U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Digiblue Media, Inc.
--------------------
(Exact name of registrant as specified in its charter)
Nevada 7371 75-3016844
- ------ ---- ----------
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
32946 Dana Spruce, Suite A, Dana Point, California 92629
- --------------------------------------------------- -----
(Address of registrant's principal executive offices) (Zip Code)
714.460.2717
------------
(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: From time to time 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. [ ] _______
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. [ ]________
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
- -------------------------------------- ------------------------ -------------------- ----------------------- ---------------
Common Stock, $.001 par value 2,000,000 (1) $0.10 $200,000 $18.40
- -------------------------------------- ------------------------ -------------------- ----------------------- ---------------
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.
(2) Represents shares offered by a selling shareholder. The offering price of
$0.10 per share for the selling shareholder was estimated for the purpose
of calculating the registration fee pursuant to Rule 457 of Regulation C.
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. No minimum amount is
required to be sold in this offering. This is our initial public offering and no
public market currently exists for shares of our common stock. This offering
will terminate six months following the effective date of this registration
statement.
No public market currently exists for shares of our common stock. We do not know
if a market will develop, if at all.
- --------------------- ---------------------- ----------------- --------------
Title of securities Number of offered Offering price Proceeds
to be offered shares per share
- --------------------- ---------------------- ----------------- --------------
Common Stock (1) 2,200,000 $0.10 $200,000
- --------------------- ---------------------- ----------------- --------------
(1)Represents shares offered for sale by Digiblue Media, Inc.
Additionally, the selling security holder wants to sell 200,000 shares of our
issued and outstanding common stock. The selling security holder will sell at a
price of $0.10 per share until the shares are quoted on the OTC Bulletin Board
or Electronic Pink Sheets and thereafter at prevailing market prices or
privately negotiated prices. We will not receive any of the proceeds from the
sale of those shares being offered by the selling shareholder.
See "Risk Factors" on Pages 4 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 September 25, 2002.
Subject to completion.
2
TABLE OF CONTENTS
Prospectus Summary ...........................................................4
Risk Factors..................................................................5
Forward Looking Statements....................................................5
Use of Proceeds...............................................................8
Determination of Offering Price...............................................8
Dilution......................................................................8
Selling Security Holders......................................................9
Plan of Distribution..........................................................9
Legal Proceedings............................................................10
Directors, Executive Officers, Promoters and Control Persons.................10
Security Ownership of Certain Beneficial Owners and Management...............11
Description of Securities....................................................11
Interest of Named Experts and Counsel........................................12
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities...................................................12
Organization Within Last Five Years..........................................12
Description of Business......................................................12
Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................................15
Description of Property......................................................16
Certain Relationships and Related Transactions.................... ...16
Market for Common Equity and Related Stockholder Matters.....................16
Executive Compensation ......................................................17
Financial Statements.........................................................18
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.....................................................18
Legal Matters................................................................18
Experts......................................................................18
Additional Information.......................................................18
Indemnification of Directors and Officers....................................18
Other Expenses of Issuance and Distribution..................................19
Recent Sales of Unregistered Securities......................................19
Exhibits.....................................................................20
Undertakings.................................................................20
Signatures...................................................................22
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
- ------------------
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.
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.
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. If we generate significant
revenues, we hope to expand the area of our
operations to the greater West Coast area.
Summary financial information: The summary financial information set forth
below 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 generally accepted
accounting principles 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.
Income Statement Period from
December 10, 2001 (inception)
to June 30, 2002
$
Revenue 10,580
Gross Profit (Loss) 297
Net Income (Loss) 297
Net Income (Loss) Per Share 0.00
Balance Sheet June 30, 2002
$
Total Assets 25,537
Total Liabilities 2,240
Shareholders' Equity 23,297
Primary offering
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Number of shares being offered: We are offering for sale 2,000,000 shares of
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, 3,450,000 shares of our common
stock will be issued and outstanding.
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.
4
Secondary offering
- ------------------
Number of shares being offered: The selling security holder wants to sell
200,000 shares of our issued and outstanding
common stock. The selling security holder
will sell at a price of $0.10 per share until
the shares are quoted on the OTC Bulletin
Board or Electronic Pink Sheets and
thereafter at prevailing market prices or
privately negotiated prices.
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.
In order to further develop our business and fund proposed marketing activities,
we believe that we need proceeds of approximately $100,000 from this offering.
We believe that $100,000 will be sufficient to pay for the expenses of this
offering and our proposed marketing activities. 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
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 June 30, 2002, 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.
5
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.
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 extensive sales and marketing experience in
the computer component industry. 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 plan to spend $40,000 for marketing and promotion
over the next twelve months if we sell all of the offered shares. We believe
that we will need to raise $200,000 in this offering to fund our operations over
the next twelve months. 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.
Risks related to owning our common stock:
The concurrent offering of shares by our selling security holders 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 the selling security holder. To the extent that selling
security holder and our shares are being offered for sale concurrently, each
sale of shares held by our selling security holder 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.
6
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.
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
- ---------------------------
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 effects of various governmental
regulations, the fluctuation of our direct costs and 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.
7
Use of Proceeds
- ----------------
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.
============================ ======================== ================== ================== ====================================
Offered Shares Sold Offering Proceeds Approximate Total Net Principal Uses of Net Proceeds
Offering Expenses Offering Proceeds
- ---------------------------- ------------------------ ------------------ ------------------ ------------------------------------
500,000 shares (25%) $75,000 $15,170 $34,830 Working Capital
- ---------------------------- ------------------------ ------------------ ------------------ ------------------------------------
Marketing Expenses and Working
1,000,000 shares (50%) $100,000 $15,170 $84,830 Capital
- ---------------------------- ------------------------ ------------------ ------------------ ------------------------------------
Marketing Expenses and Working
1,500,000 shares (75%) $150,000 $15,170 $134,830 Capital
- ---------------------------- ------------------------ ------------------ ------------------ ------------------------------------
Marketing Expenses and Working
2,000,000 shares (100%) $200,000 $15,170 $184,830 Capital
============================ ======================== ================== ================== ====================================
If less than 25% of the shares are sold, then we intend to use the net proceeds
that we receive solely for working capital. Working capital will be used to pay
general administrative expenses of approximately $10,000, legal expenses of
approximately $7,500 and accounting expenses of approximately $5,000 for the
next twelve months. Those expenses may increase if we are able to grow our
operations and marketing activities.
Assuming at least 50% of the shares are purchased, we intend to use 25% of the
net proceeds for marketing expenses, and 75% of the proceeds for working
capital. 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.
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. 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.
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.
8
========================= ========================================== ===================================== ===================
Shares Issued Total Consideration Price
Per Share
- ------------------------- ------------------------------------------ ------------------------------------- -------------------
Number Percent Amount Percent
- ------------------------- ----------------------- ------------------ ------------------ ------------------ -------------------
Founding Shareholder(1) 500,000 Shares 14.5% $10,000 4.37% $0.02
- ------------------------- ----------------------- ------------------ ------------------ ------------------ -------------------
Founding 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% $0.05
- ------------------------- ----------------------- ------------------ ------------------ ------------------ -------------------
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 founding shareholder was issued 750,000 shares of our common stock in
exchange for $15,000.
(3) The other shareholder 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%, 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 June
30, 2002.
- -------------------------------------------------------------------- --------------------- -------------------- -------------------
100% of offered 50% of offered 25% of offered
shares are sold shares are sold shares are sold
- -------------------------------------------------------------------- --------------------- -------------------- -------------------
Offering Price $0.10 per share $0.10 per share $0.10 per share
- -------------------------------------------------------------------- --------------------- -------------------- -------------------
Net tangible book value at 06/30/02 $0.02 per share $0.02 per share $0.02 per share
- -------------------------------------------------------------------- --------------------- -------------------- -------------------
Net tangible book value after giving effect to the offering $0.06 per share $0.04 per share $0.03 per share
- -------------------------------------------------------------------- --------------------- -------------------- -------------------
Increase in net tangible book value per share attributable to cash
payments made by new investors $0.08 per share $0.02 per share $0.01 per share
- -------------------------------------------------------------------- --------------------- -------------------- -------------------
Per Share Dilution to New Investors $0.04 per share $0.06 per share $0.07 per share
- -------------------------------------------------------------------- --------------------- -------------------- -------------------
Percent Dilution to New Investors 40% 60% 70%
- -------------------------------------------------------------------- --------------------- -------------------- -------------------
Selling Security Holder
- ------------------------
The following table sets forth information concerning the selling security
holder including:
1. the number of shares owned by the selling security holder prior to this
offering;
2. the total number of shares that are to be offered by the selling security
holder;
3. the total number of shares of common stock that will be owned by the
selling security holder upon completion of the offering; and
4. the percentage of common stock that will be owned by the selling security
holder upon completion of the offering if all of the offered shares are
sold by the selling security holder.
The shares offered for sale constitute all of the shares known to us to be
beneficially owned by the selling security holder. The selling security holder
has no position or office with us, nor any material relationship with us. The
selling security holder is not a broker-dealer or an affiliate of a
broker-dealer to our knowledge.
- --------------------- ------------------------ ------------------------ --------------------------- ---------------------------
Name of Selling Amount of Shares of Amount of Shares of Amount of Shares of Percentage of Common
Security Holder Common Stock Owned by Common Stock to be Common Stock Owned by Stock Owned if all of the
Selling Security Offered by the Selling Selling Security Holder Offered Shares Are Sold
Holder Before the Security Holder After the Offering
Offering
- --------------------- ------------------------ ------------------------ --------------------------- ---------------------------
Format, Inc. 200,000 200,000 0 0%
- -------------------------------------------------------------------------------------------------------------------------------
The selling security holder is Format, Inc., a Nevada corporation to whom we
issued 200,000 shares of our common stock in exchange for services valued at
$10,000. We agreed to register these shares issued to Format, Inc. in order for
Format, Inc. to distribute those shares to its own stockholders as a dividend.
9
These shares constitute all of the shares known to us to be beneficially owned
by that security holder. This selling security holder has not held any position
or office with us. The only material relationship between us and the selling
security holder is defined by the services agreement under which we issued
shares in return for services rendered to us. The selling security holders 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. 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. There are no minimum proceeds set for this offering. We will not place
the funds raised in an escrow account. All funds received in this offering will
be deposited directly into our corporate general account and will be available
for immediate utilization. This offering will terminate six months following the
effective date of this registration statement.
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 is deemed not 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:
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:
Nevada, 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. The offering by the selling security holders will start as
soon as this registration statement is declared effective. The selling security
holders will sell 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. The selling security holders 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. 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:
10
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 the selling security holders 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 selling security holders may arrange for other
brokers or dealers to participate. Brokers or dealers may receive commissions or
discounts from selling security holders, 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 holders 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 holders, we will file a post
effective amendment to disclose such event.
The selling security holders 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 holders 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.
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 holders. There
can be no assurance that the selling security holders 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 Age Position 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 holders are subject to applicable provisions which limit the timing of
purchases and sales of our common stock by the selling security holders.
We have informed the selling security holders that, during such time as they may
be engaged in a distribution of any of the shares we are registering by this
registration statement, they are 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 have informed the selling
security holders that stabilizing transactions permitted by Regulation M allow
bids to purchase our common stock if the stabilizing bids do not exceed a
specified maximum. 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.
11
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 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 executive and financial officer and is
responsible for our financial reporting and record keeping. Ms. Wood 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 is not an
officer or director of any other reporting company.
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 September 25, 2002, 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 the selling security holders will not sell any of their shares which
are being registered in this registration statement.
12
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 500,000 shares, 34.5% 20.4% 14.5%
32946 Dana Spruce president,
Suite A secretary, director
Dana Point, CA 92629
Common Stock Tamara Woody 750,000 shares, 51.7% 30.6% 21.7%
32946 Dana Spruce treasurer, director
Suite A
Dana Point, CA 92629
Common Stock All directors and named 1,250,000 shares 86.2% 51.0% 36.2%
executive officers as a
group
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. 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 September 25, 2002, 1,450,000
shares of our common stock were issued and outstanding.
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 and subject to any restrictions that may be imposed by
our lenders.
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.
13
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.
Our Business. We are a development stage company. We intend to design and
develop customized computer software applications tailored to our customers'
needs. 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. 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.
Our 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 are able to provide software
solutions to practical business applications in programming, custom IT systems
design, software development and consulting. We intend to offer customers a
variety of software development projects and programming solutions which can
include multi-tier systems, Internet/intranet access and reporting systems,
complex data processing and cost-effective user interfaces. We hope to provide
our 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 June 30, 2002, we have generated revenues of $10,580. To effectuate our
business plan during the next twelve months, we must market our services. 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. If we generate significant revenues, 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.
14
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 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 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. 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 share a 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.
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 chainstore
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
15
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.
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 September 25, 2002, we have one full time employee. 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.
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 June 30,
2002.
- -----------------------------------------------------------------------------
Liquidity and Capital Resources. We have cash and cash equivalents totaling
$18,449 as of June 30, 2002. We also had $4,580 in costs and estimated earnings
in excess of billings on uncompleted contracts. Therefore, our total current
assets were $23,029 as of June 30, 2002. We also had a net of $2,508 in computer
equipment. Our total assets were $25,237 as of June 30, 2002. We believe that
our available cash and cash equivalents are sufficient to pay our day-to-day
expenditures. As of June 30, 2002, we had liabilities of $2,240, 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 $10,580 for the
period from December 10, 2001, our date of formation, through June 30, 2002. We
anticipate that our revenues will increase significantly 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. Our income from operations for the period from December
10, 2001, our date of formation, through June 30, 2002, was $297.
Operating Expenses. For the period from December 10, 2001, our date of
formation, through June 30, 2002, our total expenses were $10,283, all of which
were general and administrative expenses. For the period from December 10, 2001,
our date of formation, through June 30, 2002, we experienced a net profit of
$297.
16
Our Plan of Operation for the Next Twelve Months. As of June 30, 2002, we
generated revenues of $10,580. We anticipate that we will generate more
significant revenues in the next twelve months. We hope to generate more
significant revenues by engaging additional clients through reputation and word
of mouth, and develop networking relationships with third party providers of
computer components, systems and maintenance and repair products and services.
As we develop additional networking relationships, our opportunities to generate
revenues increases significantly. 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. Our failure to
market and promote our services will hinder our ability to increase the size of
our operations and generate additional revenues.
We have cash and cash equivalents of $18,449 as of June 30, 2002. In the opinion
of management, available funds will satisfy our working capital requirements for
the next twelve months. Those funds do not include any funds raised in 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
adequate funds from this offering, then we may not be able to conduct marketing
activities and expand our operations.
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.
Description of Property
- -----------------------
Property held by us. As of the date specified in the following table, we held
the following property:
===================================== =========================
Property June 30, 2002
- ------------------------------------- -------------------------
Cash $18,449
- ------------------------------------- -------------------------
Property and Equipment, net $2,508
===================================== =========================
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 $9,000 for services to be rendered, 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.
17
In May 2002, we entered into an agreement for us to develop software for Format,
Inc., a Nevada corporation, which became one of our shareholders pursuant to
that agreement. Specifically, the agreement specified that Format, Inc., would
pay us $46,000 in exchange for the software development services and $4,000 for
200,000 shares of our common stock.
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 September 25, 2002, there were three record holders of our common stock.
There are no outstanding shares of our common stock which can be sold pursuant
to Rule 144. There are no outstanding options or warrants to purchase, or
securities convertible into, shares of our common stock. We have agreed to
register for sale shares of common held by one of our current security holders.
There have been no cash dividends declared on our common stock. Dividends are
declared at the sole discretion of our Board of Directors.
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.
18
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.
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 are also our employees and
receive no extra compensation for their service on our board of directors.
Compensation of Officers. As of September 25, 2002, our officers have received
no compensation for their services provided to us, except as described in the
table above.
Employment Contracts. We anticipate that we will enter into an employment
agreement with Brian Eddo, although we do not currently know the terms of that
employment agreement.
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 JUNE 30, 2002
19
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 June 30, 2002,
and the related statements of operations, stockholders' equity and cash flows
for the six month period ending June 30, 2002, for the period from December 10,
2001(inception) to December 31, 2001 and for the period from December 10,
2001(inception) to June 30, 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 June 30,
2002, and the results of its operations and its cash flows for the six month
period ending June 30, 2002, for the period from December 10, 2001(inception) to
December 31, 2001 and for the period from December 10, 2001(inception) to June
30, 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.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
September 11, 2002
20
DIGIBLUE MEDIA, INC.
DBA NEVADA DIGIBLUE MEDIA, INC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET - JUNE 30, 2002
ASSETS
Current assets:
Cash and cash equivalents $ 18,449
Cost and estimated earnings in excess of
billings on uncompleted contracts 4,580
-----------------
Total current assets $ 23,029
Computer equipment, net 2,508
-----------------
Total assets $ 25,537
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities -
accounts payable and accrued expenses $ 2,240
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
Common stock issued for services (6,000)
Retained earnings accumulated during development stage 297
-----------------
Total stockholders' equity 23,297
-----------------
Total liabilties and stockholders' equity $ 25,537
=================
See accompanying independent auditors' report and notes to finanical statements.
21
DIGIBLUE MEDIA, INC.
DBA NEVADA DIGIBLUE MEDIA, INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
For the six months From December 10, From December 10,
ended June 30, 2001 (Inception) to 2001 (Inception) to
2002 December 31, 2001 June 30, 2002
--------------------- ------------------------ ------------------------
Revenue - from related party $ 10,580 $ - $ 10,580
General and administrative expenses 9,283 1,000 10,283
--------------------- ------------------------ ------------------------
Income (loss) before provision for income taxes 1,297 (1,000) 297
Provision for income taxes - - -
--------------------- ------------------------ ------------------------
Net income (loss) $ 1,297 $ (1,000) $ 297
===================== ======================== ========================
Net income (loss) per common
share - basic and dilutive $0.00 $0.00 $ 0.00
===================== ======================== ========================
Weighted average common shares
outstanding - basic and dilutive 1,348,361 500,000 1,028,061
===================== ======================== ========================
See accompanying independent auditors' report and notes to finanical statements.
22
DIGIBLUE MEDIA, INC.
DBA NEVADA DIGIBLUE MEDIA, INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Retained earnings
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 - - - 3,000 - 3,000
Net income - - - - 1,297 1,297
------------- ---------- ------------- ------------ ---------------- -------------
Balance at June 30, 2002 1,450,000 $ 1,450 $ 27,550 $ (6,000) $ 297 $ 23,297
============= ========== ============= ============ ================ =============
See accompanying independent auditors' report and notes to finanical statements.
23
DIGIBLUE MEDIA, INC.
DBA NEVADA DIGIBLUE MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
For the six months From December 10, From December 10,
ended June 30, 2001 (Inception) to 2001 (Inception) to
2002 December 31, 2001 June 30, 2002
-------------------- ----------------------- ----------------------
Cash flows provided by (used in) operating activities:
Net income (loss) $ 1,297 $ (1,000) $ 297
-------------------- ----------------------- ----------------------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Amortization of common stock for services 3,000 - 3,000
(Increase) decrease in assets:
Cost and estimated earnings in excess of (4,580) - (4,580)
billings on uncompleted contracts
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 2,240 - 2,240
-------------------- ----------------------- ----------------------
Total adjustments 660 - 660
-------------------- ----------------------- ----------------------
Net cash provided by (used in)
operating activities 1,957 (1,000) 957
-------------------- ----------------------- ----------------------
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 18,449 - 18,449
Cash and cash equivalents, beginning of period - - -
-------------------- ----------------------- ----------------------
Cash and cash equivalents, end of period $ 18,449 $ - $ 18,449
==================== ======================= ======================
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.
See accompanying independent auditors' report and notes to finanical statements.
24
DIGIBLUE MEDIA, INC.
DBA NEVADA DIGIBLUE MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO JUNE 30, 2002
(1) Summary of Significant Accounting Policies:
Nature of Business:
Digiblue Media, Inc. (the "Company") was incorporated under
the laws of the State of Nevada on December 10, 2001. The
revenues earned to date are not considered to be substantial,
so managment believes the Company is still a development stage
company under the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 7. 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 intends to continue to raise additional financing
through debt and equity financing or other means and develop
customer relations to complete its business plan, which it
believes will be sufficient to provide the Company with the
ability to continue in existence:
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.
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.
See accompanying independent auditors' report.
25
DIGIBLUE MEDIA, INC.
DBA NEVADA DIGIBLUE MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO JUNE 30, 2002
(1) Summary of Significant Accounting Policies, Continued:
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 to employees 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. Compensation costs for non-employee stock-based
compensation will properly be recognized using the fair value
method.
Revenue Recognition:
The Company generated revenue in the six months ended June 30,
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. Selling, general and administrative costs are
charged to expense as incurred.
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 June 30, 2002,
the Company has no outstanding stock options that can be
converted into shares of Company's common stock.
See accompanying independent auditors' report.
26
DIGIBLUE MEDIA, INC.
DBA NEVADA DIGIBLUE MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO JUNE 30, 2002
(1) Summary of Significant Accounting Policies, Continued:
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 June 30, 2002,
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 June 30, 2002, all revenues have been
derived from domestic operations.
New Accounting Pronouncements:
In July 2001, the FASB issued SFAS No. 141 "Business
Combinations." SFAS No. 141 supersedes Accounting Principles
Board ("APB") No. 16 and requires that any business
combinations initiated after June 30, 2001 be accounted for as
a purchase; therefore, eliminating the pooling-of-interest
method defined in APB 16. The statement is effective for any
business combination initiated after June 30, 2001 and shall
apply to all business combinations accounted for by the
purchase method for which the date of acquisition is July 1,
2001 or later. The Company has implemented this pronouncement
and has concluded that the adoption has no material impact to
the financial statements as the company has not engaged in any
such transactions.
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 as the company has not engaged in any
such transactions.
See accompanying independent auditors' report.
27
DIGIBLUE MEDIA, INC.
DBA NEVADA DIGIBLUE MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM DECEMBER 10, 2001
(INCEPTION) TO JUNE 30, 2002
(1) Summary of Significant Accounting Policies, Continued:
New Accounting Pronouncements, Continued:
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.
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.
(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.
See accompanying independent auditors' report.
28
(2) Stockholders' Equity, Continued:
Common Stock
------------
o In December 2001, the Company issued 500,000 shares of its common
stock in exchange for $1,000 and services to be rendered to 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 has been
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 June 30,
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 six-month period ended June 30, 2002, is as
follows:
Computed "expected" tax (benefit) $ (500)
Increase (decrease) in income taxes
resulting from:
Increase in valuation allowance 500
---
$ -
============
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 June 30, 2002 are as follows:
Deferred tax assets:
Net operating loss carryforwards $ 1,600
Less valuation allowance (1,600)
-----------
$ -
===========
(3) Provision for Income Taxes, Continued:
At June 30, 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 period ended June 30,
2002, was an increase of approximately $1,600. As of June 30, 2002, the
Company had net operating loss carryforwards ("NOLs") of approximately
$1,600, expiring through 2022.
See accompanying independent auditors' report.
29
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 June 30, 2002.
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 June 30, 2002, 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.
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
======================================== ==================== ===============
30
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. valued
at $10,000, or $0.05 per share pursuant to a software purchase and development
agreement. 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.
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
5. Executed Opinion Re: Legality
8. Opinion Re: Tax Matters (not applicable)
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 Financial Statements
** Included in Exhibit 5
31
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.
32
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 Sunset Beach,
State of California, on September 25, 2002.
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 September 25, 2002
- --------------------------------------------
Brian Eddo
principal executive officer, president,
secretary, director
/s/ Tamara Woody September 25, 2002
- --------------------------------------------
Tamara Woody
principal accounting and financial officer,
treasurer, director