody has
acquired knowledge of accounting principles and practices in the course earning
her Bachelor's and Master's degrees in Business Administration. Ms. Woody is not
an officer or director of any other reporting company.
13
There is no family relationship between any of our officers or directors. There
are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any of our officers or directors from engaging in or continuing any
conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a
security, or any aspect of the securities business or of theft or of any felony.
Nor are any of the officers or directors of any corporation or entity affiliated
with us so enjoined.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of August 1, 2003, by each person or entity
known by us to be the beneficial owner of more than 5% of the outstanding shares
of common stock, each of our directors and named executive officers, and all of
our directors and executive officers as a group. The percentages in the table
assume that Format, Inc. will distribute its shares as a dividend to its own
shareholders, who will subsequently sell those shares which are being registered
in this registration statement.
=============== ============================== ====================== ==================== =================== ====================
TITLE OF CLASS NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF CLASS PERCENT OF CLASS PERCENT OF CLASS IF
BENEFICIAL OWNER BENEFICIAL OWNER IF NO SHARES ARE IF 1,000,000 2,000,000 SHARES
SOLD SHARES ARE SOLD ARE SOLD
- --------------- ------------------------------ ---------------------- -------------------- ------------------- --------------------
Common Stock Brian Eddo
32946 Dana Spruce 500,000 shares, 34.5% 20.4% 14.5%
Suite A president,
Dana Point, CA 92629 secretary, director
- --------------- ------------------------------ ---------------------- -------------------- ------------------- --------------------
Common Stock Tamara Woody
32946 Dana Spruce 750,000 shares, 51.7% 30.6% 21.7%
Suite A treasurer, director
Dana Point, CA 92629
- --------------- ------------------------------ ---------------------- -------------------- ------------------- --------------------
Common Stock Format, Inc.(1)
336 Plaza Estival 200,000 shares, 0% 0% 0%
San Clemente, CA 92672 shareholder
- --------------- ------------------------------ ---------------------- -------------------- ------------------- --------------------
Common Stock All directors and named 1,250,000 shares 86.2% 51.0% 36.2%
executive officers as a grou
=============== ============================== ====================== ==================== =================== ====================
(1) Format, Inc. currently owns 200,000 shares, or 13.8% of our issued and
outstanding common stock; however, Format, Inc. intends to distribute these
shares to its own shareholders as a dividend when this registration
statement is declared effective. We agreed to register these shares issued
to Format, Inc. Therefore, Format, Inc. will no longer hold those shares,
and its shareholders may decide to subsequently sell their shares of our
common stock that they receive.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. In accordance with Securities and Exchange
Commission rules, shares of our common stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within 60 days of the date of the table are deemed beneficially
owned by the optionees. As of August 1, 2003, we have no options or warrants
outstanding. Subject to community property laws, where applicable, the persons
or entities named in the table above have sole voting and investment power with
respect to all shares of our common stock indicated as beneficially owned by
them.
CHANGES IN CONTROL. Our management is not aware of any arrangements which may
result in a change in control.
DESCRIPTION OF SECURITIES
We were authorized to issue 50,000,000 shares of $.001 par value common stock,
and 5,000,000 shares of preferred stock. As of August 1, 2003, there were
1,450,000 shares of our common stock were issued and outstanding.
14
Each shareholder of our common stock is entitled to a pro rata share of cash
distributions made to shareholders, including dividend payments. The holders of
our common stock are entitled to one vote for each share of record on all
matters to be voted on by shareholders. There is no cumulative voting with
respect to the election of our directors or any other matter. Therefore, the
holders of more than 50% of the shares voted for the election of those directors
can elect all of the directors. In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to share ratably in all
assets remaining available for distribution to them after payment of our
liabilities and after provision has been made for each class of stock, if any,
having any preference in relation to our common stock. Holders of shares of our
common stock have no conversion, preemptive or other subscription rights, and
there are no redemption provisions applicable to our common stock.
DIVIDEND POLICY. We have never declared or paid a cash dividend on our capital
stock. We do not expect to pay cash dividends on our common stock in the
foreseeable future. We currently intend to retain our earnings, if any, for use
in our business. Any dividends declared in the future will be at the discretion
of our board of directors.
Our Articles of Incorporation and our Bylaws do not contain any provisions which
were included to delay, defer, discourage or prevent a change in control.
INTEREST OF NAMED EXPERTS AND COUNSEL
- -------------------------------------
No "expert" or our "counsel" was hired on a contingent basis, or will receive a
direct or indirect interest in us, or was a promoter, underwriter, voting
trustee, director, officer, or employee of the company, at any time prior to the
filing of this registration statement. There has been no change in these
relationships since the initial filing of this registration statement.
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
Article Seventh of our Articles of Incorporation provides, among other things,
that our officers and directors shall not be personally liable to us or our
shareholders for monetary damages for breach of fiduciary duty as an officer or
a director, except for liability:
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; or
o for unlawful payments of dividends or unlawful stock purchase or redemption
by us.
Accordingly, our directors may have no liability to our shareholders for any
mistakes or errors of judgment or for any act of omission, unless the act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933 MAY BE PERMITTED TO OUR DIRECTORS, OFFICERS AND CONTROLLING PERSONS
PURSUANT TO THE FOREGOING PROVISIONS, OR OTHERWISE, WE HAVE BEEN ADVISED THAT IN
THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THAT ACT AND IS, THEREFORE, UNENFORCEABLE.
ORGANIZATION WITHIN LAST FIVE YEARS
- -----------------------------------
TRANSACTIONS WITH PROMOTERS. Brian Eddo was our promoter. On December 16, 2001,
we issued 500,000 shares of our common stock to Mr. Eddo in exchange for cash of
$1,000 and services which were valued at $9,000.
DESCRIPTION OF BUSINESS
- -----------------------
OUR BACKGROUND. We were incorporated in Nevada on December 10, 2001 as Digiblue
Media, Inc. On February 22, 2002, we were qualified to do business in California
as Nevada Digiblue Media, Inc.
15
OUR BUSINESS. We are a development stage company. Currently, we have only
engaged one client, who is Format Inc., one of our shareholders, and therefore
our operations have been limited to serving that client and developing our own
website. As we develop our business, we hope to engage more clients. At our
current level of staffing, we are able to handle our operations as well as an
increase in activity, should we engage additional clients. However, we may
revisit the issue of increasing our staff as our client base dictates. We intend
to design and develop customized computer software applications tailored to our
customers' needs. We are a software development and design company that hopes to
specialize in providing customized software applications to small businesses and
entrepreneurs. We believe that, based on our management's experience, that we
will be able to understand our clients' software application needs and tailor
off-the-shelf software to our clients' business requirements, or where
situations warrant, design original software applications to achieve the same
goal for our clients. We propose to market our services beginning in the
southern California area by means of personal contacts, networking with
providers of computer systems, components or repair services, and eventually,
through our proposed website. Later, we hope to expand the area of our
operations to the greater West Coast area. We have not yet begun any such
marketing activities, nor is our website operational at this time.
OUR SERVICES. We currently have provided services to only one client. However,
as we develop a customer base after marketing our services to additional
potential clients and are engaged by them to provide services, we intend to
provide software design and development services, including specialized,
innovative information technology, or IT, solutions to our customers. We believe
our staff is able to perform a range of complex software development projects.
We believe we will be able to provide software solutions to practical business
applications in programming, custom IT systems design, software development and
consulting. Our possible software development projects and programming solutions
include multi-tier systems, Internet/intranet access and reporting systems,
complex data processing and cost-effective user interfaces. We hope to provide
our future clients with customized software projects at a competitive price,
ranging from internal custom software development projects or assistance from a
total software development project staff.
As of March 31, 2003, we have generated revenues of $36,800 from services
provided to our first client. To effectuate our business during the next twelve
months plan which includes expanding our client base, we must market our
services to engage additional customers. We believe that we will use some of the
proceeds generated from this offering as well as revenues generated from sales
of our services to pay for our proposed marketing activities. If we are unable
to raise capital or generate revenues to pay for our proposed marketing
activities, we hope that we will continue to market the services we offer by in
person meetings with prospective customers. Our failure to pay for our marketing
activities could result in our inability to meet the objectives of our business
plan within the next twelve months.
OUR PROPOSED WEBSITE. We currently own the domain name www.digibluemedia.com. We
anticipate that our proposed website will display our corporate logo, contact
information, and provide a general description of the computer software
development and design services that we offer as well as prices of those
services. Our website is not yet operational, but we anticipate that it will be
operating by September 2003. If we generate revenues that are sufficient to
expand the capability of our website, we intend to further develop our website
to serve as a mechanism for clients to ask online questions of our technical
staff, and to place service orders by means of e-mail.
OUR TARGET MARKETS AND MARKETING STRATEGY. We intend to serve individual and
corporate customers seeking competitively priced customized software
applications to meet their small business requirements. We have only engaged one
client to date. We believe the demand for customized software applications is
expanding, since many businesses and entrepreneurs currently purchase
off-the-shelf software on their computer systems, and often have the need for
those applications to be tailored to the requirements of their business. As
improvements in technology occur, many computer users seek to modify the
capabilities of software they purchase to increase the computing capability at
their disposal. We estimate that because of the rapid changes in technology,
computer product life cycles are increasingly shorter, prices become lower, and
competition increases. By serving as a source for customized software
applications, we believe we will be able to help fill a growing need in the
market for computer software that is competitively priced but technologically
up-to-date. We intend promote our customizing services by means of
relationship-building with both potential and current small business computer
users, trade magazine articles and advertisements, reputation and word of mouth.
We also intend to attend industry events to build relationships with potential
clients for our services.
OUR GROWTH STRATEGY. Our objective is to establish our reputation of effectively
providing tailored software solutions to our small business clients in a timely
and convenient fashion and build long-term relationships as an innovative
provider of software modifications. We have only engaged one client to date, and
as such, our operations are extremely limited. Our strategy is to provide
clients with exceptional personal service and software solutions especially
tailored to the client's needs at competitive prices. Key elements of our
strategy include:
o cultivate relationships with existing and potential clients;
o increase our relationships with third party providers of components,
computer maintenance and repair services who may sharea similar client
base;
o develop and promote our website and expand its capabilities; and
o expand operations in the Southern California and West Coast regions.
16
OUR COMPETITION. The market for customized computer software applications is
very competitive. We compete primarily with larger software manufacturers,
designers, and retail computer stores providing off the shelf software, or
similar customizing services, and other retail sources of computer software who
sell both off-the-shelf and customized software applications. Some of these
competitors are: CompUSA, BestBuy, Fry's Electronics, and other chain store
computer product retailers, especially those with technical staffs, and smaller
software design companies located in southern California such as IT Software
Design Co., Success Associates, The Dini Group, eBuilt, Inc. and Digital Point
Solutions. We also compete with other local or regional providers of computer
software customization services. Many of these competitors market their services
in a traditional store-front fashion as well as by means of a website. Some
online competitors provide a variety of services, such as hardware maintenance,
component sales and software upgrades. Some of our online competitors serving
southern California include customware.com, neotechsystems.com and ganx.com and
applitech.com.
We intend to compete on the basis of service and price, utilizing the experience
and contacts of Brian Eddo to provide high quality services at a reasonable
price. We believe that Mr. Eddo's experience and contacts in the industry will
allow us to pay less for the services that we may have to subcontract.
Many of these competitors have greater financial resources than we have,
enabling them to finance acquisition and development opportunities, to pay
higher prices for the same opportunities or to develop and support their own
operations. In addition, many of these companies can offer bundled, value-added
or additional services not provided by us, and may have greater name
recognition. These companies might be willing to sacrifice profitability to
capture a greater portion of the market for similar products and services, or
pay higher prices than we would for the same expansion and development
opportunities. Consequently, we may encounter significant competition in our
efforts to achieve our internal growth objectives.
OUR INTELLECTUAL PROPERTY. We do not presently own any copyrights, patents,
trademarks, licenses, concessions or royalties. Our success may depend in part
upon our ability to preserve our trade secrets, obtain and maintain patent
protection for our technologies, products and processes, and operate without
infringing the proprietary rights of other parties. However, we may rely on
certain proprietary technologies, trade secrets, and know-how that are not
patentable. Although we may take action to protect our unpatented trade secrets
and our proprietary information, in part, by the use of confidentiality
agreements with our employees, consultants and certain of our contractors, we
cannot guaranty that:
o these agreements will not be breached;
o we would have adequate remedies for any breach; or
o our proprietary trade secrets and know-how will not otherwise become
known or be independently developed or discovered by competitors.
We cannot guaranty that our actions will be sufficient to prevent imitation or
duplication of either our services or business methods by others or prevent
others from claiming violations of their intellectual property rights.
We own the Internet domain name www.digibluemedia.com. Under current domain name
registration practices, no one else can obtain an identical domain name, but
someone might obtain a similar name, or the identical name with a different
suffix, such as ".org", or with a country designation. The regulation of domain
names in the United States and in foreign countries is subject to change, and we
could be unable to prevent third parties from acquiring domain names that
infringe or otherwise decrease the value of our domain names.
GOVERNMENT REGULATION. We are subject to federal, state and local laws and
regulations generally applied to businesses, such as payroll taxes on the state
and federal levels. We do not believe that our sales activities are subject to
licensing or other regulatory requirements. We believe that we are in conformity
with all applicable laws in all relevant jurisdictions.
17
OUR RESEARCH AND DEVELOPMENT. We are not currently conducting any research and
development activities, other than the development of our website. We do not
anticipate conducting such activities in the near future.
EMPLOYEES. As of August 1, 2003, we have one employee, who is Brian Eddo, our
president, secretary and one of our directors. We anticipate that we will not
hire any employees in the next six months, unless we generate significant
revenues. From time-to-time, we anticipate that we will use the services of
independent contractors and consultants for the various services that we
provide, if our existing staffing levels are not adequate to furnish such
services. We will determine when and whether to add to our staff or supplement
it by means of independent contractors in the event that we obtain additional
contracts for services. We anticipate that we would engage independent
contractors on a flat fee basis.
Facilities. Our executive, administrative and operating offices are located at
32946 Dana Spruce, Suite A, Dana Point, California, 92674.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------
FOR THE PERIOD FROM DECEMBER 10, 2001, OUR DATE OF FORMATION, THROUGH DECEMBER
31, 2002.
LIQUIDITY AND CAPITAL RESOURCES. We have cash and cash equivalents totaling
$15,143 as of December 31, 2002. We also had $3,500 in accounts receivable from
a related party, and $370 in other receivables, plus $2,000 in costs and
estimated earnings in excess of billings on uncompleted contracts. Therefore,
our total current assets were $21,013 as of December 31, 2002. We also had a net
of $2,257 in computer equipment. Our total assets were $23,270 as of December
31, 2002. We have no external sources of liquidity available. We believe that
our available cash and cash equivalents are sufficient to pay our day-to-day
expenditures. As of December 31, 2002, we had liabilities of $1,360, which were
represented solely by accounts payable and accrued expenses. We had no long term
commitments or other contingencies as of that date.
RESULTS OF OPERATIONS.
REVENUES. We have realized revenues from a related party of $23,000 for the year
ended December 31, 2002, compared to no revenues generated during the period
from our date of inception on December 10, 2001 through the year ending December
31, 2001. We anticipate that our revenues will increase if we engage service
contracts with additional clients and develop additional relationships with
third party providers of computer components, systems and maintenance and repair
products and services.
OPERATING EXPENSES. For the period for the year ended December 31, 2002, our
total expenses were $27,590, all of which were general and administrative
expenses. This is in comparison to expenses of $1,000 for the period from our
date of inception on December 10, 2001 through the year ending December 31,
2001. For the period from December 10, 2001, our date of formation, through
December 31, 2002, we experienced a net loss of $4,590, compared to a net loss
of $1,000 for the period from our inception on December 10, 2001 through the
year ending December 31, 2001.
FOR THE PERIOD FROM DECEMBER 10, 2001, OUR DATE OF FORMATION, THROUGH MARCH 31,
2003.
LIQUIDITY AND CAPITAL RESOURCES. We have cash and cash equivalents totaling
$22,038 as of March 31, 2003. We also have $10,800 in costs and estimated
earnings in excess of billings on uncompleted contracts. Therefore, our total
current assets were $32,838 as of March 31, 2003. We also had a net of $1,881 in
computer equipment. Our total assets were $34,719 as of March 31, 2003. We have
no external sources of liquidity available. We believe that our available cash
and cash equivalents are sufficient to pay our day-to-day expenditures. As of
March 31, 2003, we had liabilities of $17,106, which were represented solely by
accounts payable and accrued expenses. We had no long term commitments or other
contingencies as of that date.
18
RESULTS OF OPERATIONS.
REVENUES. We have realized revenues from a related party of $13,800 for the
three month period ended March 31, 2003, compared to no revenues generated
during the same period ending March 31, 2002. We anticipate that our revenues
will increase if we engage service contracts with additional clients and develop
additional relationships with third party providers of computer components,
systems and maintenance and repair products and services.
OPERATING EXPENSES. For the three month period ended March 31, 2003, our total
expenses were $19,430, which consist of $4,870 which were represented by
contract costs, $1,500 which was represented by amortization of stock
compensation and $13,060 which was represented by general and administrative
expenses. This is in comparison to expenses of $4,726 for the three month period
ending March 31, 2002. For the three month period ending March 31, 2003, we
experienced a net loss of $5,630, compared to a net loss of $4,726 for the three
month period ending March 31, 2002. Our operating expenses for the three month
period ended March 31, 2002 which totaled $4,726 were represented by $750 for
amortization of stock compensation and $3,976 for general and administrative
expenses. The increase in our operating expenses was due to the addition of
contract costs and an increase in our general and administrative costs during
the three months ended March 31, 2003 in comparison to the same period ended
March 31, 2002.
OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS. As of March 31, 2003, we
generated revenues of $36,800 from a related party. We hope to generate revenues
in the next twelve months by engaging additional clients through reputation and
word of mouth, and develop networking relationships with vendors in related
businesses. As we develop additional networking relationships, our opportunities
to generate revenues could increase. To effectuate our business plan during the
next twelve months, we must increase our service offerings and market and
promote our services. We currently market our business primarily through
referrals and that referrals will continue to comprise a majority of our
business.
We anticipate that we will use the funds raised in this offering and revenues
generated to fund marketing activities and for working capital. We believe that
the size of our operations may vary depending on the amount of funds raised in
this offering. If we are able to sell all of the shares in this offering, we
believe that the size of our operations will increase because we will be able to
increase our marketing activities. If we do not raise any funds in this
offering, we may not have adequate funds to market our services. We believe we
will ^ need to raise $100,000 to ^ complete the development of our website and
to begin marketing our services. To fully develop our business to the extent
envisioned by our management, we believe we need to raise $200,000. Our failure
to market and promote our services will hinder our ability to increase the size
of our operations and generate additional revenues. If we are not able to
generate additional revenues that cover our estimated operating costs, our
business may ultimately fail.
Specifically, we hope to accomplish the steps listed below to implement our
business plan. We estimate that we will require at least $200,000 in order to be
able to commence operations as envisioned below during the next twelve months.
From that amount, we anticipate that our offering expenses will total
approximately $15,170, reducing the net proceeds to use to approximately
$184,830. The figures and steps listed below are estimates only, and our actual
progress and expenses may vary from these time and cost estimates.
- -------------------- -------------------------------------------------------- ----------------------------- ------------------
Milestones Steps Needed Estimated Timeframe Estimated Cost
- -------------------- -------------------------------------------------------- ----------------------------- ------------------
Website 1. Design website concept within two months of $25,000
2. Develop links to work samples receiving adequate funding
3. Deploy developed website
4. Promote website
- -------------------- -------------------------------------------------------- ----------------------------- ------------------
Computer Equipment 1. Identify equipment needed within next six months $15,000
2. Purchase equipment
- -------------------- -------------------------------------------------------- ----------------------------- ------------------
Marketing Plan 1. Develop marketing concept and target clients within next eight months $41,000
2. Develop sample projects
3. Contact potential clients
4. Negotiate and close project contracts
- -------------------- -------------------------------------------------------- ----------------------------- ------------------
Staff 1. Identify staffing needs can be scaled to number of $44,000
2. Solicit resumes, work samples clients engaged, on an
3. Interview and hire staff and/or contract with as-needed basis
independent contractors
4. Review staff/contractor performance
- -------------------- -------------------------------------------------------- ----------------------------- ------------------
19
We have cash and cash equivalents of $22,038 as of March 31, 2003. In the
opinion of management, available funds will satisfy our working capital
requirements to operate at our current level of activity for the next twelve
months. Those funds do not include any funds raised in this offering. We will
not be able to implement our expansion plans in the manner we envision unless we
raise funds from this offering. Our forecast for the period for which our
financial resources will be adequate to support our operations involves risks
and uncertainties and actual results could fail as a result of a number of
factors. In order to expand our operations, we do not currently anticipate that
we will need to raise additional capital in addition to the funds raised in this
offering. If we do not raise at least $100,000 from this offering, then we may
not be able to pay for the expenses of this offering, finish the development of
our website, conduct marketing activities and expand our operations. This
offering is a best efforts offering with no minimum. ^ We will have access to
these funds as soon as they are received.
We are not currently conducting any research and development activities, other
than the development of our website. We do not anticipate conducting such
activities in the near future. In the event that we expand our customer base,
then we may need to hire additional employees or independent contractors as well
as purchase or lease additional equipment. Our management believes that we do
not require the services of independent contractors to operate at our current
level of activity. However, if our level of operations increases beyond the
level that our current staff can provide, then we may need to supplement our
staff in this manner.
DESCRIPTION OF PROPERTY
PROPERTY HELD BY US. As of the date specified in the following table, we held
the following property:
============================== ====================== =========================
PROPERTY MARCH 31, 2003 DECEMBER 31, 2002
- ------------------------------ ---------------------- -------------------------
Cash and Equivalents $22,038 $15,143
- ------------------------------ ---------------------- -------------------------
Property and Equipment, net $1,881 $2,090
============================== ====================== =========================
OUR FACILITIES. Our executive, administrative and operating office is located in
the personal residence of Brian Eddo, our president and one of our directors. We
believe that our facilities are adequate for our needs and that additional
suitable space will be available on acceptable terms as required. We do not own
any real estate. Brian Eddo, our president and director, currently provides
office space to us at no charge. We do not have a written lease or sublease
agreement and Mr. Eddo does not expect to be paid or reimbursed for providing
office facilities.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ----------------------------------------------
RELATED PARTY TRANSACTIONS.
Brian Eddo, our president, secretary and one of our directors, currently
provides office space to us at no charge. Mr. Eddo does not expect to be paid or
reimbursed for providing office facilities.
In December 2001, we issued 500,000 shares of our common stock to Brian Eddo,
our president, secretary and one of our directors, in exchange for cash of
$1,000 and services valued at $9,000, or $0.02 per share.
In February 2002, we issued 750,000 shares of our common stock to Tamara Woody,
our treasurer and one of our directors, in exchange for $15,000, or $0.02 per
share.
In May 2002, we entered into an agreement for us to develop software for Format
which became one of our shareholders pursuant to that agreement. Specifically,
the agreement provided that Format would pay us $46,000 in exchange for the
software development services and $4,000 to purchase 200,000 shares of our
common stock, which we agreed to register on behalf of Format.
20
With regard to any future related party transaction, we plan to fully disclose
any and all related party transactions, including, but not limited to, the
following:
o disclose such transactions in prospectuses where required;
o disclose in any and all filings with the Securities and Exchange
Commission, where required;
o obtain disinterested directors' consent; and o obtain shareholder consent
where required.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- --------------------------------------------------------
REPORTS TO SECURITY HOLDERS. Our securities are not listed for trading on any
exchange or quotation service. We are not required to comply with the timely
disclosure policies of any exchange or quotation service. The requirements to
which we would be subject if our securities were so listed typically include the
timely disclosure of a material change or fact with respect to our affairs and
the making of required filings. Although we are not required to deliver an
annual report to security holders, we intend to provide an annual report to our
security holders, which will include audited financial statements.
When we become a reporting company with the Securities and Exchange Commission,
the public may read and copy any materials filed with the Securities and
Exchange Commission at the Security and Exchange Commission's Public Reference
Room at 450 Fifth Street N.W., Washington, D.C. 20549. The public may also
obtain information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Securities and Exchange Commission. The address of that
site is http://www.sec.gov.
As of August 1, 2003, there were three record holders of our common stock, and
there were 1,450,000 shares of our common stock issued and outstanding. There
have been no cash dividends declared on our common stock. Dividends are declared
at the sole discretion of our Board of Directors.
As of August 1, 2003, there are 2,000 outstanding shares of our common stock
which can be sold pursuant to Rule 144. In addition, Format's shares became
eligible for resale under the provisions of Rule 144 on May 2, 2003, the date on
which Format has held them for over one year. Rule 144 provides, among other
things, that persons holding restricted securities for a period of one year may
each sell, assuming all of the conditions of Rule 144 are satisfied, in
brokerage transactions every three months an amount of restricted securities
equal to one percent of our outstanding shares of common stock, or the average
weekly reported volume of trading during the four calendar weeks preceding the
filing of a notice of proposed sale, whichever is more. Rule 144 also provides
that, after holding such securities for a period of two years, a nonaffiliate of
the company may sell those securities without restriction, other than the
requirement that we are current with respect to our information reporting
requirements.
As of August 1, 2003, there are no outstanding options or warrants to purchase,
or securities convertible into, shares of our common stock.
21
We have agreed to register for sale 200,000 shares of our common stock held by
one of our current security holders, Format, which intends to distribute these
shares as a dividend to its own shareholders, as described herein.
PENNY STOCK REGULATION. Shares of our common stock will probably be subject to
rules adopted by the Securities and Exchange Commission that regulate
broker-dealer practices in connection with transactions in "penny stocks". Penny
stocks are generally equity securities with a price of less than $5.00, except
for securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in those securities is provided by the exchange or
system. The penny stock rules require a broker-dealer, prior to a transaction in
a penny stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Securities and Exchange Commission, which
contains the following:
o a description of the nature and level of risk in the market for penny
stocks in both public offerings and secondary trading;
o a description of the broker's or dealer's duties to the customer and of the
rights and remedies available to the customer with respect to violation to
such duties or other requirements of securities' laws;
o a brief, clear, narrative description of a dealer market, including "bid"
and "ask" prices for penny stocks and the significance of the spread
between the "bid" and "ask" price;
o a toll-free telephone number for inquiries on disciplinary actions;
o definitions of significant terms in the disclosure document or in the
conduct of trading in penny stocks; and
o such other information and is in such form, including language, type, size
and format, as the Securities and Exchange Commission shall require by rule
or regulation.
Prior to effecting any transaction in penny stock, the broker-dealer also must
provide the customer the following:
o the bid and offer quotations for the penny stock;
o the compensation of the broker-dealer and its salesperson in the
transaction;
o the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the market
for such stock; and
o monthly account statements showing the market value of each penny stock
held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
Holders of shares of our common stock may have difficulty selling those shares
because our common stock will probably be subject to the penny stock rules.
22
EXECUTIVE COMPENSATION
- ----------------------
Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our board of directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.
SUMMARY COMPENSATION TABLE. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to us payable to our chief
executive officer and our other executive officers during the years ending
December 31, 2001 and 2002. Our Board of Directors may adopt an incentive stock
option plan for our executive officers which would result in additional
compensation.
========================================= ======= ============= ============= ================= =========================
Name and Principal Position Year Annual Bonus ($) Other Annual All Other Compensation
Salary ($) Compensation ($)
- ----------------------------------------- ------- ------------- ------------- ----------------- -------------------------
Brian Eddo - president, secretary 2001 None None None $9,000(1)
- ----------------------------------------- ------- ------------- ------------- ----------------- -------------------------
2002 None None None None
- ----------------------------------------- ------- ------------- ------------- ----------------- -------------------------
Tamara Woody - treasurer 2001 None None None None
- ----------------------------------------- ------- ------------- ------------- ----------------- -------------------------
2002 None None None None
========================================= ======= ============= ============= ================= =========================
(1)Represents stock issued for services.
COMPENSATION OF DIRECTORS. Our current directors who are also our employees
receive no extra compensation for their service on our board of directors.
COMPENSATION OF OFFICERS. As of August 1, 2003, our officers have received no
compensation for their services provided to us, except as described in the table
above. None of the proceeds of this offering will be used to compensate our
officers for any services that were provided to us prior to the offering.
EMPLOYMENT CONTRACTS. We anticipate that we will enter into an employment
agreement with Brian Eddo, although we have not yet done so. Therefore, we do
not currently know the terms of that employment agreement.
23
FINANCIAL STATEMENTS
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO DECEMBER 31, 2002
24
CONTENTS
Page
Independent Auditors' Report 26
Financial Statements:
Balance Sheet 27
Statements of Operations 28
Statement of Stockholders' Equity 29
Statements of Cash Flows 30
Notes to Financial Statements 31 - 38
25
INDEPENDENT AUDITORS' REPORT
Board of Directors
Digiblue Media, Inc.
Dana Point, California
We have audited the accompanying balance sheet of Digiblue Media, Inc. (dba
Nevada Digiblue Media, Inc.) (A Development Stage Company) as of December 31,
2002, and the related statements of operations, stockholders' equity and cash
flows for the year ended December 31, 2002, for the period from December 10,
2001(inception) to December 31, 2001 and for the period from December 10,
2001(inception) to December 31, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
2002, and the results of its operations and its cash flows for the year ended
December 31, 2002, for the period from December 10, 2001(inception) to December
31, 2001 and for the period from December 10, 2001 (inception) to December 31,
2002, in conformity with accounting principles generally accepted in the United
States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
accompanying financial statements, the Company has no established source of
revenue, which raises substantial doubt about its ability to continue as a going
concern. Management's plan in regard to these matters is also discussed in Note
1. These financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
February 4, 2003
26
FINANCIAL STATEMENTS
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET - DECEMBER 31, 2002
ASSETS
Current assets:
Cash and cash equivalents $ 15,143
Accounts receivable - from related party 3,500
Other receivable 370
Cost and estimated earnings in excess of
billings on uncompleted contracts 2,000
-----------------
Total current assets $ 21,013
Computer equipment, less accumulated depreciation of $418 2,090
-----------------
$ 23,103
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities -
accounts payable and accrued expenses $ 1,360
Stockholders' equity:
Common stock, $0.001 par value; 50,000,000 shares authorized;
1,450,000 shares issued and outstanding $ 1,450
Additional paid-in capital 27,550
Unearned compensation (1,500)
Deficit accumulated during development stage (5,757)
-----------------
Total stockholders' equity 21,743
-----------------
$ 23,103
=================
The accompanying notes form an integral part of these financial statements.
27
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
From December 10, From December 10,
For the year ended 2001 (Inception) to 2001 (Inception) to
December 31, 2002 December 31, 2001 December 31, 2002
---------------------------------------------------------------------------
Revenue - from related party $ 23,000 $ - $ 23,000
----------------------- ----------------------- -------------------------
Costs:
Contract costs 4,090 - 4,090
Amortization of stock compensation 7,500 - 7,500
General and administrative expenses 16,167 1,000 17,167
----------------------- ----------------------- -------------------------
27,757 1,000 28,757
----------------------- ----------------------- -------------------------
Loss before provision for income taxes (4,757) (1,000) (5,757)
Provision for income taxes - - -
----------------------- ----------------------- -------------------------
Net loss $ (4,757) $ (1,000) $ (5,757)
======================= ======================= =========================
Net loss per common share -
basic and dilutive $0.00 $0.00 $0.00
======================= ======================= =========================
Weighted average common shares
outstanding - basic and dilutive 1,262,466 500,000 1,232,368
======================= ======================= =========================
The accompanying notes form an integral part of these financial statements.
28
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
accumulated
Common stock Additional Common during Total
--------------------------- paid-in stock for development stockholders'
Shares Amount capital services stage equity
----------- ------------- -------------- -------------- -------------- ---------------
Balance at December 10, 2001 - $ - $ - $ - $ - $ -
Issuance of common stock for cash and
services - December 2001 500,000 500 9,500 (9,000) - 1,000
Net loss - - - - (1,000) (1,000)
----------- ------------- -------------- -------------- -------------- ---------------
Balance at December 31, 2001 500,000 500 9,500 (9,000) (1,000) -
Issuance of common stock for cash:
February 2002 at $.02 per share 750,000 750 14,250 - - 15,000
May 2002 at $.02 per share 200,000 200 3,800 - - 4,000
Amortization of services - - - 7,500 - 7,500
Net loss - - - - (4,757) (4,757)
----------- ------------- -------------- -------------- -------------- ---------------
Balance at December 31, 2002 1,450,000 $ 1,450 $ 27,550 $ (1,500) $ (5,757) $ 21,743
=========== ============= ============== ============== ============== ===============
The accompanying notes form an integral part of these financial statements.
29
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
From December 10, From December 10,
For the year ended 2001 (Inception) to 2001 (Inception) to
December 31, 2002 December 31, 2001 December 31, 2002
-------------------- -------------------- --------------------
Cash flows used for operating activities:
Net loss $ (4,757) $ (1,000) $ (5,757)
-------------------- -------------------- --------------------
Adjustments to reconcile net loss to net cash
used for operating activities:
Amortization of common stock for services 7,500 - 7,500
Depreciation 418 418
Increase in assets:
Accounts receivable - from related party (3,500) (3,500)
Other receivable (370) (370)
Cost and estimated earnings in excess of
billings on uncompleted contracts (2,000) - (2,000)
Increase in liabilities -
accounts payable and accrued expenses 1,360 - 1,360
-------------------- -------------------- --------------------
Total adjustments 3,408 - 3,408
-------------------- -------------------- --------------------
Net cash used for operating activities (1,349) (1,000) (2,349)
-------------------- -------------------- --------------------
Cash flows used for investing activities -
purchase of equipment (2,508) - (2,508)
-------------------- -------------------- --------------------
Cash flows provided by financing activities -
proceeds from issuance of common stock 19,000 1,000 20,000
-------------------- -------------------- --------------------
Net increase in cash and cash equivalents 15,143 - 15,143
Cash and cash equivalents, beginning of period - - -
-------------------- -------------------- --------------------
Cash and cash equivalents, end of period $ 15,143 $ - $ 15,143
==================== ==================== ====================
Supplemental disclosure of cash flow information:
Income taxes paid $ - $ - $ -
==================== ==================== ====================
Interest paid $ - $ - $ -
==================== ==================== ====================
Non cash investing and financing activities
In December 2001, the Company issued 500,000 shares valued at $10,000, of which $9,000 was for services to be
rendered to the Company.
The accompanying notes form an integral part of these financial statements.
30
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO DECEMBER 31, 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS:
Digiblue Media, Inc. (the "Company") is currently a
development stage company under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 7 and was
incorporated under the laws of the State of Nevada on December
10, 2001. The Company plans to design and develop specialized
software programs for any potential customer.
BASIS OF PRESENTATION:
The accompanying financial statements have been prepared in
conformity with accounting principles generally accepted in
the United States of America, which contemplate continuation
of the Company as a going concern. However, the Company has no
established source of revenue. This matter raises substantial
doubt about the Company's ability to continue as a going
concern. These financial statements do not include any
adjustments relating to the recoverability and classification
of recorded asset amounts, or amounts and classification of
liabilities that might be necessary should the Company be
unable to continue as a going concern.
Management plans to take the following steps that it believes
will be sufficient to provide the Company with the ability to
continue in existence:
Management intends to continue to raise additional financing
through debt and equity financing or other means and develop
customer relations to complete its business plan.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair values of cash and cash equivalents,
accounts receivable, accounts payable and accrued expenses
approximate their carrying value because of the short term
maturity of these instruments or the stated interest rates are
indicative of market interest rates.
USE OF ESTIMATES:
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reported
periods. Actual results could materially differ from those
estimates.
31
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO DECEMBER 31, 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
CASH AND CASH EQUIVALENTS:
For purposes of the statement of cash flows, the Company
considers all highly liquid investments purchased with
original maturities of three months or less to be cash
equivalents.
COMPUTER EQUIPMENT:
Computer equipment is valued at cost. Depreciation is being
provided by use of straight-line over the estimated useful
life of three years.
STOCK-BASED COMPENSATION:
SFAS No. 123, "Accounting for Stock-Based Compensation,"
encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans
at fair value. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related
interpretations. Accordingly, compensation expense for stock
options is measured as the excess, if any, of the quoted
market price of the Company's common stock (at the date of the
grant), less the amount an employee must pay to acquire the
stock.
REVENUE RECOGNITION:
The Company generated revenue in the year ended December 31,
2002 under a contract with a shareholder of the Company to
create a software program. It was the only contract for the
Company since inception. Revenue under this contract was
recognized on the percentage-of-completion method measured by
the portion of the total contract or job cost expended to date
to the estimated total cost to complete. Contract costs
include all direct labor, subcontract costs and indirect
payroll costs. Contract costs in excess of billings are
presented as cost and estimated earnings in excess of billings
on uncompleted contracts. Selling, general and administrative
costs are charged to expense as incurred.
32
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO DECEMBER 31, 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INCOME TAXES:
The Company accounts for income taxes under SFAS 109,
"Accounting for Income Taxes." Under the asset and liability
method of SFAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statements carrying amounts
of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in income in the period the enactment occurs. A
valuation allowance is provided for certain deferred tax
assets if it is more likely than not that the Company will not
realize tax assets through future operations.
BASIC AND DILUTED LOSS PER SHARE:
In accordance with SFAS No. 128, "Earnings Per Share," the
basic loss per common share is computed by dividing net loss
available to common stockholders by the weighted average
number of common shares outstanding. Diluted loss per common
share is computed similar to basic loss per common share
except that the denominator is increased to include the number
of additional common shares that would have been outstanding
if the potential common shares had been issued and if the
additional common shares were dilutive. As of December 31,
2002, the Company has no outstanding stock options that can be
converted into shares of Company's common stock.
COMPREHENSIVE INCOME:
SFAS No. 130, "Reporting Comprehensive Income," establishes
standards for the reporting and display of comprehensive
income and its components in the financial statements. For the
period from December 10, 2001 (inception) to December 31,
2002, the Company's comprehensive income (loss) consisted of
loss from operations. The Company has no items that represent
other comprehensive income and has not included a schedule of
comprehensive income in the financial statements.
SEGMENT REPORTING:
Based on the Company's integration and management strategies,
the Company operated in a single business segment. For the
period from inception to December 31, 2002, all revenues have
been derived from domestic operations.
33
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO DECEMBER 31, 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
NEW ACCOUNTING PRONOUNCEMENTS:
In July 2001, the Financial Accounting Standards Board (FASB)
issued SFAS No. 142, "Goodwill and Other Intangibles." SFAS
No. 142 addresses the initial recognition; measurement and
amortization of intangible assets acquired individually or
with a group of other assets (but not those acquired in a
business combination) and addresses the amortization
provisions for excess cost over fair value of net assets
acquired or intangibles acquired in a business combination.
The statement is effective for fiscal years beginning after
December 15, 2001, and is effective July 1, 2001 for any
intangibles acquired in a business combination initiated after
June 30, 2001. The Company has implemented this pronouncement
and has concluded that the adoption has no material impact to
the financial statements.
In October 2001, the FASB issued SFAS No. 143, "Accounting for
Asset Retirement Obligations," which requires companies to
record the fair value of a liability for asset retirement
obligations in the period in which they are incurred. The
statement applies to a company's legal obligations associated
with the retirement of a tangible long-lived asset that
results from the acquisition, construction, and development or
through the normal operation of a long-lived asset. When a
liability is initially recorded, the company would capitalize
the cost, thereby increasing the carrying amount of the
related asset. The capitalized asset retirement cost is
depreciated over the life of the respective asset while the
liability is accreted to its present value. Upon settlement of
the liability, the obligation is settled at its recorded
amount or the company incurs a gain or loss. The statement is
effective for fiscal years beginning after June 30, 2002. The
Company does not expect the adoption to have a material impact
to the Company's financial position or results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." Statement
144 addresses the accounting and reporting for the impairment
or disposal of long-lived assets. The statement provides a
single accounting model for long-lived assets to be disposed
of. New criteria must be met to classify the asset as an asset
held-for-sale. This statement also focuses on reporting the
effects of a disposal of a segment of a business. This
statement is effective for fiscal years beginning after
December 15, 2001. The Company has implemented this
pronouncement and has concluded that the adoption has no
material impact to the financial statements.
34
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO DECEMBER 31, 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
NEW ACCOUNTING PRONOUNCEMENTS, CONTINUED:
In April 2002, the FASB issued Statement No. 145, "Rescission
of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections." This Statement
rescinds FASB Statement No. 4, "Reporting Gains and Losses
from Extinguishment of Debt," and an amendment of that
Statement, FASB Statement No. 64, "Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements" and FASB Statement
No. 44, "Accounting for Intangible Assets of Motor Carriers."
This Statement amends FASB Statement No. 13, "Accounting for
Leases," to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. The
Company does not expect the adoption to have a material impact
to the Company's financial position or results of operations.
In June 2002, the FASB issued Statement No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities." This
Statement addresses financial accounting and reporting for
costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." The provisions of
this Statement are effective for exit or disposal activities
that are initiated after December 31, 2002, with early
application encouraged. The Company does not expect the
adoption to have a material impact to the Company's financial
position or results of operations.
In October 2002, the FASB issued Statement No. 147,
"Acquisitions of Certain Financial Institutions--an amendment
of FASB Statements No. 72 and 144 and FASB Interpretation No.
9", which removes acquisitions of financial institutions from
the scope of both Statement 72 and Interpretation 9 and
requires that those transactions be accounted for in
accordance with Statements No. 141, Business Combinations, and
No. 142, Goodwill and Other Intangible Assets. In addition,
this Statement amends SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, to include in its
scope long-term customer-relationship intangible assets of
financial institutions such as depositor- and
borrower-relationship intangible assets and credit cardholder
intangible assets. The requirements relating to acquisitions
of financial institutions is effective for acquisitions for
which the date of acquisition is on or after October 1, 2002.
The provisions related to accounting for the impairment or
disposal of certain long-term customer-relationship intangible
assets are effective on October 1, 2002. The adoption of this
Statement did not have a material impact to the Company's
financial position or results of operations as the Company has
not engaged in either of these activities.
35
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO DECEMBER 31, 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
NEW ACCOUNTING PRONOUNCEMENTS, CONTINUED:
In December 2002, the FASB issued Statement No. 148,
"Accounting for Stock-Based Compensation--Transition and
Disclosure", which amends FASB Statement No. 123, Accounting
for Stock-Based Compensation, to provide alternative methods
of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In
addition, this Statement amends the disclosure requirements of
Statement 123 to require prominent disclosures in both annual
and interim financial statements about the method of
accounting for stock-based employee compensation and the
effect of the method used on reported results. The transition
guidance and annual disclosure provisions of Statement 148 are
effective for fiscal years ending after December 15, 2002,
with earlier application permitted in certain circumstances.
The interim disclosure provisions are effective for financial
reports containing financial statements for interim periods
beginning after December 15, 2002. The adoption of this
statement did not have a material impact on the Company's
financial position or results of operations as the Company has
not elected to change to the fair value based method of
accounting for stock-based employee compensation.
In January 2003, the FASB issued Interpretation No. 46,
"Consolidation of Variable Interest Entities." Interpretation
46 changes the criteria by which one company includes another
entity in its consolidated financial statements. Previously,
the criteria were based on control through voting interest.
Interpretation 46 requires a variable interest entity to be
consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest
entity's activities or entitled to receive a majority of the
entity's residual returns or both. A company that consolidates
a variable interest entity is called the primary beneficiary
of that entity. The consolidation requirements of
Interpretation 46 apply immediately to variable interest
entities created after January 31, 2003. The consolidation
requirements apply to older entities in the first fiscal year
or interim period beginning after June 15, 2003. Certain of
the disclosure requirements apply in all financial statements
issued after January 31, 2003, regardless of when the variable
interest entity was established. The Company does not expect
the adoption to have a material impact to the Company's
financial position or results of operations.
36
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO DECEMBER 31, 2002
(2) STOCKHOLDERS' EQUITY:
The Company is authorized to issue 55,000,000 shares of stock with
5,000,000 shares designated as preferred stock, par value of $0.001,
and 50,000,0000 shares designated as common stock, par value of $0.001.
COMMON STOCK
------------
o In December 2001, the Company issued 500,000 shares of its common
stock in exchange for $1,000 and services. The shares were valued
at $10,000, the current market value on the date of issuance.
The difference between the fair market value of $10,000 and the
cash proceeds of $1,000 is being expensed over a one year period,
^ which is the life of the services to be rendered to the
Company.
o In February 2002, the Company sold 750,000 shares of its common
stock for $15,000.
o In May 2002, the Company entered into an agreement for the
Company to develop software for a customer (see Revenue
recognition). The agreement also stipulated the customer was to
purchase 200,000 shares of the Company's common stock. The shares
were sold for proceeds of $4,000.
PREFERRED STOCK
---------------
Preferred Stock, any series, shall have the powers, preferences,
rights, qualifications, limitations and restrictions as fixed by the
Company's Board of Directors in its sole discretion. As of December 31,
2002, the Company's Board of Directors has not issued any Preferred
Stock.
(3) PROVISION FOR INCOME TAXES:
The reconciliation of the effective income tax rate to the federal
statutory rate for the year ended December 31, 2002, is as follows:
Computed "expected" tax (benefit) $ (1,600)
Increase (decrease) in income taxes
resulting from:
Increase in valuation allowance 1,600
------------
$ -
============
37
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO DECEMBER 31, 2002
(3) PROVISION FOR INCOME TAXES, CONTINUED:
Deferred tax assets and liabilities reflect the net effect of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and
liabilities at December 31, 2002 are as follows:
Deferred tax assets:
Net operating loss carryforwards $ 2,040
Less valuation allowance (2,040)
------------
$ -
============
At December 31, 2002, the Company has provided a 100% valuation
allowance for the deferred tax asset, since management has not been
able to determine that the realization of that asset is more likely
than not. The net change in the valuation allowance for the year ended
December 31, 2002, was an increase of approximately $750. As of
December 31, 2002, the Company had net operating loss carryforwards
("NOLs") of approximately $6,000, expiring through 2022.
(4) CONTINGENCIES AND LIABILITIES:
The Company's contract with its sole customer has been temporarily
postponed due to the customer's inability to make payments according to
the contract agreement. Both parties agreed to postpone further work on
the project until the customer is able to resume payments, which is
expected to transpire in March 2003.
38
DIGIBLUE MEDIA, INC.
(DBA NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO MARCH 31, 2003
CONTENTS
Page
Financial Statements:
Balance Sheet 40
Statements of Operations 41
Statement of Stockholders' Equity 42
Statements of Cash Flows 43
Notes to Financial Statements 44-46
39
DIGIBLUE MEDIA, INC.
(dba NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET - MARCH 31, 2003 (UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 22,038
Cost and estimated earnings in excess of
billings on uncompleted contracts - related party 10,800
--------------
Total current assets 32,838
Computer equipment, net 1,881
--------------
Total assets $ 34,719
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities -
accounts payable and accrued expenses $ 17,106
--------------
Stockholders' equity:
Common stock, $0.001 par value; 50,000,000 shares authorized;
1,450,000 shares issued and outstanding 1,450
Additional paid-in capital 27,550
Deficit accumulated during development stage (11,387)
--------------
Total stockholders' equity 17,613
--------------
Total liabilities and stockholders' equity $ 34,719
==============
The accompanying notes form an integral part of these financial statements.
40
DIGIBLUE MEDIA, INC.
(dba NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended
March 31, From December 10,
----------------------------------------- 2001 (Inception) to
2003 2002 March 31, 2003
------------------- ------------------- ----------------------
Revenue - from related party $ 13,800 $ - $ 36,800
------------------- ------------------- ----------------------
Costs:
Contract costs 4,870 - 8,960
Amortization of stock compensation 1,500 750 9,000
General and administrative expenses 13,060 3,976 30,227
------------------- ------------------- ----------------------
19,430 4,726 48,187
------------------- ------------------- ----------------------
Loss before provision for income taxes (5,630) (4,726) (11,387)
Provision for income taxes - - -
------------------- ------------------- ----------------------
Net loss $ (5,630) $ (4,726) $ (11,387)
=================== =================== ======================
Net loss per common
share - basic and dilutive ($0.00) ($0.01) ($0.01)
=================== =================== ======================
Weighted average common shares
outstanding - basic and dilutive 1,450,000 758,333 1,274,043
=================== =================== ======================
The accompanying notes form an integral part of these financial statements.
41
DIGIBLUE MEDIA, INC.
(dba NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
accumulated
Common stock Additional Common during Total
-------------------------- paid-in stock for development stockholders
Shares Amount capital services stage equity
------------ ------------- ---------------- --------------- ----------------- --------------
Balance at December 10, 2001 - $ - $ - $ - $ - $ -
Issuance of common stock for
cash and services - December 2001 500,000 500 9,500 (9,000) - 1,000
Net loss - - - - (1,000) (1,000)
------------ ------------- ---------------- --------------- ----------------- --------------
Balance at December 31, 2001 500,000 500 9,500 (9,000) (1,000) -
Issuance of common stock for
cash - February 2002 750,000 750 14,250 - - 15,000
Issuance of common stock for
cash - May 2002 200,000 200 3,800 - - 4,000
Amortization of services - - - 7,500 - 7,500
Net loss for the year ended
December 31, 2002 - - - - (4,757) (4,757)
------------ ------------- ---------------- --------------- ----------------- --------------
Balance at December 31, 2002 1,450,000 $ 1,450 $ 27,550 $ (1,500) $ (5,757) $ 21,743
Amortization of services (unaudited) - - - 1,500 - 1,500
Net loss for the three months ended
March 31, 2003 (unaudited) - - - - (5,630) (5,630)
------------ ------------- ---------------- --------------- ----------------- --------------
Balance at March 31, 2003 (unaudited) 1,450,000 $ 1,450 $ 27,550 $ - $ (11,387) $ 17,613
============ ============= ================ =============== ================= ==============
The accompanying notes form an integral part of these financial statements.
42
DIGIBLUE MEDIA, INC.
(dba NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months ended
March 31, From December 10,
-------------------------------------- 2001 (Inception) to
2003 2002 March 31, 2003
------------------ ------------------ --------------------
Cash flows provided by operating activities:
Net loss $ (5,630) $ (4,726) $ (11,387)
------------------ ------------------ --------------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization of common stock for services 1,500 750 9,000
Depreciation 209 - 627
(Increase) decrease in assets:
Accounts receivable - from related party 3,500 - -
Other receivable 370 - -
Cost and estimated earnings in excess of
billings on uncompleted contracts (8,800) - (10,800)
Increase in liabilities -
accounts payable and accrued expenses 15,746 3,976 17,106
------------------ ------------------ --------------------
Total adjustments 12,525 4,726 15,933
------------------ ------------------ --------------------
Net cash provided by operating activities 6,895 - 4,546
------------------ ------------------ --------------------
Cash flows used for investing activities -
purchase of equipment - - (2,508)
------------------ ------------------ --------------------
Cash flows provided by financing activities -
proceeds from issuance of common stock - 15,000 20,000
------------------ ------------------ --------------------
Net increase in cash and cash equivalents 6,895 15,000 22,038
Cash and cash equivalents, beginning of period 15,143 - -
------------------ ------------------ --------------------
Cash and cash equivalents, end of period $ 22,038 $ 15,000 $ 22,038
================== ================== ====================
Supplemental disclosure of cash flow information:
Income taxes paid $ - $ - $ -
================== ================== ====================
Interest paid $ - $ - $ -
================== ================== ====================
The accompanying notes form an integral part of these financial statements.
43
DIGIBLUE MEDIA, INC.
(DBA NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO MARCH 31, 2003
(1) Summary of Significant Accounting Policies:
Nature of Business:
Digiblue Media, Inc. (the "Company") is currently a
development stage company under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 7 and was
incorporated under the laws of the State of Nevada on December
10, 2001. The Company plans to design and develop specialized
software programs for any potential customer. As of March 31,
2003, the Company has produced revenues of $36,800 (unaudited)
but will continue to report as a development stage company
until significant revenues are produced.
Basis of Presentation:
The accompanying financial statements have been prepared in
conformity with accounting principles generally accepted in
the United States of America, which contemplate continuation
of the Company as a going concern. However, the Company has no
substantial established source of revenue. This matter raises
substantial doubt about the Company's ability to continue as a
going concern. These financial statements do not include any
adjustments relating to the recoverability and classification
of recorded asset amounts, or amounts and classification of
liabilities that might be necessary should the Company be
unable to continue as a going concern.
Management plans to take the following steps that it believes
will be sufficient to provide the Company with the ability to
continue in existence:
Management intends to continue to raise additional financing
through debt and equity financing or other means and develop
customer relations to complete its business plan.
Interim Period:
These financial have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in
the United States of America have been omitted. Operating
results for the three months ended March 31, 2003 are not
necessarily indicative of the results that may be expected for
the full year ended December 31, 2003.
The unaudited interim condensed financial statements should be
read in conjunction with the Company's audited financial
statements and notes thereto, for the past fiscal year ended
December 31, 2002 included in this Form SB-2.
44
DIGIBLUE MEDIA, INC.
(DBA NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO MARCH 31, 2003
(1) Summary of Significant Accounting Policies, Continued:
New Accounting Pronouncements:
In November 2002, the FASB issued Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Guarantees of Indebtedness of Others"
("FIN 45"). FIN 45 requires that upon issuance of a guarantee,
a guarantor must recognize a liability for the fair value of
an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and
annual financial statements about the obligations associated
with guarantees issued. The recognition provisions of FIN 45
are effective for any guarantees issued or modified after
December 31, 2002. The disclosure requirements are effective
for financial statements of interim or annual periods ending
after December 15, 2002. The adoption of this pronouncement
does not have a material effect on the earnings or financial
position of the Company.
In January 2003, the FASB issued Interpretation No. 46,
"Consolidation of Variable Interest Entities." Interpretation
46 changes the criteria by which one company includes another
entity in its consolidated financial statements. Previously,
the criteria were based on control through voting interest.
Interpretation 46 requires a variable interest entity to be
consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest
entity's activities or entitled to receive a majority of the
entity's residual returns or both. A company that consolidates
a variable interest entity is called the primary beneficiary
of that entity. The consolidation requirements of
Interpretation 46 apply immediately to variable interest
entities created after January 31, 2003. The consolidation
requirements apply to older entities in the first fiscal year
or interim period beginning after June 15, 2003. Certain of
the disclosure requirements apply in all financial statements
issued after January 31, 2003, regardless of when the variable
interest entity was established. The Company does not expect
the adoption to have a material impact to the Company's
financial position or results of operations.
During April 2003, the FASB issued SFAS 149 - "Amendment of
Statement 133 on Derivative Instruments and Hedging
Activities," effective for contracts entered into or modified
after June 30, 2003, except as stated below and for hedging
relationships designated after June 30, 2003. In addition,
except as stated below, all provisions of this Statement
should be applied prospectively. The provisions of this
Statement that relate to Statement 133 Implementation Issues
that have been effective for fiscal quarters that began prior
to June 15, 2003, should continue to be applied in accordance
with their respective effective dates. In addition, paragraphs
7(a) and 23(a), which relate to forward purchases or sales of
when-issued securities or other securities that do not yet
exist, should be applied to both existing contracts and new
contracts entered into after June 30, 2003. The Company does
not participate in such transactions, however, is evaluating
the effect of this new pronouncement, if any, and will adopt
FASB 149 within the prescribed time.
45
(1) Summary of Significant Accounting Policies, Continued:
New Accounting Pronouncements, Continued:
During May 2003, the FASB issued SFAS 150 - "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity," effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period
beginning after June 15, 2003. This Statement establishes
standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a freestanding
financial instrument that is within its scope as a liability
(or an asset in some circumstances). Many of those instruments
were previously classified as equity. Some of the provisions
of this Statement are consistent with the current definition
of liabilities in FASB Concepts Statement No. 6, Elements of
Financial Statements. The Company is evaluating the effect of
this new pronouncement and will adopt FASB 150 within the
prescribed time.
(2) Stockholders' Equity:
The Company is authorized to issue 55,000,000 shares of stock with
5,000,000 shares designated as preferred stock, par value of $0.001,
and 50,000,0000 shares designated as common stock, par value of $0.001.
Common Stock
o In December 2001, the Company issued 500,000 shares of its common
stock in exchange for $1,000 and services to incorporate the
Company. The shares were valued at $10,000, the current market
value on the date of issuance. The difference between the fair
market value of $10,000 and the cash proceeds of $1,000 is being
expensed over a one year period, ^ which is the life of the
services to be rendered to the Company.
o In February 2002, the Company sold 750,000 shares of its common
stock for $15,000.
o In May 2002, the Company entered into an agreement for the Company
to develop software for a customer. The agreement also stipulated
the customer was to purchase 200,000 shares of the Company's
common stock. The shares were sold for proceeds of $4,000.
Preferred Stock
Preferred Stock, any series, shall have the powers, preferences,
rights, qualifications, limitations and restrictions as fixed by the
Company's Board of Directors in its sole discretion. As of December 31,
2002, the Company's Board of Directors has not issued any Preferred
Stock.
(3) Contingencies and Liabilities:
The Company's sole customer has not been able to make its payments as
agreed. Therefore, the Company's contract may be temporarily postponed
due to the customer's inability to make payments.
46
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
- --------------------------------------------------------------------------
In September 2002, our Board of Directors appointed Stonefield Josephson, Inc.,
a professional accountancy corporation, to audit our financials statements from
December 10, 2001, our date of formation, through March 31, 2003. There have
been no disagreements with our accountant since our formation.
LEGAL MATTERS
- -------------
The validity of the issuance of the shares of common stock offered by us has
been passed upon by MC Law Group, Inc., located in Newport Beach, California.
EXPERTS
- -------
Our financial statements for the period from December 10, 2001, our date of
formation, through March 31, 2003, appearing in this prospectus which is part of
a Registration Statement have been audited by Stonefield Josephson, Inc. and are
included in reliance upon such report given upon the authority of Stonefield
Josephson, Inc. as experts in accounting and auditing.
ADDITIONAL INFORMATION
- ----------------------
We have filed a registration statement on Form SB-2 with the Securities and
Exchange Commission pursuant to the Securities Act of 1933. This prospectus does
not contain all of the information set forth in the registration statement and
the exhibits and schedules to the registration statement. For further
information regarding us and our common stock offered hereby, reference is made
to the registration statement and the exhibits and schedules filed as a part of
the registration statement.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
- ------------------------------------------------
INDEMNIFICATION OF DIRECTORS AND OFFICERS
- -----------------------------------------
Article Seventh of our Articles of Incorporation provides, among other things,
that our officers and directors shall not be personally liable to us or our
shareholders for monetary damages for breach of fiduciary duty as an officer or
a director, except for liability:
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; or
o for unlawful payments of dividends or unlawful stock purchase or redemption
by us.
Accordingly, our directors may have no liability to our shareholders for any
mistakes or errors of judgment or for any act of omission, unless the act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933 MAY BE PERMITTED TO OUR DIRECTORS, OFFICERS AND CONTROLLING PERSONS
PURSUANT TO THE FOREGOING PROVISIONS, OR OTHERWISE, WE HAVE BEEN ADVISED THAT IN
THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS, THEREFORE, UNENFORCEABLE.
47
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
- -------------------------------------------
We will pay all expenses in connection with the registration and sale of our
common stock. The estimated expenses of issuance and distribution are set forth
below.
======================================== ==================== ===============
Registration Fees Approximately $20.24
- ---------------------------------------- -------------------- ---------------
Transfer Agent Fees Approximately $650.00
- ---------------------------------------- -------------------- ---------------
Costs of Printing and Engraving Approximately $500.00
- ---------------------------------------- -------------------- ---------------
Legal Fees Approximately $10,000.00
- ---------------------------------------- -------------------- ---------------
Accounting Fees Approximately $4,000.00
======================================== ==================== ===============
RECENT SALES OF UNREGISTERED SECURITIES
- ---------------------------------------
There have been no sales of unregistered securities within the last three years,
which would be required to be disclosed pursuant to Item 701 of Regulation S-B,
except for the following:
In December 2001, we issued 500,000 shares of our common stock to Brian Eddo,
our president, secretary and one of our directors, in exchange for cash of
$1,000 and services which were valued at $9,000, or $0.02 per share. The shares
were issued in a transaction which we believe satisfies the requirements of that
certain exemption from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended, which exemption is specified by the
provisions of Section 4(2) of that act. We believe that Mr. Eddo has such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective investment. In addition, Mr.
Eddo had sufficient access to material information about us because he is our
president, secretary and one of our directors.
In February 2002, we issued 750,000 shares of our common stock to Tamara Woody,
our treasurer and one of our directors, in exchange for $15,000, or $0.02 per
share. The shares were issued in a transaction which we believe satisfies the
requirements of that certain exemption from the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended, which exemption
is specified by the provisions of Section 4(2) of that act. We believe that Ms.
Woody has such knowledge and experience in financial and business matters that
she is capable of evaluating the merits and risks of the prospective investment.
In addition, Ms. Woody had sufficient access to material information about us
because she is our treasurer and one of our directors.
In May 2002, we issued 200,000 shares of our common stock to Format, Inc. in
exchange for $4,000 or $0.02 per share pursuant to a software purchase and
development agreement, wherein we would also provide software development
services in exchange for cash paid to us by Format, Inc. A copy of that
agreement is attached as an exhibit. The shares were issued in a transaction
which we believe satisfies the requirements of that certain exemption from the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended, which exemption is specified by the provisions of Section 4(2) of
that act.
48
EXHIBITS
- --------
Copies of the following documents are filed with this registration
statement, Form SB-2, as exhibits:
Exhibit No.
- -----------
1. Underwriting Agreement (not applicable)
3.1 Articles of Incorporation*
3.2 Bylaws*
4.1 Subscription Agreement
5. Executed Opinion Re: Legality*
8. Opinion Re: Tax Matters (not applicable)
10.1 Services Agreement with Format, Inc.****
11. Statement Re: Computation of Per Share Earnings**
15. Letter on unaudited interim financial information
(not applicable)
23.1 Consent of Auditors
23.2 Consent of Counsel***
* Included in Registration Statement on Form SB-2 filed on October 4, 2002
** Included in Financial Statements
*** Included in Exhibit 5
**** Included in Amendment No. 2 to Form SB-2 filed May 6, 2003.
49
UNDERTAKINGS
- ------------
A. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities, other than the payment by us of expenses incurred or paid by
our director, officer or controlling person in the successful defense of any
action, suit or proceeding, is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
B. We hereby undertake:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)
(3) of the Securities Act of 1933;
(ii) To specify in the prospectus any facts or events
arising after the effective date of the registration
statement, or most recent post-effective amendment
thereof, which, individually or in the aggregate,
represent a fundamental change in the information
set forth in the registration statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered, if the
total dollar value of securities offered would not
exceed that which was registered, and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b), Section
230.424(b) of Regulation S-B, if, in the aggregate,
the changes in volume and price represent no more
than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) To include any additional or changed material
information with respect to the plan of distribution
not previously disclosed in the registration
statement or any material change to such information
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
50
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements of filing on Form SB-2 and authorized this registration statement
to be signed on our behalf by the undersigned, in the city of Dana Point, State
of California, on August 1, 2003.
Digiblue Media, Inc.,
a Nevada corporation
/s/ Brian Eddo
- --------------------------------------------
Brian Eddo
principal executive officer, president,
secretary, director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
/s/ Brian Eddo August 1, 2003
- -------------------------------------------- --------------
Brian Eddo
principal executive officer, president,
secretary, director
/s/ Tamara Woody August 1, 2003
- -------------------------------------------- --------------
Tamara Woody
principal accounting and financial officer,
treasurer, director