<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended JUNE 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to________________ .
Commission File No.: 000-27777
BLAGMAN MEDIA INTERNATIONAL, INC. (SUCCESSOR REGISTRANT TO MNS EAGLE EQUITY
GROUP I INC.)
--------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
NEVADA 95-472-9314
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1901 AVENUE OF THE STARS,
SUITE 1710, LOS ANGELES, CA 90067
--------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 310.788.5444
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(G) of the Act:
COMMON STOCK --$.001 PAR VALUE
------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 14,665,257 SHARES OF COMMON
STOCK AS OF JUNE 30, 2000
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
<PAGE>
INDEX
BLAGMAN MEDIA INTERNATIONAL, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements............................................................... 1
Consolidated Balance Sheet as of June 30, 2000 (unaudited)......................... 2
Consolidated Statements of Operations for the Six Months
and Three Months Ended June 30, 2000 and 1999 (unaudited).......................... 3
Consolidated Statement of Changes in Stockholders' Equity
for the Six Months Ended June 30, 2000 (unaudited)................................. 4
Consolidated Statement of Cash Flows for the Six Months Ended
June 30, 2000 and 1999 (unaudited)................................................. 5
Notes to Consolidated Financial Statements as of June 30, 2000
(unaudited)........................................................................ 6
Item 2. Management's Discussion and Analysis of
Results of Operations.............................................................. 16
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................. 20
Item 2. Changes in Securities and Use of Proceeds.......................................... 20
Item 3. Default Upon Senior Securities..................................................... 20
Item 4. Submission of Matters to a Vote of Security Holders................................ 20
Item 5. Other Information.................................................................. 20
Item 6. Exhibits and Reports on Form 8-K................................................... 20
</TABLE>
i
<PAGE>
ITEM 1. BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
PAGE 2 CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 (UNAUDITED)
PAGE 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE
30, 2000 AND 1999 (UNAUDITED)
PAGE 4 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED
JUNE 30, 2000 (UNAUDITED)
PAGE 5 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
PAGES 6 - 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2000 (UNAUDITED)
</TABLE>
1
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2000
<TABLE>
<CAPTION>
June 30, 2000
(unaudited) December 31, 1999
----------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 199,679 $ -
Accounts receivable 116,077 479,054
Other current assets 28,053 1,918
Note receivable - stockholder 75,000 -
Loan receivable - stockholder 31,321 38,948
----------- -----------
Total Current Assets 450,130 519,920
PROPERTY AND EQUIPMENT - NET 69,424 6,942
----------- -----------
TOTAL ASSETS $ 519,554 $ 526,862
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Notes and loans payable - current portion $ 80,152 $ 80,152
Line of credit - 74,713
Accounts payable and accrued expenses 227,989 460,587
----------- -----------
Total Current Liabilities 308,141 615,452
LONG-TERM LIABILITIES
Notes and loans payable 50,000 50,000
----------- -----------
Total Liabilities 358,141 665,452
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.001 par value, 100,000,000 shares authorized, 14,664 12,070
14,665,257 and 12,069,873 shares issued and outstanding
Common stock to be issued (5,033 shares) 5 -
Additional paid-in capital 2,513,427 24,630
Accumulated deficit (2,351,349) (175,290)
----------- -----------
176,747 138,590
Subscriptions receivable (15,334) -
----------- -----------
Total Stockholders' Equity (Deficiency) 161,413 (138,590)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 519,554 $ 526,862
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For The Six For The Six For The Three For The Three
Months Ended Months Ended Months Ended Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
(unaudited) (unaudited) (unaudited) (unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES - NET $ 948,642 $ 1,349,828 $ 523,928 $ 906,911
COST OF REVENUES 789,999 952,909 327,419 594,479
------------ ------------ ------------ ------------
GROSS PROFIT 158,643 396,919 196,509 312,432
------------ ------------ ------------ ------------
OPERATING EXPENSES
Officers' compensation 800,000 85,226 725,500 33,847
Employee compensation and taxes 123,098 97,677 84,017 76,095
Travel and entertainment 131,804 - 73,884 -
Other general and administrative 102,106 10,648 63,408 7,658
Professional and consulting fees 805,761 10,020 713,907 5,000
Rent 38,244 16,541 30,616 7,089
Telephone 15,476 7,927 8,775 3,304
Advertising 123,067 - 95,830 -
Auto 8,360 4,616 7,766 2,221
Depreciation 4,316 - 2,422 -
------------ ------------ ------------ ------------
Total Operating Expenses 2,152,232 232,655 1,806,125 135,214
------------ ------------ ------------ ------------
(LOSS) INCOME FROM OPERATIONS (1,993,589) 164,264 (1,609,616) 177,218
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Subsidiary acquisition cost (179,220) - (179,220) -
Interest expense (6,441) (4,191) (2,402) (2,906)
Interest income 3,191 719 2,279 399
------------ ------------ ------------ ------------
Total Other (Expense) (182,470) (3,472) (179,343) (2,507)
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (2,176,059) $ 160,792 $ (1,788,959) $ 174,711
============ ============ ============ ============
Net (loss) income per common share - basic and diluted $ (0.17) 0.02 (0.13) 0.02
============ ============ ============ ============
Weighted average number of common shares outstanding -
basic and diluted 13,170,695 8,200,000 13,737,245 8,200,000
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock To Be Additional
Common Stock Issued Paid-in Accumulated Subscriptions
Shares Amount Shares Amount Capital Deficit Receivable Total
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 12,069,873 $ 12,070 - $ - $ 24,630 $ (175,290) $ - $ (138,590)
Stock issued for cash and 1,295,417 1,294 - - 1,173,706 - (15,344) 1,159,666
subscribed to
Stock issued for compensation and 1,255,000 1,255 - - 1,235,921 - - 1,237,176
services
Stock issued in MNS Acquisition 44,967 45 - - 71,253 - - 71,298
Stock to be issued in MNS - - 5,033 5 7,917 - - 7,922
Acquisition
Net loss, June 30, 2000 - - - - - (2,176,059) - (2,176,059)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 2000 14,665,257 $ 14,664 5,033 $ 5 $ 2,513,427 $(2,351,349) $ (15,334) $ 161,413
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Six For The Six
Months Ended Months Ended
June 30, 2000 June 30, 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income $(2,176,059) $ 160,792
Adjustments to reconcile net (loss) income to net cash (used in) provided by
operating activities:
Depreciation 4,316 -
Stock based acquisition cost of subsidiary 79,220 -
Stock issued for compensation and services 1,237,176 -
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 362,977 8,362
Other current assets (26,135) -
Loan receivable - stockholder 7,627 5,079
Increase (Decrease) in:
Accounts payable and accrued expenses (232,598) (56,821)
----------- -----------
Net cash (used in) provided by operating activities (743,476) 117,412
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (66,798) -
Note receivable stockholder (75,000) -
----------- -----------
Net cash used in investing activities (141,798) -
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance 1,159,666 -
Repayment of loans - (3,760)
Line of credit - net (74,713) 9,988
----------- -----------
Net cash provided by financing activities 1,084,953 6,228
----------- -----------
NET INCREASE IN CASH 199,679 123,640
CASH - BEGINNING OF PERIOD - 67,342
----------- -----------
CASH - END OF PERIOD $ 199,679 $ 190,982
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for - Interest $ 6,441 $ 4,191
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A) ORGANIZATION
Blagman Media International, Inc. (the "Company") was formed on
January 29, 1999 upon incorporation from a sole proprietorship.
The Company is a global direct response marketing and advertising
agency that produces response-driven infomercials, and provides
product placement, media buying, medical marketing, production
and syndication of television programming, and other associated
transactional media business pursuits.
On August 2, 1999 one hundred percent of the issued and
outstanding common stock of Blagman Media International, Inc. was
acquired by Unisat, Inc. in a transaction accounted for as a
recapitalization of Blagman Media International, Inc. Unisat,
Inc. subsequently changed its name to Blagman Media
International, Inc. (See Note 10)
During the quarter ended June 30, 2000 the Company acquired one
hundred percent of MNS Eagle Equity Group I, Inc., an inactive
development stage company incorporated in Nevada. (See Note
10(B))
(B) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles and the rules and regulations of the Securities and
Exchange Commission for interim financial information.
(C) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant
inter-company transactions and balances have been eliminated in
consolidation.
(D) USE OF ESTIMATES
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements and
6
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
revenues and expenses during the reported period. Actual results
could differ from those estimates.
(E) CASH AND CASH EQUIVALENTS
For purposes of the cash flow statements, the Company considers
all highly liquid investments with original maturities of three
months or less at the time of purchase to be cash equivalents.
(F) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments", requires disclosures
of information about the fair value of certain financial
instruments for which it is practicable to estimate the value.
For purposes of this disclosure, the fair value of a financial
instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties other
than in a forced sale or liquidation.
The carrying amounts of the Company's accounts receivable, loan
receivable, accounts payable and accrued liabilities, and notes
and loans payable, approximates fair value due to the relatively
short period to maturity for these instruments.
(G) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated, using
accelerated methods over the estimated economic useful lives of 5
to 7 years. Expenditures for maintenance and repairs are charged
to expense as incurred. Major improvements are capitalized.
(H) REVENUE RECOGNITION
The Company recognizes revenue from the sale of media time to
advertising clients when the related advertisement is
broadcasted. In addition, they earn commissions in connection
with the procurement of media time on behalf of advertising
clients. Such commissions are also considered earned when the
underling advertisement is broadcasted. Additionally, the Company
has entered into contractual agreements with other advertising
firms to share revenues based upon the terms of the specific
agreements. The income produced by these revenue-sharing
contracts are recognized as media or commission income depending
upon the nature of the income earned from the agreement.
7
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
(I) INCOME TAXES
The Company accounts for income taxes under the Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("Statement
109"). Under Statement 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement 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 Statement 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
(J) CONCENTRATION OF CREDIT RISK
The Company maintains its cash in bank deposit accounts, which,
at times, may exceed federally insured limits. The Company has
not experienced any losses in such accounts and believes it is
not exposed to any significant credit risk on cash and cash
equivalents.
(K) EARNINGS (LOSS) PER SHARE
Net income (loss) per common share for the six months ended June
30, 2000 is computed based upon the weighted average common
shares outstanding as defined by Financial Accounting Standards
No. 128, "Earnings Per Share".
Common stock equivalents at June 30, 2000 have not been included
in the computation of diluted earnings per share since the effect
would be anti-dilutive.
At June 30, 2000 there were 100,000 common stock options
outstanding which could potentially dilute future earnings per
share.
(L) SEGMENT INFORMATION
The Company follows Statement of Financial Accounting Standards
No. 131 "Disclosures about Segments of an Enterprise and Related
Information." During the six months ended June 30, 2000, the
Company only operated in one segment therefore segment disclosure
has not been presented.
8
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
(M) RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued
several new accounting pronouncements. Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities",
as amended by Statements No. 137 and 138, establishes accounting
and reporting standards for derivative instruments and related
contracts and hedging activities. This statement is effective for
all fiscal quarters and fiscal years beginning after June 15,
2000. The Company believes that its adoption of pronouncement No.
133, as amended by No. 137 and 138, will not have a material
effect on the Company's financial position or results of
operations.
(N) STOCK OPTIONS
In accordance with Statement of Financial Accounting Standards
No. 123, "Accounting For Stock Based Compensation" ("SFAS 123"),
the Company has elected to account for Stock Options issued to a
loan guarantor in accordance with SFAS 123.
NOTE 2 NOTE AND LOAN RECEIVABLE - STOCKHOLDER
The note receivable from stockholder is due on September 30, 2000
and bears interest at 8% per annum.
The loan receivable from stockholder is uncollateralized and
non-interest bearing.
NOTE 3 PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at June 30,
2000:
<TABLE>
<S> <C>
Computer equipment $ 38,401
Furniture and fixtures 42,560
Office equipment 13,461
Leasehold improvements 2,876
----------
97,298
Less: Accumulated depreciation (27,875)
==========
Property and equipment - net $ 69,423
==========
</TABLE>
Depreciation expense was $4,316 for the period ended June 30,
2000.
9
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
NOTE 4 NOTES AND LOANS PAYABLE
The following schedule reflects notes and loans payable at June
30, 2000:
<TABLE>
<S> <C>
Note payable, interest at 6% due March 31, 2001.
In addition, the Company provided an option to
purchase up to 100,000 shares of common stock,
at $0.25 per share, at any time until
September 1, 2000. (See Note 6) $ 50,000
Note payable- related party, due on demand
with no interest. 66,545
Loan payable, interest at 9.5%, due on demand. 13,607
--------
130,152
Less current portion 130,152
--------
Notes and loans payable - non-current $ -
========
</TABLE>
NOTE 5 LINE OF CREDIT
The Company had a line of credit agreement with a bank that
provided that it could borrow up to $75,000 at 2% over Prime. The
line matured on February 7, 2000 and all principal and interest
due was paid.
NOTE 6 EQUITY
(A) COMMON STOCK ISSUANCE
The Company issued 43,750 shares of common stock for cash
totaling $175,000.
The Company issued 1,255,000 shares of common stock for
compensation, consulting and legal services having a fair value
of $1,237,176 based upon the per share fair value at the issuance
date.
In connection with its acquisition of MNS Eagle, the Company
issued 44,967 shares of common stock and will issue another 5,033
shares having an aggregate fair value of $79,220. (See Note
10(B)).
(B) COMMON STOCK OFFERING
On February 16, 2000, the Board of Directors agreed to offer up
to 1,250,000 shares of common stock, pursuant to Regulation D,
Section 4(6) of the Securities
10
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
Act of 1933, as amended, at $0.80 per share. The offer was fully
subscribed to by June 30, 2000 and $984,666 of the total
subscription of $1,000,000 had been received.
(C) STOCK OPTIONS GRANTED UNDER LOAN GUARANTEE AGREEMENT
For options issued in connection with a note (See Note 4), the
Company applies SFAS 123. Accordingly, a loan fee of $16,000 was
charged to operations in the year ended December 31, 1999.
For financial statement disclosure purposes and for purposes of
valuing stock options issued to new employees, the fair market
value of each stock option granted estimated on the date of grant
using the Black-Scholes Options-Pricing Model in accordance SFAS
123, using the following weighted-average assumptions: expected
dividend yield of 0%, risk-free rate of 5.2%, volatility of 180%
and expected term of one year.
A summary of the options under the loan guarantee agreement as of
June 30, 2000 is presented below:
<TABLE>
<CAPTION>
Number of Weighted Average
Options Exercise Price
---------- ----------------
<S> <C> <C>
STOCK OPTIONS
Balance at beginning of period 100,000 $0.25
Granted
Exercised
Forfeited
---------- -------
Balance at end of period 100,000 $0.25
========== =======
Options exercisable at end of period 100,000 $0.25
Weighted average fair value of options granted
during the year
</TABLE>
The following table summarizes information about stock options
outstanding at June 30, 2000:
11
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------- -------------------------
Weighted
Average Weighted Number Weighted
Range of Number Remaining Average Exercisable Average
Exercise Outstanding at Contractual Exercise at June 30, Exercise
Price June 30, 2000 Life Price 2000 Price
--------- -------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.25 100,000 0.25 Years $0.25 100,000 $0.25
</TABLE>
NOTE 7 COMMITMENTS AND CONTINGENCIES
(A) OPERATING LEASE
On February 29, 2000, the Company entered into a new lease
agreement for corporate offices. The lease term is for 37 months.
The monthly base rent is $9,089 commencing March 1, 2000. Minimum
annual rentals under this lease are as follows:
<TABLE>
<CAPTION>
Years Ending
June 30: Amount
---------------- -----------
<S> <C>
2001 $109,068
2002 109,068
2003 90,890
</TABLE>
(B) CONSULTING AGREEMENTS
On December 2, 1999, the Company entered into a six-month
agreement with a consulting firm to provide management
consulting, business advisory, shareholder information, and
public relations advice. The agreement called for compensation
based on proposed fees for services to be rendered.
On December 1, 1999, the Company entered into a five-year
agreement with a consultant where the consultant will provide
advisory business services. The agreement called for the
consultant to receive 25,000 shares of the Company's common stock
upon execution of the agreement, and an additional 25,000 shares
upon expiration of each quarter year during the first year term
to an aggregate of 100,000 shares. None of the above shares were
issued. On March 21, 2000, the parties entered into a settlement
agreement and mutual release and the Company will issue 50,000
shares of common stock as consideration after June 30, 2000.
12
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
(C) LEGAL ACTIONS
On April 1, 1999, a Nevada Corporation filed suit against the
Company, its former Chairman of the Board and a former director
in the Second Judicial District Court of the State of Nevada, in
and for the County of Washoe. In the complaint, the plaintiff
alleged intentional interference with contractual relations
between the Company and a third party, intentional interference
with prospective economic advantage, conspiracy, unfair business
practices, breach of fiduciary duty, unjust enrichment,
rescission of contract, incomplete accounting and permanent
injunction. On February 7, 2000, the parties to the legal action
stipulated that the alleged complaints in the lawsuit be
dismissed without prejudice.
NOTE 8 CONCENTRATIONS
Approximately 83% of revenues were derived from three customers
for the period ended June 30, 2000. Approximately 92% of accounts
receivable were due from four customers having balances an excess
of 10% as of June 30, 2000.
NOTE 9 INCOME TAXES
In 1998, the Company was a sole-proprietorship and the proprietor
was responsible for all taxes personally.
There was no income tax (benefit) for the six months ended June
30, 2000 as the Company incurred a loss.
The tax effects of temporary differences that gave rise to
significant proportions of deferred tax assets and liabilities at
June 30, 2000 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforward $ 781,040
------------
Total gross deferred tax assets 781,040
Less valuation allowance (781,040)
------------
Net deferred tax assets $ -
============
</TABLE>
At June 30, 2000, the Company had a net operating loss
carryforward of approximately $2,297,200 for U.S. Federal income
tax purposes available to offset future taxable income expiring
on various dates beginning in 2016 through 2018.
13
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
The valuation allowance at January 1, 2000 was $32,370. The net
change in the valuation allowance during the period ended June
30, 2000 was an increase of approximately $748,670.
NOTE 10 BUSINESS COMBINATIONS
(A) ACQUISITION AND RECAPITALIZATION - UNISTAT, INC.
Under a Stock Exchange Agreement (the "Agreement") consummated on
August 2, 1999, Unisat, Inc., ("Unisat"), a non-reporting public
shell with no operations at that time, acquired one hundred
percent of the issued and outstanding common stock (9,000,000
shares) of Blagman Media International, Inc. ("Blagman") in
exchange for 8,200,000 shares of the $0.001 par value common
stock of Unisat. As a result of the exchange, the Company became
a wholly owned subsidiary of Unisat and the stockholders of
Blagman become stockholders of approximately sixty-eight percent
of Unisat. Generally Accepted Accounting Principles require that
the Company whose shareholders retain a majority interest in a
business combination be treated as the acquiror for accounting
purposes. As a result, the exchange was treated as an acquisition
of Unisat by Blagman, and a recapitalization of Blagman. The
Company's consolidated financial statements immediately following
the acquisition were as follows: (1) The Balance Sheet consists
of Blagman's net assets at historical cost and Unisat's net
assets at historical cost and (2) the Statement of Operations
includes Blagman's operations for the period presented and
Unisat's operations from the date of acquisition. The Company
filed an amendment to its articles of incorporation to change its
name from Unisat, Inc. to Blagman Media International, Inc.
(B) STOCK EXCHANGE AGREEMENT
Pursuant to a Stock Exchange Agreement (the "Exchange Agreement")
dated as of April 20, 2000, as amended, between the Company and
the shareholders of MNS Eagle Equity Group I, Inc. ("MNS"), a
Nevada Corporation, 100% of the outstanding shares of common
stock held by the MNS shareholders were exchanged for 50,000
shares of common stock of the Company having a fair value of
$79,220 and $100,000 cash in a transaction in which the Company
effectively became the parent corporation of MNS.
The Exchange Agreement was adopted by the unanimous consent of
the Board of Directors of the Company and MNS on April 20, 2000.
No approval of the shareholders of either the Company or MNS is
required under applicable state corporate law.
14
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
At the date of the acquisition MNS Eagle was an inactive public
shell corporation with no assets or liabilities. Therefore, the
cost of acquiring MNS was not attributable to an intangible asset
or goodwill, but was accounted for as a charge to operations and
classified as an other deduction on the statement of operations
in the account, subsidiary acquisition costs.
(C) ACQUISITION AND RECESSION AGREEMENTS
Under a Stock Exchange Agreement (the "Agreement) consummated in
2000, the Company was to acquire Mullinger Media &
Communications, Ltd. ("MMC") in exchange for 600,000 shares of
Series A Preferred Stock of the Company. As a result of the
exchange, MMC would have become a wholly owned subsidiaries of
the Company. Subsequent thereto, the Company rescinded this
agreement for failure of consideration and other deficiencies.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION
AND
ANALYSIS OF RESULTS OF OPERATIONS
GENERAL
Blagman Media International, Inc. (the "Company") was incorporated on
January 29, 1999 as a successor to a sole proprietorship. The Company is a
global direct response marketing and advertising agency that produces
response-driven infomercials, and provides product placement, media buying,
medical marketing, production and syndication of television programming, and
other associated transactional media business products.
Under a Stock Exchange Agreement (the "Agreement") consummated on
August 2, 1999, Unisat, Inc., ("Unisat"), a non-reporting public entity with no
operations at that time, acquired one hundred percent of the issued and
outstanding common stock (9,000,000 shares) of the Company in exchange for
8,200,000 shares of the $0.001 par value common stock of Unisat. As a result of
the exchange, the Company became a wholly owned subsidiary of Unisat and the
stockholders of the Company become stockholders of approximately sixty-eight
percent of Unisat. Generally Accepted Accounting Principles require that the
entity whose shareholders retain a majority interest in a business combination
be treated as the acquiror for accounting purposes. As a result, the exchange
was treated as an acquisition of Unisat by the Company, and a recapitalization
of the Company.
Pursuant to a Stock Exchange Agreement (the "Exchange Agreement") dated
as of April 20, 2000, as amended, between the Company and the shareholders of
MNS Eagle Equity Group I, Inc. ("MNS"), a Nevada corporation, 100% of the
outstanding shares of common stock held by the MNS shareholders were to be
exchanged for 50,000 shares of common stock of the Company having a fair value
of $79,220 and $100,000 cash in a transaction in which the Company effectively
became the parent corporation of MNS. At June 30, 2000, 89.9% of the shares had
been exchanged and the remainder were exchanged in July.
On April 20, 2000, the Company filed an interim report on Form 8-K as
successor to MNS and assumed MNS' reporting status. The transition of the name
change of the Securities and Exchange Commission file from MNS to the Company is
currently in process.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Net Revenues (principally from advertising placements, commissions and
revenue sharing arrangements) for the three month period ended June 30, 2000
decreased from $906,911 to $523,928 (42%). The reduction was principally the
result of the loss of a major insurance company account, which had accounted for
advertising placements of more than $4,000,000 for
16
<PAGE>
the Company, when that insurer was acquired by another insurer which then ceased
all advertising efforts. The acquisition occurred in late 1999 but the change in
advertising policy fully impacted the Company commencing in the second quarter
of 2000. The decrease in revenues of $382,982 (42%) was also reflected in gross
profits, which decreased from $312,432 to $196,509 or $115,923 (37%). The
changes in gross profit approximates the changes in revenues since the nature of
the Company's business provides margins which tend to be proportionate to its
revenues. For the comparable six month periods in 2000 and 1999, net revenues
were $948,642 in 2000 and $1,349,828 in 1999, representing a $401,186 (30%)
decrease. This decrease was also principally related to the loss of the
insurance client when it was acquired by another insurer.
The decrease in revenues as well as a $1,670,911 (1235%) increase in
total operating expenses from $135,214 during the three months ended June 30,
1999 to $1,806,125 for the three months ended June 30, 2000 resulted in a loss
(before other expenses of $179,343) in 2000 of $1,609,616 compared to operating
income of $177,218 for the three month period in 1999 or a 1008% decrease in
operating results. During the three months ended June 30, 2000, the Company
issued 1,255,00 common shares as additional compensation to officers and as
compensation to professionals. Under GAAP, the Company is required to record
these amounts as a compensation expense based on the market price of the
Company's shares on the date of issuance, even though no cash payments were
made. As a result, the Company recorded $650,000 in additional officer
compensation and $587,176 in additional professional and consulting fees
("Non-Cash Compensation").
The increase in operating costs also resulted from the Company's shift
to a public entity which accounted for a $121,731 increase in cash professional
fees and a $129,634 aggregate increase in travel, entertainment and other
general and administrative expenses during the three month period ended June 30,
2000 as compared to the same period in 1999. In addition, the Company
experienced aggregate increases from $122,556 to $302,504 (245%) in cash
compensation to officers and in other compensation related costs, rents,
advertising and related items, all in connection with the expanded operating
requirements and the need for additional operating staff since certain
executives were required to devote a substantial portion of their time to the
public aspects of the Company rather than to day-to-day sales and marketing
activities for the Company.
COST OF REVENUES
Cost of revenues (principally consisting of media acquisition and
airtime costs) for the three months ended June 30, 2000 decreased from $594,479
to $327,419 representing a decrease of $267,060 (45%) primarily due to the
impact of the loss of the large insurance company account. As a general matter,
the Company incurs media costs in direct proportion to operating revenues and,
therefore, the decrease in costs was related to the decrease in advertising
revenues. For the six months ended June 30, 2000, the cost of revenues decreased
from $952,909 to $789,999 representing a decrease of $162,916 (17%), again, due
primarily to the reduced media purchases because of the loss of the large
insurance company account.
17
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES
Total general and administrative expenses increased from $135,214 to
$1,806,125 (1336%) for the three month period ended June 30, 2000 and from
$232,655 to $2,152,232 (925%) for the six months ended June 30, 1999 and 2000
respectively. The increase consisted principally of the $1,237,176 of Non-Cash
Compensation and the increase in cash professional fees from $5,000 to $126,731
for the three months and $10,020 to $218,585 for the six months ended June 30,
1999 and 2000 respectively. Cash expenditures increased in each category to
accommodate the public company requirements and the expanded staffing and
overhead costs to accommodate the public status and the sales and advertising
personnel added when certain executives shifted a portion of their efforts from
sales and marketing to public company matters. The Non-Cash Compensation amount
is not expected to be a recurring item. The Company anticipates that the other
increases will moderate in future periods as management gains experience
overseeing a publicly held enterprise and is able to manage and predict those
costs and needs more effectively.
INTEREST EXPENSE AND OUTSTANDING LOANS
Interest expense in the three month periods was not a significant item
and decreased from $2,906 to $2,402 (17%). In the six month period ended June
30, 2000, the interest expense increased from $4,191 to $6,441 (34%) from the
same period in 1999. Since the Company records revenues as received and
generally commits to time expenditures only when there is assurance of payment
from its clients, interest costs and advertising revenue adjustments are small.
At June 30, 2000, the Company had loans of $106,321 due from shareholders who
have deferred salary and have received certain short term advances, and taken
advances from the Company, all or a portion of which is expected to be converted
to compensation expense when employment agreements are finalized.
SUBSIDIARY ACQUISITION COST
In the three months ended June 30, 2000, the Company recorded an
expense of $179,220 as the costs related to acquisition of MNS. This amount
consists of $100,000 in cash and $79,200 representing the fair value of the
50,000 common shares of the Company exchanged for the MNS shares.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 2000, compared to December 31, 1999,
the Company's available cash increased by $199,679, but was offset by a decrease
in accounts receivable from $479,054 to $116,077 resulting in a decrease in
current assets from $519,920 to $450,130 (14%) from December 31, 1999 until June
30, 2000. Similarly, the accounts payable at June 30, 2000 were $227,939
compared to $460,587 at December 31, 1999, a 51% decrease. Those shifts in
accounts receivable and payables were the result of the impact of the loss of
the large insurance company account. Management anticipates that additional
accounts now being acquired by the Company will replace all, or a substantial
portion, of the lost revenues from this
18
<PAGE>
account and that a significant portion of those revenues will be recognized
during the balance of 2000, but there is no assurance that the Company will be
successful in fully offsetting the lost account.
During the six months ended June 30, 2000, the Company issued 2,595,384
common shares of which 1,295,417 were issued for new capital, 44,967 were issued
in connection with the MNS transaction and 1,255,000 common shares were issued
as Non-Cash Compensation. These transactions resulted in 14,665,257 common
shares outstanding at June 30, 2000. During the first six months of 2000, the
Company received additional paid-in capital of $1,159,666, consisting of the
cash proceeds of the sale of additional common shares. These funds, along with
the Non-Cash Compensation and the MNS transaction, resulted in a total
shareholders equity of $161,413 at June 30, 2000 compared to a deficit of
$138,590 at December 31, 1999. The additional capital was applied to meet
working capital requirements.
Management is currently pursuing various initiatives to expand the
Company's operations internally and through strategic alliances with other
industry partners. These endeavors may require additional capital funding which
the Company expects to raise funds through debt or equity financing
arrangements, if appropriate financing is available, on reasonable and accepted
terms.
The Company intends to continue to seek additional working capital to
meet its operating requirements and to provide further capital for expansion,
acquisitions or strategic alliances with businesses that are complementary to
the Company's long term business objectives. While the Company believes that
additional capital will be needed to maintain the growth plans of the Company,
management believes that the working capital now available to it along with
funds generated from operations will be sufficient to meet capital requirements
for the next 12 months even if substantial additional working capital does not
become available.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has adopted several notices
with regard to the treatment of interim financial statements. These issues are
presented in the Company's interim financial statements. As discussed in the
notes to the interim financial statements, the implementation of these new
pronouncements is not expected to have a material effect on the financial
statements.
YEAR 2000 STATEMENT
The Company has verified that all internal software used in the
operations of the Company and related developments are Year 2000 compliant. The
Company sees no risk at this time pertaining to Year 2000, and internal company
operations.
19
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLAGMAN MEDIA INTERNATIONAL, INC.
Dated: October 12, 2000 /s/ Robert Blagman
-----------------------------------
Robert Blagman, President
21
