U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Digiblue Media, Inc.
--------------------
(Exact name of registrant as specified in its charter)
Nevada 3577 75-3016844
- ------ ---- ----------
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
2175 rue de la Montagne, Suite 311, Montreal, Quebec, Canada H3G 1Z8
- ------------------------------------------------------------ -------
(Address of registrant's principal executive offices) (Zip Code)
(514)886-6557
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(Registrant's Telephone Number, Including Area Code)
Law Offices of Randall J. Lanham
28562 Oso Parkway, Suite D
Rancho Santa Margarita, California 92688
(949) 858-6773 (Telephone)
(949)858-6774 (Facsimile)
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public: As soon as practicable after
this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _______
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 5,976,000 (1) $0.10(1) $597,000(2) $75.72
====================================== ======================== ==================== ======================= ===============
(1) The offering price per share for the selling security holders was estimated
solely for the purpose of calculating the registration fee pursuant to Rule
457 of Regulation C.
(2) We will not receive any proceeds from this offering.
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
AMENDED PROSPECTUS
DIGIBLUE MEDIA, INC., A NEVADA CORPORATION
5,976,000 SHARES OF COMMON STOCK
This amended prospectus pertains to the prospectus dated December 18, 2003
relating to the resale of 5,976,000 shares of our common stock by certain
holders of the common stock of Digiblue Media, Inc., a Nevada Corporation
("DGIB").
We offered and sold 2,000,000 shares of our common stock in a direct public
offering, with a purchase price of $0.10 per share. The proceeds to us were
$200,000. This offering was described as our primary offering in the prospectus
dated December 18, 2003. This prospectus amendment concerns the shares sold that
primary offering. This amended prospectus does not pertain to or update any
information concerning the 200,000 shares held by the selling security holder
described in that prospectus which were subsequently sold by that selling
security holder. We did not receive any proceeds from the shares sold in that
secondary offering. Subsequent to public offering described above, we effected a
3:1 forward split, resulting in the number of shares sold in that public
offering equivalent to 6,000,000 shares. No underwriter was involved in the
initial offering and distribution of the shares sold in the primary offering,
and we offered and sold these shares without any underwriting discounts or
commissions. Our president offered and sold the shares on our behalf. No public
market currently exists for shares of our common stock.
This amended prospectus should be read in conjunction with the prospectus dated
December 18, 2003, which is to be delivered with this amended prospectus. This
amended prospectus is not complete without, and may not be delivered or utilized
except in connection with the prospectus. This amended prospectus is qualified
by reference to the prospectus, except to the extent that the information in
this amended prospectus supersedes the information contained in the prospectus.
Capitalized terms used in this amended prospectus and not otherwise defined
herein have the meanings specified in the prospectus.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON
PAGES 5 TO 8 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. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE OR OTHER JURISDICTION WHERE THE OFFER
OR SALE OF THESE SECURITIES IS NOT PERMITTED.
The date of this prospectus is August 24, 2004.
Subject to completion.
2
TABLE OF CONTENTS
Prospectus Summary ............................................................4
Risk Factors...................................................................5
Forward Looking Statements.....................................................8
Use of Proceeds................................................................8
Determination of Offering Price................................................8
Dilution.......................................................................8
Selling Security Holders.......................................................8
Plan of Distribution...........................................................9
Legal Proceedings.............................................................11
Directors, Executive Officers, Promoters and Control Persons..................11
Security Ownership of Certain Beneficial Owners and Management................11
Description of Securities.....................................................12
Interest of Named Experts and Counsel.........................................12
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities....................................................13
Organization Within Last Five Years...........................................13
Description of Business.......................................................13
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......................17
Executive Compensation .......................................................18
Financial Statements..........................................................19
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure......................................................19
Legal Matters.................................................................19
Experts.......................................................................19
Additional Information........................................................19
Indemnification of Directors and Officers.....................................20
Other Expenses of Issuance and Distribution...................................20
Recent Sales of Unregistered Securities.......................................20
Exhibits......................................................................21
Undertakings..................................................................21
Signatures....................................................................23
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 executive, administrative and operating
offices are located at 2175, rue de la Montagne,
Suite 311, Montreal, Quebec, Canada H3G 1Z8. Our
telephone number is 514.886.6557.
Our auditors have expressed substantial doubt about
our ability to continue as a going concern. We are
a development stage company. We currently have no
active operations, however, on April 20, 2004, we
acquired all the outstanding shares of Oled
Systems, Inc., a privately held New Brunswick
corporation ("Oled") from its sole shareholder in
exchange for $50,000. Oled has the right to acquire
Nova-Plasma Inc., a Canadian corporation, a company
involved in information technologies and
telecommunications using nanomaterials & devices,
in exchange for the right to acquire a majority of
our issued and outstanding common stock.
We intend to acquire Nova Plasma Inc., and adopt
the business of Nova-Plasma Inc. ("NPI"), which
encompasses the development and manufacture of
organic light emitting diode ("OLED") displays
which may be used as computer terminal display
panels. NPI was founded in 2001 by three
researchers affiliated with the Ecole Polytechnique
of Montreal. NPI is establishing itself as a
provider of ultra-high barrier technology to the
flat panel display (FPD) industry. Since its
inception, NPI has received an investment by
Polyvalor and has three patent pending technologies
as part of its intellectual property portfolio. In
addition, NPI has begun establishing relationships
with companies in the FPD industry, including
polymer film and component suppliers and display
manufacturers.
Summary financial The summary financial information set forth below
information: is derived from the more detailed financial
statements appearing elsewhere in this Form SB-2.
We have prepared our financial statements contained
in this Form SB-2 in accordance with accounting
principles generally accepted in the United States.
All information should be considered in conjunction
with our financial statements and the notes
contained elsewhere in this Form SB-2.
INCOME STATEMENT FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, 2004 DECEMBER 31, 2003
$ $
Revenue 0 53,500
Costs of Operations (105,344) (56,402)
Net Income (Loss) (105,344) (25,902)
Net Income (Loss) Per Share (0.02) (0.02)
BALANCE SHEET JUNE 30, 2004 DECEMBER 31, 2003
$
Total Assets 75,898 14,148
Total Liabilities (56,706) (16,807)
Stockholders' Equity 19,192 (2,659)
4
NUMBER OF SHARES The selling security holders want to sell 5,976,000
BEING OFFERED: shares of our common stock. The offered shares were
acquired by the selling security holders in private
placement transactions, which were exempt from the
registration and prospectus delivery requirements
of the Securities Act of 1933. The selling security
holders will sell their shares at $0.10 per share
until our shares are quoted on the OTC Bulletin
Board and thereafter at prevailing market prices or
privately negotiated prices.
NUMBER OF SHARES 10,350,000 shares of our common stock are issued
OUTSTANDING: and outstanding. This offering will not change the
number of shares we have issued and outstanding. We
have no other securities issued.
ESTIMATED USE OF PROCEEDS: We will not receive any of the proceeds from the
sale of those shares being offered.
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 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 and lack of
current operations 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 NO CURRENT SOURCE OF REVENUES AND HAVE RECENTLY CHANGED OUR BUSINESS
FOCUS; THEREFORE, WE MAY INCUR NET LOSSES IN THE FORESEEABLE FUTURE.
Since our inception through June 30, 2004, we have only generated revenues from
our prior business operations, which were from services provided to a related
party. We have no current source of revenues since changing our business plan
earlier this year. Unless we are able to begin operations, develop our product
and promote and sell our products 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 products, 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.
We have no operating history in the computer terminal display development and
manufacturing industry, and the fact that we seek to enter into an emerging
industry exposes us to risks that may affect our ability to execute our business
model.
We have revised our business plan and intend to acquire NPI, another entity with
rights to certain technologies for the development and manufacture of OLED
display components. We have not yet acquired that entity, nor are we in a
position to do so at this time. We may not be able to complete that acquisition
as contemplated and have no other operations. Changes in our anticipated
business model could harm our ability to become profitable in the future. You
must consider these facts as well as the risks, uncertainties, expenses and
difficulties frequently encountered by companies in their early stages of
development. Some of the risks and difficulties relate to our potential
inability to:
o acquire the contemplated business operations of NPI;
o acquire or license third-party patents at a reasonable cost or at a
cost structure beneficial to us;
o increase awareness of our brand; and
o develop or maintain the strategic relationships necessary to operate
NPI.
There is no assurance that we will successfully address these risks or
difficulties. If we fail to address any of these risks or difficulties
adequately, we will likely be unable to execute our business model
5
THE MARKET ACCEPTANCE OF OUR PRODUCTS IS CRITICAL TO OUR GROWTH.
We hope to complete the acquisition of NPI which is developing the OLED computer
display component, after which we hope to be able to generate revenue from the
manufacture and sale of OLED display devices. The market acceptance of our
proposed products is therefore critical to our future growth. We anticipate
needing to spend a significant amount of time and resources developing this
product, and on marketing this product. We anticipate making significant time
and resource expenditures in advance of any prospect of a revenue stream under
our new business plan. If our eventual customers do not accept our proposed OLED
display products and purchase them, then our revenue, cash flow, operating
results and/or stock price would be negatively impacted.
IF INDUSTRY LEADERS DO NO ADOPT OUR PROPOSED PRODUCT FOR INTEGRATION INTO FUTURE
COMPUTER SYSTEMS, IT MAY BE DIFFICULT FOR US TO EXECUTE OUR BUSINESS STRATEGY
AND WE MAY NOT BE ABLE TO GENERATE REVENUES IN THE FUTURE.
An important part of our future strategy will be to penetrate new markets by
targeting potential licensees that are leaders in those markets. This strategy
is designed to encourage other participants in those markets to also adopt our
products. If a high profile industry participant adopts our products for
integration into one or more of their systems, but fails to achieve success with
those products, other industry participants' perception of our proposed product
could be harmed. Likewise, if a market leader adopts and achieves success with a
competing technology, our revenue growth could be limited and other potential
licensees may not adopt our product.
TECHNOLOGICAL IMPROVEMENTS AND LOWER PRICES IN THE COMPUTER PERIPHERAL INDUSTRY
MAY UNDERCUT THE NEED FOR OUR PRODUCTS.
We hope to develop and manufacture components that can be used as display
screens for computers; this industry is constantly undergoing rapid changes and
improvements in technology that have historically lowered the prices of computer
peripheral equipment, 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 products becoming available to
consumers and businesses, which would greatly reduce the demand for comparable
products such as our proposed products.
ADOPTING A COMPUTER PERIPHERAL DEVELOPMENT AND MANUFACTURING BUSINESS IS
ESPECIALLY DIFFICULT DURING THE CURRENT ECONOMIC DOWNTURN, AND IF WE ARE NOT
ABLE TO SUCCESSFULLY DEVELOP AND MARKET OUR PRODUCTS, OUR BUSINESS WILL FAIL.
Our industry is significantly competitive. We have competitors that provide the
types of products we hope to develop and manufacture 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 products than we may
be able to do. If we are not able to complete the development of our product or
are not able compete effectively with current and future competitors, we may be
unable to manufacture and sell our proposed products, or be able to complete
effectively. This could result in a reduction in our revenues, resulting in
lower earnings or operating losses.
6
OUR OFFICERS, DIRECTORS AND PRINCIPAL SHAREHOLDERS, CONTROL OUR OPERATIONS AND
COULD CONTROL MATTERS REQUIRING SHAREHOLDER APPROVAL.
Our officers, directors and principal shareholders own approximately 36.8% of
our outstanding shares of common stock. As a result, our officers, directors and
principal shareholders could 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 ALAIN HOULE, OUR PRESIDENT, TO
CONTINUE OPERATIONS AND GENERATE REVENUES.
Alain Houle is a key employee with experience relevant to business. Mr. Houle is
currently our only employee. The demands on Mr. Houle's time as our only
employee may prevent him from devoting sufficient time to his duties as our
chief executive officer; the demands on his time will increase because of our
status as a public company. The interruption of the services of Mr. Houle 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. Houle 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.
OUR OFFICERS AND DIRECTORS ARE ENGAGED IN OTHER ACTIVITIES WHICH COULD DIVERT
THEIR TIME AWAY FROM OUR ACTIVITIES AND COULD CONFLICT WITH OUR BUSINESS
INTERESTS WHICH COULD HARM OUR ABILITY TO CONTINUE PROCEEDING WITH OUR PLAN TO
COMPLETE THE ACQUISITION OF NPI.
Our officers and directors engage in other activities. Those activities may
divert our officers and directors' time away from our business activities.
Currently, Mr. Houle, our president, treasurer and one of our directors and Ms.
Trudel, our secretary and one of our directors, each spend minimal time on our
activities. If our officers and directors are not able to devote sufficient time
to our business activities, our ability to operate at a profit could be harmed.
Our officers and directors may have conflicts of interests in allocating time,
services, and functions between the other business ventures in which those
persons may be or become involved. Neither of our officers devotes their entire
business hours to our operations.
WE ANTICIPATE THAT WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO COMPLETE THE
ACQUISITION OF NPI AND THEN MOVE ON TO DEVELOP AND MARKET OUR PRODUCTS. OUR
FAILURE TO RAISE ADDITIONAL CAPITAL WILL SIGNIFICANTLY AFFECT OUR ABILITY TO
FUND OUR PROPOSED ACTIVITIES.
We are currently do not have any operations but contemplate completing the
acquisition of NPI which is currently conducting research and development
activities in regard to beginning the manufacture of OLED displays. We will need
to raise at funds to complete the acquisition as contemplated. We do not know if
we will be able to acquire such financing at commercially reasonable rates. Our
failure to obtain additional funds would significantly limit or eliminate our
ability to fund our sales and marketing activities.
OUR AUDITORS HAVE EXPRESSED SUBSTANTIAL DOUBT REGARDING OUR ABILITY TO CONTINUE
OPERATIONS AS A "GOING CONCERN." INVESTORS MAY LOSE ALL OF THEIR INVESTMENT IF
WE ARE UNABLE COMMENCE OPERATIONS AS CONTEMPLATED AND GENERATE REVENUES.
We hope to obtain revenues from future sales of computer display components
developed by NPI, as described herein, but have yet to acquire NPI. In the
absence of any sales, we may seek to raise additional funds to meet our working
capital needs principally through the additional sales of our securities.
However, we cannot guaranty that we will be able to obtain sufficient additional
funds when needed, or that such funds, if available, will be obtainable on terms
satisfactory to us. If we do not raise sufficient funds as needed, we may not be
able to continue in business. As a result, our auditors believe that substantial
doubt exists about our ability to continue operations.
7
RISKS RELATED TO OWNING OUR COMMON STOCK:
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" OR "SHOULD" OR OTHER VARIATIONS OR SIMILAR WORDS.
NO ASSURANCES CAN BE GIVEN THAT THE FUTURE RESULTS ANTICIPATED BY THE
FORWARD-LOOKING STATEMENTS WILL BE ACHIEVED. THE FOLLOWING MATTERS CONSTITUTE
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS WITH RESPECT TO THOSE
FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THE FUTURE RESULTS ANTICIPATED BY
THOSE FORWARD-LOOKING STATEMENTS. AMONG THE KEY FACTORS THAT HAVE A DIRECT
BEARING ON OUR RESULTS OF OPERATIONS ARE THE COSTS AND EFFECTIVENESS OF OUR
OPERATING STRATEGY. OTHER FACTORS COULD ALSO CAUSE ACTUAL RESULTS TO VARY
MATERIALLY FROM THE FUTURE RESULTS ANTICIPATED BY THOSE FORWARD-LOOKING
STATEMENTS.
USE OF PROCEEDS
- ---------------
We will not receive any proceeds from the sale of shares of our common stock
being offered by the selling security holders.
DETERMINATION OF OFFERING PRICE
The selling security holders will offer and sell the shares at privately
negotiated prices until our shares are quoted on the OTC Bulletin Board.
DILUTION
- --------
The shares offered for sale by the selling security holders are already
outstanding and, therefore, do not contribute to dilution.
8
SELLING SECURITY HOLDERS
- ------------------------
The following table sets forth information concerning the selling security
holders including:
1. the number of shares owned by each selling security holder prior to
this offering;
2. the total number of shares that have already been sold by each
selling security holder; and
3. the total number of shares and the percentage of common stock are
currently held by each selling security holder
The selling security holders may sell their remaining shares as part of this
offering.
The shares offered for sale constitute all of the shares known to us to be
beneficially owned by the selling security holders. None of the selling security
holders has held any position or office with us, except as specified in the
following table. Other than the relationships described below, none of the
selling security holders had or have any material relationship with us. None of
the selling security holders is a broker-dealer or an affiliate of a
broker-dealer to our knowledge.
- ---------------------------- ---------------------------------- ---------------------------------- ---------------------------------
NAME OF SELLING SECURITY AMOUNT OF SHARES OF COMMON STOCK AMOUNT OF SHARES OF COMMON STOCK AMOUNT OF SHARES AND THE
HOLDERS OWNED BY SELLING SECURITY ALREADY SOLD BY THE SELLING PERCENTAGE OF COMMON STOCK
HOLDERS BEFORE THE SALE SECURITY HOLDERS CURRENTLY OWNED BY SELLING
SECURITY HOLDER AFTER THE SALE
- ---------------------------- ---------------------------------- ---------------------------------- ---------------------------------
610051 NB, Inc. 750,000 637,200 76,200
7.2% 6.5% 0.7%
- ------------------------------------------------------------------------------------------------------------------------------------
750,000 250,000 500,000
610056 NB, Inc. 7.2% 2.4% 4.8%
- ------------------------------------------------------------------------------------------------------------------------------------
738,000 238,000 500,000
610057 NB, Inc. 7.1% 2.3% 4.8%
- ------------------------------------------------------------------------------------------------------------------------------------
750,000 166,500 583,500
610077 NB, Inc. 7.2% 1.6% 5.6%
- ------------------------------------------------------------------------------------------------------------------------------------
750,000 330,000 420,000
GBTW Corp. 7.2% 3.2% 4.1%
- ------------------------------------------------------------------------------------------------------------------------------------
750,000 330,000 420,000
LCAL Corp. 7.2% 3.2% 4.1%
- ------------------------------------------------------------------------------------------------------------------------------------
738,000 731,966 6,034
Logo Investments, Inc. 7.1% 7.1% 0.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Tansannier Capital 750,000 750,000 0
Investments, Inc. 7.2% 7.2% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
5,976,000 3,470,266 2,505,734
Total 57.7% 33.5% 24.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Percentages may vary due to rounding.
The entities listed in the table of selling security holders above purchased
shares from us in the offering registered by means of our original registration
statement on Form SB-2. Subsequent to the date of that prospectus, and pursuant
to private transactions, each selling security holder subsequently sold a
portion of their shares to other shareholders as indicated, and each currently
holds the number of shares listed above.
Although these selling security holders did not purchase their shares with a
view to distribution, these selling security holders may nonetheless be
considered underwriters in the view of the Securities and Exchange Commission.
Therefore, their shares may only be sold pursuant to this registration
statement; therefore these transactions are included in this supplement. To our
knowledge, and based on certain representations made by the selling security
holders, none of the selling security holders has held any position or office or
had any other material relationship within the past three years with us.
9
PLAN OF DISTRIBUTION
- --------------------
The selling security holders described in this amended prospectus purchased an
aggregate total of 5,976,000 shares from us and have subsequently have sold an
aggregate total of 3,470,266 shares of our issued and outstanding common stock
and may sell their remaining shares. We did not receive any of the proceeds from
the sale of those shares sold by these selling shareholders, nor will we receive
any proceeds from any such future sales.
The selling security holders sold their shares of our common stock at privately
negotiated prices since our shares are not quoted in any public quotation
system. 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.
Currently, our shares do not meet the listing standards for any securities
exchange, and may never be listed on any exchange. The shares were not sold in
an underwritten public offering. The shares may be sold directly or through
brokers or dealers. The methods by which the shares may be sold include:
o purchases by a broker or dealer as principal and resale by such
broker or dealer for its account;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o privately negotiated transactions.
The shares of common stock being offered by 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 the selling security holders may arrange for
other brokers or dealers to participate. Brokers or dealers may receive
commissions or discounts from the selling security holder, or, if any such
broker-dealer acts as agent for the purchaser of such shares, from such
purchaser, in amounts to be negotiated. Broker-dealers may agree with the
selling security 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
holder, 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.
Any participating NASD members must comply with the "Filing Requirements" of
Rule 2710(b)(1), and "Information Required to be Filed" of Rule 2710(b)(6).
Maximum compensation to any NASD member will not exceed 8% of the maximum
proceeds.
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
their shares.
Under the Securities Exchange Act of 1934 and the regulations thereunder, any
person engaged in a distribution of the shares of our common stock offered by
this prospectus may not simultaneously engage in market making activities with
respect to our common stock during the applicable "cooling off" periods prior to
the commencement of such distribution. Also, the selling security holders are
subject to applicable provisions which limit the timing of purchases and sales
of our common stock by the selling security holders.
10
We will inform the selling security holders that, during such time as they are
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 holders, any affiliated
purchasers and any broker-dealer or other person who participates in a
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase, any security which is the subject of the distribution
until the entire distribution is complete. Regulation M defines a "distribution"
as an offering of securities that is distinguished from ordinary trading
activities by the magnitude of the offering and the presence of special selling
efforts and selling methods. Regulation M also defines a "distribution
participant" as an underwriter, prospective underwriter, broker, dealer, or
other person who has agreed to participate or who is participating in a
distribution.
Regulation M prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security, except
as specifically permitted by Rule 104 of Regulation M. These stabilizing
transactions may cause the price of our common stock to be more than it would
otherwise be in the absence of these transactions. We will also inform the
selling security holders that stabilizing transactions will not be permitted by
Regulation M if a market for the shares develops. Regulation M specifically
prohibits stabilizing that is the result of fraudulent, manipulative, or
deceptive practices. Selling security holders and distribution participants are
required to consult with their own legal counsel to ensure compliance with
Regulation M.
LEGAL PROCEEDINGS
There are no legal actions pending against us nor are any legal actions
contemplated by us at this time.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
EXECUTIVE OFFICERS AND DIRECTORS. Our directors and principal executive
officers are as specified on the following table:
=================== =============== ===========================================
NAME AGE POSITION
- ------------------- --------------- -------------------------------------------
Alain Houle 38 president, treasurer and a director
- ------------------- --------------- -------------------------------------------
Luce Trudel 45 secretary and a director
=================== =============== ===========================================
ALAIN HOULE. Mr. Houle was appointed as our secretary on January 14, 2004; upon
his appointment as our president, treasurer and one of our directors on April 6,
2004, he resigned his position as our secretary. Mr. Houle is an attorney in the
Province of Quebec, Canada, and a member of the Quebec Bar. He has been in
private practice as an attorney since 1992. Mr. Houle earned his law degree from
the University of Montreal in 1991 and his bachelor's degree in Management from
McGill University in 1987. Mr. Houle is not an officer or director of any other
reporting company.
LUCE TRUDEL. Ms. Trudel was appointed as our secretary on April 6, 2004, and as
one of our directors on April 26, 2004. Ms. Trudel has been a legal secretary
for the Law Offices of Alain Houle since prior to 1999. Ms. Trudel's career as a
legal secretary spans twenty-six years. Ms. Trudel owns 1,000 shares of the
Issuer's common stock. Ms. Trudel 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.
11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of August 24, 2004, 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.
==================== ===================================================== =================================== ==============
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE OF BENEFICIAL PERCENT OF
OWNER CLASS
- -------------------- ----------------------------------------------------- ----------------------------------- --------------
Common Stock Alain Houle
2175 Rue de la Montagne, Suite 300 3,379,000 shares (1) 36.7%
Montreal, Quebec, Canada H3G1Z8 president, treasurer, director
- -------------------- ----------------------------------------------------- ----------------------------------- --------------
Common Stock Luce Trudel
2175 Rue de la Montagne, Suite 300 1,000 shares 0.1%
Montreal, Quebec, Canada H3G1Z8 secretary, director
- -------------------- ----------------------------------------------------- ----------------------------------- --------------
Common Stock 610077 NB, Inc.
147 West Morland Dr., Suite 200 583,500 shares 5.6%
Fredericton, New Brunswick, Canada E3B 3L4 shareholder
- -------------------- ----------------------------------------------------- ----------------------------------- --------------
Common Stock All directors and named executive officers as a
group 3,380,000 shares 36.8%
==================== ===================================================== =================================== ==============
(1) includes 3,000 shares owned as trustee for his minor child
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. In accordance with Securities and Exchange
Commission rules, shares of our common stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within 60 days of the date of the table are deemed beneficially
owned by the optionees. As of August 24, 2004, we have no options or warrants
outstanding. Subject to community property laws, where applicable, the persons
or entities named in the table above have sole voting and investment power with
respect to all shares of our common stock indicated as beneficially owned by
them.
CHANGES IN CONTROL. Our management is not aware of any arrangements which may
result in a change in control, except for the agreement with NPI as described
herein. 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.
DESCRIPTION OF SECURITIES
- -------------------------
We were authorized to issue 50,000,000 shares of $.001 par value common stock,
and 5,000,000 shares of preferred stock. As of August 24, 2004, there were
10,350,000 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.
STOCK SPLIT. Subsequent to the closing of our public offering, described above,
our Board of Directors approved a 3 for 1 forward stock split of our issued and
outstanding common stock which was effectuated through a dividend of two shares
for each share of common stock outstanding as of the record date. The dividend
was payable on January 6, 2004 for shareholders of record on that same date. As
a result of the split, the total number of our issued and outstanding shares of
common stock is 10,350,000. Fractional shares were rounded upward. There are 79
record holders of our common stock.
12
DIVIDENDS. There have been no cash dividends declared on our common stock.
Dividends are declared at the sole discretion of our Board of Directors. 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. The holders of our common stock are entitled to
receive dividends when, as and if declared by our Board of Directors from funds
legally available therefore. Cash dividends are at the sole discretion of our
Board of 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.
INTEREST OF NAMED EXPERTS AND COUNSEL
No "expert" or our "counsel" was hired on a contingent basis, or will receive a
direct or indirect interest in us, or was a promoter, underwriter, voting
trustee, director, officer, or employee of the company, at any time prior to the
filing of this registration statement. There has been no change in these
relationships since the initial filing of this registration statement.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Article Seventh of our Articles of Incorporation provides, among other things,
that our officers and directors shall not be personally liable to us or our
shareholders for monetary damages for breach of fiduciary duty as an officer or
a director, except for liability:
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; or
o for unlawful payments of dividends or unlawful stock purchase or
redemption by us.
Accordingly, our directors may have no liability to our shareholders for any
mistakes or errors of judgment or for any act of omission, unless the act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933 MAY BE PERMITTED TO OUR DIRECTORS, OFFICERS AND CONTROLLING PERSONS
PURSUANT TO THE FOREGOING PROVISIONS, OR OTHERWISE, WE HAVE BEEN ADVISED THAT IN
THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THAT ACT AND IS, THEREFORE, UNENFORCEABLE.
13
ORGANIZATION WITHIN LAST FIVE YEARS
Transactions with Promoters. Brian Eddo, one of our former officers and
directors, was our promoter. On December 16, 2001, we issued 500,000 pre-split
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. Until our new management
joined us during the quarter ended March 31, 2004, we were a software
development and design company in the development stage that specialized in
providing customized software applications to small businesses and
entrepreneurs. Our change in management is described below. In addition, on
April 20, 2004, we entered into an agreement with Oled Systems, Inc., a
privately held New Brunswick corporation ("Oled") and its sole shareholder to
acquire all the outstanding shares of Oled in exchange for $50,000. Oled has the
right to acquire Nova-Plasma Inc., a Canadian corporation, ("NPI") a company
involved in information technologies and telecommunications using nanomaterials
& devices. Pursuant to the terms of that agreement, NPI would acquire a majority
of our issued and outstanding common stock.
We hope to exercise that right to acquire NPI and operate its business, which
encompasses the development and manufacture of organic light emitting diode
displays. NPI was founded in 2001 by three researchers affiliated with the Ecole
Polytechnique of Montreal, and is establishing itself as a provider of
ultra-high barrier technology to the flat panel display (FPD) industry. Since
its inception, NPI has received an investment by Polyvalor and has three patent
pending technologies as part of its intellectual property portfolio. In
addition, NPI has begun establishing relationships with companies in the FPD
industry, including polymer film and component suppliers and display
manufacturers.
Although the FPD market today is dominated by liquid crystal displays (LCDs), in
the estimation of our management, the next major innovation is the use of
organic light emitting diode (OLED) displays. Our management believes that the
advantages offered by OLED displays are that they do not require backlight, and
are lighter, thinner, bringer and consume less power than LCD displays, and can
be cheaper to produce, have a faster response time, a better viewing angle and
can be produced using flexible transparent polymers instead of glass.
Our management believes that there is a great potential market available by
utilizing NPI's technology, which is anticipated to allow for the manufacture of
low-cost, lightweight, unbreakable and bendable display screens on flexible
transparent plastic substrates instead of glass screens currently in use. Upon
concluding the acquisition of NPI, we hope to adopt and operate its business as
described above.
Prior to this agreement with Oled, we had engaged only one client, who was
Format Inc., a former shareholder, and therefore our prior operations were
limited to serving that client and developing our own website.
14
OUR PROPOSED PRODUCTS. We intend to acquire Nova Plasma Inc., and adopt the
business of Nova-Plasma Inc. ("NPI"), which encompasses the development and
manufacture of organic light emitting diode displays. NPI was founded in 2001 by
three researchers affiliated with the Ecole Polytechnique of Montreal. NPI is
establishing itself as a provider of ultra-high barrier technology to the flat
panel display (FPD) industry. Since its inception, NPI has received an
investment by Polyvalor and has three patent pending technologies as part of its
intellectual property portfolio. In addition, NPI has begun establishing
relationships with companies in the FPD industry, including polymer film and
component suppliers and display manufacturers.
Although the FPD market today is dominated by liquid crystal displays (LCDs), in
the estimation of our management, the next major innovation is the use of
organic light emitting diode (OLED) displays. Our management believes that the
advantages offered by OLED displays are that they do not require backlight, and
are lighter, thinner, bringer and consume less power than LCD displays, and can
be cheaper to produce, have a faster response time, a better viewing angle and
can be produced using flexible transparent polymers instead of glass.
Our management believes that there is a great potential market available by
utilizing NPI's technology, which is anticipated to allow for the manufacture of
low-cost, lightweight, unbreakable and bendable display screens on flexible
transparent plastic substrates instead of glass screens currently in use.
OUR TARGET MARKETS AND MARKETING STRATEGY. Should we complete the acquisition of
NPI, we hope to engage in the manufacture of OLED display screens that would be
incorporated into computer systems sold to the general market. We believe the
demand for such displays will expand along with the demand for high-quality,
state-of-the-art components. As improvements in technology occur, many computer
users seek to modify the capabilities of hardware they purchase to enhance the
quality of their computing experience. We estimate that because of the rapid
changes in technology, computer product life cycles are increasingly shorter,
prices become lower, and competition increases. By developing and manufacturing
a state-of-the-art computer display components, we believe we will be able to
help fill a growing need in the market for computer hardware that is
technologically up-to-date. We intend to promote our potential products by means
of relationship-building with computer component and peripheral manufacturers,
computer users, trade magazine articles and advertisements.
15
COMPETITION. We believe that competition in the market for this type of product,
including LCD, CRT and other technology displays and display systems is
generally based on price, product performance, product availability and customer
service. A number of other large companies, including Sony, Philips Electronics,
Ltd., and several other manufacturers, presently manufacture LCD and CRT-based
and other displays. Several companies have developed a strong presence in
various markets for fully integrated video display systems.
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 products not provided by us, and may have greater name
recognition. These companies might be willing to sacrifice profitability to
capture a greater portion of the market for similar products and services, or
pay higher prices than we would for the same expansion and development
opportunities. Consequently, we may encounter significant competition in our
efforts to achieve our internal growth objectives.
OUR INTELLECTUAL PROPERTY. We do not presently own any copyrights, patents,
trademarks, licenses, concessions or royalties. Our success may depend in part
upon our ability to preserve our trade secrets, obtain and maintain patent
protection for our technologies, products and processes, and operate without
infringing the proprietary rights of other parties. However, we may rely on
certain proprietary technologies, trade secrets, and know-how that are not
patentable. Although we may take action to protect our unpatented trade secrets
and our proprietary information, in part, by the use of confidentiality
agreements with our employees, consultants and certain of our contractors, we
cannot guaranty that:
o these agreements will not be breached;
o we would have adequate remedies for any breach; or
o our proprietary trade secrets and know-how will not otherwise become
known or be independently developed or discovered by competitors.
We cannot guaranty that our actions will be sufficient to prevent imitation or
duplication of either our products or business methods by others or prevent
others from claiming violations of their intellectual property rights.
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 current activities are subject to
licensing or other regulatory requirements. We believe that we are in conformity
with all applicable laws in all relevant jurisdictions and will seek to remain
so as we continue with our business objectives.
OUR RESEARCH AND DEVELOPMENT. We are not currently conducting any research and
development activities. We do not anticipate conducting such activities in the
near future unless we complete the acquisition of NPI as described herein.
EMPLOYEES. As of August 24, 2004, we have one employee, who is Alain Houle, our
president, treasurer and one of our directors. We anticipate that we will not
hire any employees in the next six months, unless we complete the acquisition of
NPI, as described herein. From time-to-time, we anticipate that we will use the
services of independent contractors and consultants as needed, if our existing
staffing levels are not adequate to conduct operations. We will determine when
and whether to add to our staff or supplement it by means of independent
contractors in the event that we commence operations.
FACILITIES. Our executive, administrative and operating offices are located at
2175 rue de la Montagne, Suite 311, Montreal, Quebec, Canada, H3G 1Z8.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES. Our total assets were $75,898 as of June 30,
2004, which consisted of cash of $25,062, property and equipment with a net
value of $836 and the option to purchase NPI which is valued at $50,000. In
January 2004, we issued 6,000,000 shares of our common stock sold pursuant to
our Registration Statement on Form SB-2 in exchange for receiving $200,000. Our
registration statement was declared effective in November 2003. Our cash on hand
will not be sufficient for us to continue current operation for the next twelve
months. We will either have to raise additional capital through the issuance of
debt or equity, or we will need to begin to generate cash from operations.
Our current liabilities as of June 30, 2004 totaled $56,706 of which $18,346 is
accounts payable and $38,360 is accrued expenses. We had no other liabilities
and no long-term commitments or contingencies at June 30, 2004. From May 2002,
we had engaged only one client, which had been one of our shareholders. During
the first quarter of 2004, we had difficulty in providing services relating to
that contract, and as of April 5, 2004, we were released from providing any
additional services pertaining to that contract. In consideration for this
release, we were required to pay $43,000. The payment was made in April 2004.
OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS. From our inception on December
10, 2001 through June 30, 2004, we generated revenues of $53,500 from a related
party. We hope to generate revenues in the next twelve months after acquiring
and beginning to operate the business of NPI as described herein. On April 20,
2004, we entered into an agreement with Oled Systems, Inc., a privately held New
Brunswick corporation ("Oled") and its sole shareholder to acquire all the
outstanding shares of Oled in exchange for $50,000. Oled has the right to
acquire NPI, a Canadian corporation, a company involved in information
technologies and telecommunications using nanomaterials and devices. We
anticipate that we will use the balance of the funds raised in January 2004 and
revenues generated to develop this business, to fund marketing activities and
for working capital. Our failure to do so will hinder our ability to increase
the size of our operations and generate additional revenues. If we are not able
to generate additional revenues that cover our estimated operating costs, our
business may ultimately fail.
We have cash of $25,062 as of June 30, 2004. Our cash on hand will not be
sufficient for us to continue current operation for the next twelve months. We
will either have to raise additional capital through the issuance of debt or
equity, or we will need to begin to generate cash from operations.
We are not currently conducting any research and development activities. We do
not anticipate conducting such activities in the near future, though upon the
acquisition of NPI, we may undertake additional research and development
activities. In the event that we expand acquire NPI, then we may need to hire
additional employees or independent contractors as well as purchase or lease
additional equipment. Our management believes that we do not require the
services of independent contractors to operate at our current level of activity.
However, if our level of operations increases beyond the level that our current
staff can provide, then we may need to supplement our staff in this manner.
17
DESCRIPTION OF PROPERTY
PROPERTY HELD BY US. As of the date specified in the following table, we held
the following property:
============================ ========================= =========================
PROPERTY JUNE 30, 2004 DECEMBER 31, 2003
- ---------------------------- ------------------------- -------------------------
Cash and Equivalents $25,062 $1,839
- ---------------------------- ------------------------- -------------------------
Property and Equipment, net $836 $1,254
============================ ========================= =========================
OUR FACILITIES. Our executive, administrative and operating office is located in
the business offices of Alain Houle, 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. Alain Houle, 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. Houle does not expect to be paid or reimbursed for providing
office facilities.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATED PARTY TRANSACTIONS.
Alain Houle, our current president, treasurer and one of our directors, provides
office space to us at no charge. Mr. Houle does not expect any compensation for
this contribution.
Brian Eddo, our former president, secretary and one of our directors, provided
office space to us at no charge. Mr. Eddo was not paid or reimbursed for
providing office facilities, nor did he expect such compensation.
In December 2001, we issued 500,000 shares of our common stock to Brian Eddo,
our former president, secretary and one of our directors, in exchange for cash
of $1,000 and services valued at $9,000, or $0.02 per share.
In February 2002, we issued 750,000 shares of our common stock to Tamara Woody,
our former treasurer and one of our former directors, in exchange for $15,000,
or $0.02 per share.
In May 2002, we entered into an agreement for us to develop software for Format
which became one of our shareholders pursuant to that agreement. Specifically,
the agreement provided that Format would pay us $46,000 in exchange for the
software development services and $4,000 to purchase 200,000 shares of our
common stock, which we agreed to register on behalf of Format.
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.
18
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.
We are a reporting company with the Securities and Exchange Commission; as such,
the public may read and copy any materials filed with the Securities and
Exchange Commission at the Security and Exchange Commission's Public Reference
Room at 450 Fifth Street N.W., Washington, D.C. 20549. The public may also
obtain information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Securities and Exchange Commission. The address of that
site is http://www.sec.gov.
As of August 24, 2004, there were seventy-nine record holders of our common
stock, and there were 10,350,000 shares of our common stock issued and
outstanding. There have been no cash dividends declared on our common stock.
Dividends are declared at the sole discretion of our Board of Directors.
As of August 24, 2004, there were no outstanding shares of our common stock
which can be sold pursuant to Rule 144. Rule 144 provides, among other things,
that persons holding restricted securities for a period of one year may each
sell, assuming all of the conditions of Rule 144 are satisfied, in brokerage
transactions every three months an amount of restricted securities equal to one
percent of our outstanding shares of common stock, or the average weekly
reported volume of trading during the four calendar weeks preceding the filing
of a notice of proposed sale, whichever is more. Rule 144 also provides that,
after holding such securities for a period of two years, a nonaffiliate of the
company may sell those securities without restriction, other than the
requirement that we are current with respect to our information reporting
requirements.
As of August 24, 2004, there are no outstanding options or warrants to purchase,
or securities convertible into, shares of our common stock.
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.
19
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, 2003 and 2004. Our current management joined us in January 2004
upon the resignation of our former management. 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 - former president, secretary 2003 None None None None
- --------------------------------------------- -------- ------------ ------------- --------------------- -------------------------
Tamara Woody - former treasurer 2003 None None None None
- --------------------------------------------- -------- ------------ ------------- --------------------- -------------------------
Alain Houle - president, treasurer 2004 None None None None
- --------------------------------------------- -------- ------------ ------------- --------------------- -------------------------
Luce Trudel - secretary 2004 None None None None
============================================= ======== ============ ============= ===================== =========================
COMPENSATION OF DIRECTORS. Our current directors who are also our employees
receive no extra compensation for their service on our board of directors.
COMPENSATION OF OFFICERS. As of August 24, 2004, our officers have received no
compensation for their services provided to us, except as described in the table
above.
EMPLOYMENT CONTRACTS. We are not a party to any employment contracts or any
collective bargaining agreements.
20
FINANCIAL STATEMENTS
PART I. FINANCIAL INFORMATION
DIGIBLUE MEDIA, INC.
(DBA NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JUNE 30,
2004
-----------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 25,062
-----------------
TOTAL CURRENT ASSETS 25,062
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $1,672 836
OPTION TO PURCHASE TECHNOLOGY 50,000
-----------------
TOTAL ASSETS $ 75,898
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 18,346
Accrued expenses 38,360
-----------------
TOTAL CURRENT LIABILITIES 56,706
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDERS' EQUITY
Common stock; $0.001 par value; 50,000,000 shares
authorized; 10,350,000 shares issued and outstanding 10,350
Additional paid-in capital 221,650
Deficit accumulated during the development stage (212,808)
-----------------
TOTAL STOCKHOLDERS' EQUITY 19,192
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 75,898
=================
The accompanying notes are an integral part of these financial statements.
21
DIGIBLUE MEDIA, INC.
(DBA NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
CUMULATIVE FROM
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 10,
JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2001 (INCEPTION) TO
2003 2004 2003 2004 JUNE 30, 2004
----------- ----------- ----------- ----------- ---------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
REVENUE -- FROM RELATED PARTY $ 16,700 $ - $ 30,500 $ - $ 53,500
----------- ----------- ----------- ----------- ---------------
COSTS AND EXPENSES
Contract costs 1,500 - 6,370 43,000 53,460
General and administrative costs 8,718 53,528 23,278 107,344 212,848
----------- ----------- ----------- ----------- ---------------
TOTAL OPERATING EXPENSES 10,218 53,528 29,648 150,344 266,308
----------- ----------- ----------- ----------- ---------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 6,482 (53,528) 852 (150,344) (212,808)
PROVISION FOR INCOME TAXES - - - - -
----------- ----------- ----------- ----------- ---------------
NET INCOME (LOSS) $ 6,482 $ (53,528)$ 852 $ (150,344) $ (212,808)
=========== =========== =========== =========== ===============
NET INCOME (LOSS) PER SHARE:
BASIC AND DILUTED $ 0.00 $ (0.01) $ 0.00 $ (0.02) $ (0.04)
=========== =========== =========== =========== ===============
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC AND DILUTED 1,450,000 10,350,000 1,450,000 9,855,495 5,159,486
=========== =========== =========== =========== ===============
The accompanying notes are an integral part of these financial statements.
22
DIGIBLUE MEDIA, INC.
(DBA NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
DEFICIT
ACCUMULATED TOTAL
ADDITIONAL COMMON DURING THE STOCKHOLDERS'
COMMON STOCK PAID-IN STOCK FOR DEVELOPMENT EQUITY
SHARES AMOUNT CAPITAL SERVICES STAGE (DEFICIT)
--------- --------- ---------- ---------- --------- ----------
Balance at December 10, 2001 (inception),
as effected for 3:1 stock split - $ - $ - $ - $ - $ -
Issuance of common stock for cash and
services - December 2001 1,500,000 1,500 8,500 (9,000) - 1,000
Net loss for the period from inception -
(December 10, 2001) to December 31, 2001 - - - - (1,000) (1,000)
--------- --------- ---------- ---------- --------- ----------
Balance at December 31, 2001 1,500,000 1,500 8,500 (9,000) (1,000) -
Issuance of common stock for cash - February 2002 2,250,000 2,250 12,750 - - 15,000
Issuance of common stock for cash - May 2002 600,000 600 3,400 - - 4,000
Amortization of services - - - 7,500 - 7,500
Net loss - - - - (4,757) (4,757)
--------- --------- ---------- ---------- --------- ----------
Balance at December 31, 2002 4,350,000 4,350 24,650 (1,500) (5,757) 21,743
Amortization of services - - - 1,500 - 1,500
Net loss - (56,707) (56,707)
--------- --------- ---------- ---------- --------- ----------
Balance at December 31, 2003 4,350,000 4,350 24,650 - (62,464) (33,464)
Issuance of common stock for cash -
January 2004 (unaudited) 6,000,000 6,000 194,000 - - 200,000
Contributed capital -- office space (unaudited) 3,000 - - 3,000
Net loss (unaudited) (150,344) (150,344)
--------- --------- ---------- ---------- --------- ----------
Balance at June 30, 2004 (unaudited) 10,350,000 $ 10,350 $ 221,650 $ - $(212,808) $ 19,192
========= ========= ========== ========== ========= ==========
The accompanying notes are an integral part of these financial statements.
23
DIGIBLUE MEDIA, INC.
(DBA NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
CUMULATIVE FROM
SIX MONTHS ENDED DECEMBER 10,
JUNE 30, JUNE 30, 2001 (INCEPTION) TO
2003 2004 JUNE 30, 2004
-------------- ---------------- -------------------
(unaudited) (unaudited) (unaudited)
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ 852 $ (150,344) $ (212,808)
Adjustment to reconcile net income (loss) to net cash
used in operating activities:
Amortization of common stock for services 1,500 - 9,000
Depreciation expense 418 418 1,672
Allowance for doubtful accounts 8,250 16,500
Capital contribution - office rent 3,000 3,000
Changes in assets and liabilities:
Accounts receivable - from related party (24,000) - (16,500)
Other receivables 370 - -
Cost and estimated earnings in excess of
billings on uncompleted contracts 2,000 - -
Accounts payable and accrued expenses 14,531 11,899 56,706
-------------- ---------------- -------------------
Net cash used in operating activities (4,329) (126,777) (142,430)
-------------- ---------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - - (2,508)
Purchase of Oled Systems, Inc. - (50,000) (50,000)
-------------- ---------------- -------------------
Net cash used in investing activities - (50,000) (52,508)
-------------- ---------------- -------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock - 200,000 220,000
-------------- ---------------- -------------------
Net cash provided by financing activities - 200,000 220,000
-------------- ---------------- -------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (4,329) 23,223 25,062
CASH AND CASH EQUIVALENTS, Beginning of period 15,143 1,839 -
-------------- ---------------- -------------------
CASH AND CASH EQUIVALENTS, End of period $ 10,814 $ 25,062 $ 25,062
============== ================ ===================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ - $ - $ -
============== ================ ===================
Income taxes paid $ - $ - $ -
============== ================ ===================
The accompanying notes are an integral part of these financial statements.
24
DIGIBLUE MEDIA, INC.
(DBA NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION
Nature of Business
Digiblue Media, Inc. (the "Company") is currently a development stage company
under the provisions of Statement of Financial Accounting Standards ("SFAS") No.
7 and was incorporated under the laws of the State of Nevada on December 10,
2001. The Company plans to design and develop specialized software programs for
potential customers.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 enable it to continue as a going concern.
Interim Financial Statements
In the opinion of the Company's management, the accompanying unaudited financial
statements of the Company contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position of the
Company as of June 30, 2004, and the results of its operations and cash flows
for the three and six month periods ended June 30, 2004 and 2003. The operating
results of the Company on a quarterly basis may not be indicative of operating
results for the full year.
The accompanying unaudited financial statements are presented in accordance with
the requirements for Form 10-QSB and Article 10 of Regulation S-X and Regulation
S-B. Accordingly, they do not include all the disclosures normally required by
generally accepted accounting principles. Reference should be made to the
Digiblue Media, Inc.'s Form 10-KSB for the year ended December 31, 2003, for
additional disclosures including a summary of the Company's accounting policies,
which have not significantly changed.
Fair Value of Financial Instruments
The estimated fair values of cash and cash equivalents, none of which are held
for trading, accounts receivable, accounts payable and accrued expenses
approximate their carrying value because of the short term maturity of these
instruments or the stated interest rates are indicative of market interest
rates.
25
DIGIBLUE MEDIA, INC.
(DBA NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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.
Concentration of Credit Risk
The Company primarily transacts its business with one financial institution. The
amount on deposit in that one institution may from time to time exceed the
$100,000 federally insured limit.
Property and Equipment
Computer equipment is valued at cost. Depreciation is being provided by use of
straight-line over the estimated useful life of three years.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but does
not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. Accordingly, compensation expense for
stock options is measured as the excess, if any, of the quoted market price of
the Company's common stock (at the date of the grant), less the amount an
employee must pay to acquire the stock.
Revenue Recognition
The Company's only source of revenue was under a contract with a shareholder of
the Company to create a software program. It was the only contract for the
Company since inception. Revenue under this contract was recognized on the
percentage-of-completion method measured by the portion of the total contract or
job cost expended to date to the estimated total cost to complete. Contract
costs include all direct labor, subcontract costs and indirect payroll costs.
Contract costs in excess of billings are presented as cost and estimated
earnings in excess of billings on uncompleted contracts. Selling, general and
administrative costs are charged to expense as incurred.
During the first quarter of 2004, the Company incurred difficulty in providing
services relating to the contract and was released from providing any additional
services thereon. In consideration for this release, the Company is required to
pay the shareholder $43,000. The payment was made in April 2004.
26
DIGIBLUE MEDIA, INC.
(DBA NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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.
Through June 30, 2004, the Company experienced net operating losses totaling
$212,808 that can be carried forward to offset future taxable income through the
year 2016. The net operating losses generated a deferred tax asset of
approximately $70,000, which was adjusted by the Company to zero as the Company
does not know if it will ever benefit from these loss carry forwards.
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, 2004, the Company
had no outstanding stock options or common stock equivalents that could be
converted into shares of Company's common stock.
New Accounting Pronouncements
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (an interpretation of Accounting Research Bulletin
(ARB) No. 51, Consolidated Financial Statements). Interpretation 46 addresses
consolidation by business enterprises of entities to which the usual condition
of consolidation described in ARB-51 does not apply. The Interpretation changes
the criteria by which one company includes another entity in its consolidated
financial statements. The general requirement to consolidate under ARB-51 is
based on the presumption that an enterprise's financial statements should
include all of the entities in which it has a controlling financial interest
(i.e., majority voting interest). Interpretation 46 requires a variable interest
entity to be consolidated by a company that does not have a majority voting
interest, but nevertheless, is subject to a majority of the risk of loss from
the variable interest entity's activities or entitled to receive a majority of
the entity's residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. In December
2003 the FASB concluded to revise certain elements of FIN 46, primarily to
clarify the required accounting for interests in variable interest entities.
FIN-46R replaces FIN-46, that was issued in January 2003. FIN-46R exempts
certain entities from its requirements and provides for special effective dates
for entities that have fully or partially applied FIN-46 as of December 24,
2003. In certain situations, entities have the option of applying or continuing
to apply FIN-46 for a short period of time before applying FIN-46R. In general,
for all entities that were previously considered special purpose entities, FIN
46 should be applied in periods ending after December 15, 2003. Otherwise, FIN
46 is to be applied for registrants who file under Regulation SX in periods
ending after March 15, 2004, and for registrants who file under Regulation SB,
in periods ending after December 15, 2004. The Company does not expect the
adoption to have a material impact on the Company's financial position or
results of operations.
27
DIGIBLUE MEDIA, INC.
(DBA NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
In December 2003, the FASB issued a revised SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" which replaces the
previously issued Statement. The revised Statement increases the existing
disclosures for defined benefit pension plans and other defined benefit
postretirement plans. However, it does not change the measurement or recognition
of those plans as required under SFAS No. 87, "Employers' Accounting for
Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No.
106,"Employers' Accounting for Postretirement Benefits Other Than Pensions."
Specifically, the revised Statement requires companies to provide additional
disclosures about pension plan assets, benefit obligations, cash flows, and
benefit costs of defined benefit pension plans and other defined benefit
postretirement plans. Also, companies are required to provide a breakdown of
plan assets by category, such as debt, equity and real estate, and to provide
certain expected rates of return and target allocation percentages for these
asset categories. The Company has implemented this pronouncement and has
concluded that the adoption has no material impact to the financial statements.
During April 2003, the FASB issued SFAS 149 - "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," effective for contracts entered
into or modified after June 30, 2003, except as stated below and for hedging
relationships designated after June 30, 2003. In addition, except as stated
below, all provisions of this Statement should be applied prospectively. The
provisions of this Statement that relate to Statement 133 Implementation Issues
that have been effective for fiscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their respective effective
dates. In addition, paragraphs 7(a) and 23(a), which relate to forward purchases
or sales of when issued securities or other securities that do not yet exist,
should be applied to both existing contracts and new contracts entered into
after June 30, 2003. The Company has implemented this pronouncement and has
concluded that the adoption has no material impact to the financial statements.
During May 2003, the FASB issued SFAS 150 - "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity," effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective for public entities at the beginning of the first interim period
beginning after June 15, 2003. This Statement establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a freestanding financial instrument that is within its scope as a
liability (or an asset in some circumstances). Many of those instruments were
previously classified as equity. Some of the provisions of this Statement are
consistent with the current definition of liabilities in FASB Concepts Statement
No. 6, Elements of Financial Statements. The Company has implemented this
pronouncement and has concluded that the adoption has no material impact to the
financial statements.
Reclassifications
Certain amounts in the 2003 financial statements have been reclassified to
conform to the 2004 presentation.
28
DIGIBLUE MEDIA, INC.
(DBA NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - 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 50,000,000 shares
designated as common stock, par value of $0.001
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, 2004, the Company's Board of
Directors has not issued any Preferred Stock.
Common Stock
In January 2004, the Company issued 6,000,000 shares of its common stock in
exchange for receiving $200,000 in cash.
Stock Split
The Company declared a 3 for 1 stock split effective as of January 6, 2004. The
financial statements reflected herein have all been restated to give effect to
the stock split as if it occurred at the beginning of each period presented.
NOTE 4 - ACQUISITION
On April 20, 2004, the Company entered into an agreement to acquire all of the
outstanding stock of Oled Systems, Inc., a privately-held New Brunswick
corporation ("Oled"), for $50,000. Oled has the right to acquire Nova-Plasma,
Inc. a Canadian Corporation, which is involved in information technologies and
telecommunications using nanomaterials and devices. This transaction was
accounted for by the purchase method of accounting, as required by SFAS No. 141,
"Business Combinations," and accordingly, the purchase price has been allocated
to the assets acquired and the liabilities assumed based upon the estimated fair
values at the date of acquisition. The allocation of the purchase price as shown
below is preliminary, and may be adjusted upon the completion of an appraisal of
the property and equipment and other future analyses.
The allocation of the purchase price is as follows:
Options to purchase a technology company $ 50,000
------------------
Purchase price $ 50,000
==================
Oled had no operations prior to the acquisition; therefore pro forma information
has not been presented.
29
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE YEAR ENDING DECEMBER 31, 2003
INDEPENDENT AUDITORS' REPORT
Board of Directors
Digiblue Media, Inc.
Dana Point, California
We have audited the accompanying balance sheet of Digiblue Media, Inc. (dba
Nevada Digiblue Media, Inc.) (A Development Stage Company) as of December 31,
2003 and the related statements of operations, stockholders' deficit and cash
flows for the years ended December 31, 2003 and 2002, and for the period since
inception of December 10, 2001 to December 2003. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
2003 and the results of its operations and its cash flows for the years ended
December 31, 2003 and 2002, and for the period since inception of December 10,
2001 to December 2003 in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
accompanying financial statements, the Company has no established source of
revenue, which raises substantial doubt about its ability to continue as a going
concern. Management's plan in regard to these matters is also discussed in Note
1. These financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Stonefield Josephson, Inc.
Santa Monica, California
March 20, 2004
30
DIGIBLUE MEDIA, INC.
(dba NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET - DECEMBER 31, 2003
ASSETS
------
Current assets:
Cash and cash equivalents $ 1,839
Accounts Receivable-from related party,
net allowance for doubtful account of $8,250 8,250
-------------------
Total current assets 10,089
Computer equipment, net of accumulated depreciation of $1,254 1,254
-------------------
Total assets $ 11,343
===================
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities -
accounts payable and accrued expenses $ 44,807
-------------------
Commitments and contingencies -
Stockholders' deficit:
Common stock, $0.001 par value; 50,000,000 shares authorized;
4,350,000 shares issued and outstanding 4,350
Additional paid-in capital 24,650
Deficit accumulated during development stage (62,464)
-------------------
Total stockholders' deficit (33,464)
-------------------
Total liabilities and stockholders' deficit $ 11,343
===================
The accompanying notes form an integral part of these financial statements.
31
DIGIBLUE MEDIA, INC.
(dba NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the year For the year From December 10,
ended ended 2001 (Inception) to
December 31, 2003 December 31, 2002 December 31, 2003
------------------------ ---------------------- -----------------------
Revenue - from related party $ 30,500 $ 23,000 $ 53,500
------------------------ ---------------------- -----------------------
Costs:
Contract costs 6,370 4,090 10,460
Amortization of stock compensation 1,500 7,500 9,000
Selling, general and administrative expenses 79,337 16,167 96,504
------------------------ ---------------------- -----------------------
87,207 27,757 115,964
------------------------ ---------------------- -----------------------
Loss before provision for income taxes (56,707) (4,757) (62,464)
Provision for income taxes - - -
------------------------ ---------------------- -----------------------
Net loss $ (56,707) $ (4,757) $ (62,464)
======================== ====================== =======================
Net loss per common
share - basic and dilutive ($0.01) $ 0.00 ($0.01)
======================== ====================== =======================
Weighted average common shares
outstanding - basic and dilutive 4,350,000 3,787,398 3,984,888
======================== ====================== =======================
The accompanying notes form an integral part of these financial statements.
32
DIGIBLUE MEDIA, INC.
(dba NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Deficit
accumulated (Accumulated
Additional Common during deficit)/
Common stock paid-in stock for development retained
Shares Amount capital services stage earnings
------------- ---------- ------------ ------------ ------------- --------------
Balance at December 10, 2001,
as effected for 3:1 stock split (see Note 3) - $ - $ - $ - $ - $ -
Issuance of common stock for
cash and services - December 2001 1,500,000 1,500 8,500 (9,000) - 1,000
Net loss - - - - (1,000) (1,000)
------------- ---------- ------------ ------------ ------------- --------------
Balance at December 31, 2001 1,500,000 1,500 8,500 (9,000) (1,000) -
Issuance of common stock for
cash - February 2002 2,250,000 2,250 12,750 - - 15,000
Issuance of common stock for
cash - May 2002 600,000 600 3,400 - - 4,000
Amortization of services - - - 7,500 - 7,500
Net loss for the year ended
December 31, 2002 - - - - (4,757) (4,757)
------------- ---------- ------------ ------------ ------------- --------------
Balance at December 31, 2002 4,350,000 $ 4,350 $ 24,650 $ (1,500) $ (5,757) $ 21,743
Amortization of services - - - 1,500 - 1,500
Net loss for the year ended
December 31, 2003 - - - - (56,707) (56,707)
------------- ---------- ------------ ------------ ------------- --------------
Balance at December 31, 2003 4,350,000 $ 4,350 $ 24,650 $ - $ (62,464) $ (33,464)
============= ========== ============ ============ ============= ==============
The accompanying notes form an integral part of these financial statements.
33
DIGIBLUE MEDIA, INC.
(dba NEVADA DIGIBLUE MEDIA, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the year For the year From December 10,
ended ended 2001 (Inception) to
December 31, 2003 December 31, 2002 December 31, 2003
-------------------- -------------------- --------------------
Cash flows provided by (used for) operating activities:
Net loss $ (56,707) $ (4,757) $ (62,464)
-------------------- -------------------- --------------------
Adjustments to reconcile net loss to net cash
used for operating activities:
Amortization of common stock for services 1,500 7,500 9,000
Depreciation 836 418 1,254
Allowance for doubtful account 8,250 - 8,250
(Increase) decrease in assets:
Accounts receivable - from related party (13,000) (3,500) (16,500)
Other receivable 370 (370) -
Cost and estimated earnings in excess of
billings on uncompleted contracts 2,000 (2,000) -
Increase in liabilities -
accounts payable and accrued expenses 43,447 1,360 44,807
-------------------- -------------------- --------------------
Total adjustments 43,403 3,408 46,811
-------------------- -------------------- --------------------
Net cash used for operating activities (13,304) (1,349) (15,653)
-------------------- -------------------- --------------------
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 20,000
-------------------- -------------------- --------------------
Net increase (decrease) in cash and cash equivalents (13,304) 15,143 1,839
Cash and cash equivalents, beginning of period 15,143 - -
-------------------- -------------------- --------------------
Cash and cash equivalents, end of period $ 1,839 $ 15,143 $ 1,839
==================== ==================== ====================
Supplemental disclosure of cash flow information:
Income taxes paid $ - $ - $ -
==================== ==================== ====================
Interest paid $ - $ - $ -
==================== ==================== ====================
Supplemental disclosure of non-cash financing activities -
During the year ended December 31, 2002, the Company
issued 1,500,000 post-split shares valued at $10,000
in exchange for cash and services $ - $ 10,000 $ 10,000
==================== ==================== ====================
The accompanying notes form an integral part of these financial statements.
34
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2003
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS:
Digiblue Media, Inc. (the "Company") is currently a
development stage company under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 7 and was
incorporated under the laws of the State of Nevada on December
10, 2001. The Company plans to design and develop specialized
software programs for any potential customer. Although the
Company recognized $53,500 in revenue from inception through
December 31, 2003, the Company does not consider this to be
significant revenues, and therefore have determined to
remain as a development stage entity.
BASIS OF PRESENTATION:
The accompanying financial statements have been prepared in
conformity with accounting principles generally accepted in
the United States of America, which contemplate continuation
of the Company as a going concern. However, the Company has no
established source of revenue. This matter raises substantial
doubt about the Company's ability to continue as a going
concern. These financial statements do not include any
adjustments relating to the recoverability and classification
of recorded asset amounts, or amounts and classification of
liabilities that might be necessary should the Company be
unable to continue as a going concern.
Management plans to take the following steps that it believes
will be sufficient to provide the Company with the ability to
continue in existence:
Management intends to continue to raise additional financing
through debt and equity financing or other means and develop
customer relations to complete its business plan (see Note 5
for subsequent events). In January 2004, the Company sold
6,000,000 (post-split) shares for $200,000.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair values of cash and cash equivalents, none
of which are held for trading, accounts receivable, accounts
payable and accrued expenses approximate their carrying value
because of the short term maturity of these instruments or
the stated interest rates are indicative of market interest
rates.
USE OF ESTIMATES:
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reported
periods. Actual results could materially differ from those
estimates.
35
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2003
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
CASH AND CASH EQUIVALENTS:
For purposes of the statement of cash flows, the Company
considers all highly liquid investments purchased with
original maturities of three months or less to be cash
equivalents.
COMPUTER EQUIPMENT:
Computer equipment is valued at cost. Depreciation is being
provided by use of straight-line over the estimated useful
life of three years.
STOCK-BASED COMPENSATION:
SFAS No. 123, "Accounting for Stock-Based Compensation,"
encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans
at fair value. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related
interpretations. Accordingly, compensation expense for stock
options is measured as the excess, if any, of the quoted
market price of the Company's common stock (at the date of the
grant), less the amount an employee must pay to acquire the
stock.
REVENUE RECOGNITION:
The Company generated revenue in the year ended December 31,
2003 under a contract with a shareholder of the Company to
create a software program. It was the only contract for the
Company since inception. Revenue under this contract was
recognized on the percentage-of-completion method measured by
the portion of the total contract or job cost expended to date
to the estimated total cost to complete. Contract costs
include all direct labor, subcontract costs and indirect
payroll costs. Contract costs in excess of billings are
presented as cost and estimated earnings in excess of billings
on uncompleted contracts. Selling, general and administrative
costs are charged to expense as incurred.
36
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2003
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INCOME TAXES:
The Company accounts for income taxes under SFAS 109,
"Accounting for Income Taxes." Under the asset and liability
method of SFAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statements carrying amounts
of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in income in the period the enactment occurs. A
valuation allowance is provided for certain deferred tax
assets if it is more likely than not that the Company will not
realize tax assets through future operations.
BASIC AND DILUTED LOSS PER SHARE:
In accordance with SFAS No. 128, "Earnings Per Share," the
basic loss per common share is computed by dividing net loss
available to common stockholders by the weighted average
number of common shares outstanding. Diluted loss per common
share is computed similar to basic loss per common share
except that the denominator is increased to include the number
of additional common shares that would have been outstanding
if the potential common shares had been issued and if the
additional common shares were dilutive. As of December 31,
2003, the Company has no outstanding stock options or common
stock equivalents that can be converted into shares of
Company's common stock.
COMPREHENSIVE INCOME:
SFAS No. 130, "Reporting Comprehensive Income," establishes
standards for the reporting and display of comprehensive
income and its components in the financial statements. For the
period from December 10, 2001 (inception) to December 31,
2003, the Company's comprehensive income (loss) consisted of
loss from operations. The Company has no items that represent
other comprehensive income and has not included a Statement
of Comprehensive Income in the financial statements.
SEGMENT REPORTING:
Based on the Company's integration and management strategies,
the Company operated in a single business segment. For the
period from inception to December 31, 2003, all revenues have
been derived from domestic operations.
37
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2003
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
NEW ACCOUNTING PRONOUNCEMENTS:
In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities" (an interpretation of Accounting
Research Bulletin (ARB) No. 51, Consolidated Financial Statements).
Interpretation 46 addresses consolidation by business enterprises of
entities to which the usual condition of consolidation described in
ARB-51 does not apply. The Interpretation changes the criteria by which
one company includes another entity in its consolidated financial
statements. The general requirement to consolidate under ARB-51 is
based on the presumption that an enterprise's financial statements
should include all of the entities in which it has a controlling
financial interest (i.e., majority voting interest). Interpretation 46
requires a variable interest entity to be consolidated by a company
that does not have a majority voting interest, but nevertheless, is
subject to a majority of the risk of loss from the variable interest
entity's activities or entitled to receive a majority of the entity's
residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity.
In December 2003 the FASB concluded to revise certain elements of FIN
46, primarily to clarify the required accounting for interests in
variable interest entities. FIN-46R replaces FIN-46, that was issued in
January 2003. FIN-46R exempts certain entities from its requirements
and provides for special effective dates for entities that have fully
or partially applied FIN-46 as of December 24, 2003. In certain
situations, entities have the option of applying or continuing to apply
FIN-46 for a short period of time before applying FIN-46R. In general,
for all entities that were previously considered special purpose
entities, FIN 46 should be applied in periods ending after December 15,
2003. Otherwise, FIN 46 is to be applied for registrants who file under
Regulation SX in periods ending after March 15, 2004, and for
registrants who file under Regulation SB, in periods ending after
December 15, 2004. The Company does not expect the adoption to have a
material impact on the Company's financial position or results of
operations.
In December 2003, the FASB issued a revised SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" which
replaces the previously issued Statement. The revised Statement
increases the existing disclosures for defined benefit pension plans
and other defined benefit postretirement plans. However, it does not
change the measurement or recognition of those plans as required under
SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits," and SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions." Specifically, the revised Statement requires companies to
provide additional disclosures about pension plan assets, benefit
obligations, cash flows, and benefit costs of defined benefit pension
plans and other defined
38
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2003
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
NEW ACCOUNTING PRONOUNCEMENTS:
benefit postretirement plans. Also, companies are required to provide a
breakdown of plan assets by category, such as debt, equity and real
estate, and to provide certain expected rates of return and target
allocation percentages for these asset categories. The Company has
implemented this pronouncement and has concluded that the adoption has
no material impact to the financial statements.
During April 2003, the FASB issued SFAS 149 - "Amendment of Statement
133 on Derivative Instruments and Hedging Activities," effective for
contracts entered into or modified after June 30, 2003, except as
stated below and for hedging relationships designated after June 30,
2003. In addition, except as stated below, all provisions of this
Statement should be applied prospectively. The provisions of this
Statement that relate to Statement 133 Implementation Issues that have
been effective for fiscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their respective
effective dates. In addition, paragraphs 7(a) and 23(a), which relate
to forward purchases or sales of when issued securities or other
securities that do not yet exist, should be applied to both existing
contracts and new contracts entered into after June 30, 2003. The
Company has implemented this pronouncement and has concluded that the
adoption has no material impact to the financial statements.
During May 2003, the FASB issued SFAS 150 - "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity," effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective for public entities at
the beginning of the first interim period beginning after June 15,
2003. This Statement establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a
freestanding financial instrument that is within its scope as a
liability (or an asset in some circumstances). Many of those
instruments were previously classified as equity. Some of the
provisions of this Statement are consistent with the current definition
of liabilities in FASB Concepts Statement No. 6, Elements of Financial
Statements. The Company has implemented this pronouncement and has
concluded that the adoption has no material impact to the financial
statements.
(2) RECLASSIFICATIONS:
Certain amounts in the 2002 financial statements have been reclassified
to conform with the 2003 presentation.
39
DIGIBLUE MEDIA, INC.
(dba Nevada Digiblue Media, Inc.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2003
(3) STOCKHOLDERS' EQUITY: (DEFICIT)
The Company is authorized to issue 55,000,000 shares of stock with
5,000,000 shares designated as preferred stock, par value of $0.001,
and 50,000,0000 shares designated as common stock, par value of $0.001
COMMON STOCK
------------
o In December 2001, the Company issued 1,500,000 (post-split)
shares of its common stock in exchange for $1,000 and services to
incorporate the Company. The shares were valued at $10,000, the
current market value on the date of issuance. The difference
between the fair market value of $10,000 and the cash proceeds of
$1,000 was expensed over a one-year period, which was the life of
the services to be rendered to the Company.
o In February 2002, the Company sold 2,250,000 (post-split) 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 600,000 (post-split) shares of the Company's common
stock. The shares were sold for proceeds of $4,000.
o No shares were issued in 2003.
STOCK SPLIT
-----------
o During January 2004, the Company declared a 3 for 1 stock split
effective as of January 6, 2004 (See Note 5). The financial
statements have been restated to give effect of the stock split
for all periods reflected.
PREFERRED STOCK
---------------
Preferred Stock, any series, shall have the powers, preferences,
rights, qualifications, limitations and restrictions as fixed by the
Company's Board of Directors in its sole discretion. As of December 31,
2003, the Company's Board of Directors has not issued any Preferred
Stock.
40
4) Provision for Income Taxes:
Deferred tax assets and liabilities reflect the net effect of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and
liabilities at December 31, 2003 are as follows:
Deferred tax assets:
Net operating loss carryforwards $ 26,371
Less valuation allowance (26,371)
---------------
$ -
---------------
At December 31, 2003, the Company has provided a 100% valuation allowance for
the deferred tax asset, since management has not been able to determine that the
realization of that asset is more likely than not. The net change in the
valuation allowance for the year ended December 31, 2003, was an increase of
approximately $24,300. As of December 31, 2003, the Company had net operating
loss carryforwards ("NOLs") of approximately $29,000, expiring through 2023.
(5) SUBSEQUENT EVENTS:
COMMON STOCK ISSUANCES:
On January 5, 2004, the Company issued 2,640,000 (post-split) shares of
its common stock for a total of $88,000, or $.033 per share. On January
6, 2004, the Company sold additional 3,360,000 (post-split) shares of
its common stock that the Company offered pursuant to the Form SB-2
for $112,000 or $.033 per share (post-split).
STOCK SPLIT:
The Board of Directors approved a 3 for 1 stock split of the Company's
issued and outstanding common stock. Per share data has been adjusted
according to the stock split. As a result of the split, the total
number of the Company's issued and outstanding shares of common stock
is 10,350,000.
CHANGE IN OFFICERS:
On January 14, 2004, Brian Eddo, the secretary of the Company, resigned
the position of a secretary. Alain Houle was appointed as the
Company's secretary on the same date. Mr. Houle owns 46,000 shares
of the Company's common stock, which comprises 0.4% of the Company's
total issued and outstanding shares
41
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 December 31, 2002. On May 18,
2004 we filed a report containing Item 4, Change in Accountant, to report that
effective May 12, 2004, we dismissed Stonefield Josephson, Inc. and engaged
Jonathon P. Reuben, CPA to act as our independent chartered accountants.
The reports of Stonefield Josephson, Inc. for these fiscal years did not contain
an adverse opinion, or disclaimer of opinion and were not qualified or modified
as to audit scope or accounting principles except as described herein. The
report of Stonefield Josephson, Inc. for these fiscal years was qualified with
respect to uncertainty as to our ability to continue as a going concern. During
our two most recent fiscal years and the period from the end of the most
recently completed fiscal year through May 12, 2004, the date of dismissal,
there were no disagreements with Stonefield Josephson, Inc. on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures, which disagreements, if not resolved to the satisfaction of
Stonefield Josephson, Inc. would have caused it to make reference to such
disagreements in its reports.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered by us has
been passed upon by the Law Offices of Randall J. Lanham., located in Rancho
Santa Margarita, California.
EXPERTS
Our financial statements for the period from December 10, 2001, our date of
formation, through December 31, 2003, appearing in this prospectus which is part
of a Registration Statement have been audited by Stonefield Josephson, Inc. and
are included in reliance upon such report given upon the authority of Stonefield
Josephson, Inc. as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed a registration statement on Form SB-2 with the Securities and
Exchange Commission pursuant to the Securities Act of 1933. This prospectus does
not contain all of the information set forth in the registration statement and
the exhibits and schedules to the registration statement. For further
information regarding us and our common stock offered hereby, reference is made
to the registration statement and the exhibits and schedules filed as a part of
the registration statement.
The SEC requires us to "incorporate" into this prospectus information that we
file with the SEC in other documents. This means that we can disclose important
information to you by referring to other documents that contain that
information. The information incorporated by reference is considered to be part
to this prospectus. Information contained in this prospectus and information
that we file with the SEC in the future and incorporate by reference in this
prospectus automatically updates and supersedes previously filed information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC pursuant to the Securities Exchange Act of 1934, prior to the
sale of all the shares covered by this prospectus.
1. Our Quarterly Report on Form 10-QSB for the quarter ended September 30, 2003.
2. Our Annual Report on Form 10-KSB for the year ended December 31, 2003. 3. Our
Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004. 4. Our
Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004.
You may read and copy any materials filed with the Securities and Exchange
Commission at www.sec.gov.
42
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 $75.72
- ---------------------------------------- -------------------- ---------------
Transfer Agent Fees Approximately $650.00
- ---------------------------------------- -------------------- ---------------
Costs of Printing and Engraving Approximately $500.00
- ---------------------------------------- -------------------- ---------------
Legal Fees Approximately $10,000.00
- ---------------------------------------- -------------------- ---------------
Accounting Fees Approximately $4,000.00
======================================== ==================== ===============
RECENT SALES OF UNREGISTERED SECURITIES
There have been no sales of unregistered securities within the last three years,
which would be required to be disclosed pursuant to Item 701 of Regulation S-B,
except for the following:
In December 2001, we issued 500,000 shares of our common stock to Brian Eddo,
our president, secretary and one of our directors, in exchange for cash of
$1,000 and services which were valued at $9,000, or $0.02 per share. The shares
were issued in a transaction which we believe satisfies the requirements of that
certain exemption from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended, which exemption is specified by the
provisions of Section 4(2) of that act. We believe that Mr. Eddo had 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 was 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 had 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 wass our treasurer and one of our directors.
43
In May 2002, we issued 200,000 shares of our common stock to Format, Inc. in
exchange for $4,000 or $0.02 per share pursuant to a software purchase and
development agreement, wherein we would also provide software development
services in exchange for cash paid to us by Format, Inc. A copy of that
agreement is attached as an exhibit. The shares were issued in a transaction
which we believe satisfies the requirements of that certain exemption from the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended, which exemption is specified by the provisions of Section 4(2) of
that act.
EXHIBITS
Copies of the following documents are filed with this registration
statement, Form SB-2, as exhibits:
Exhibit No.
- -----------
1. Underwriting Agreement (not applicable)
3.1 Articles of Incorporation*
3.2 Bylaws*
4.1 Subscription Agreement
5. Executed Opinion Re: Legality*
8. Opinion Re: Tax Matters (not applicable)
10.1 Services Agreement with Format, Inc.****
11. Statement Re: Computation of Per Share Earnings**
15. Letter on unaudited interim financial information (not applicable)
23.1 Consent of Auditors
23.2 Consent of Counsel***
* Included in Registration Statement on Form SB-2 filed on October 4, 2002
** Included in Financial Statements
*** Included in Exhibit 5
**** Included in Amendment No. 2 to Form SB-2 filed May 6, 2003.
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
44
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.
45
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 Montreal, Province
of Quebec, Canada, on August 20, 2004.
Digiblue Media, Inc.,
a Nevada corporation
/s/ Alain Houle
- --------------------------------------------
Alain Houle
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/ Alain Houle August 20, 2004
- --------------------------------------------
Alain Houle
principal executive officer, president,
principal accounting and financial officer,
treasurer, director
/s/ Luce Trudel August 20, 2004
- --------------------------------------------
Luce Trudel
secretary, director