<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended SEPTEMBER 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: 19,583,373 SHARES OF COMMON
STOCK AS OF SEPTEMBER 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
September 30, 2000 (Unaudited)..................................................... 2
Consolidated Statements Of Operations
For The Nine Months And Three Months Ended
September 30, 2000 And 1999 (Unaudited)............................................ 3
Consolidated Statement Of Changes In
Stockholders' Equity For The Nine Months Ended
September 30, 2000 (Unaudited)..................................................... 4
Consolidated Statement Of Cash Flows
For The Nine Months Ended
September 30, 2000 And 1999 (Unaudited)............................................ 5
Notes To Consolidated Financial Statements As Of
September 30, 2000 (Unaudited)..................................................... 6
Item 2. Management's Discussion and Analysis of
Results of Operations.............................................................. 15
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................. 19
Item 2. Changes in Securities and Use of Proceeds.......................................... 19
Item 3. Default Upon Senior Securities..................................................... 19
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 SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
CONTENTS
<S> <C> <C>
PAGE 2 CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PAGE 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS AND THREE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
PAGE 4 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 (UNAUDITED)
PAGE 5 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
1999 (UNAUDITED)
PAGES 6 - 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2000 (UNAUDITED)
</TABLE>
1
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
(UNAUDITED) DECEMBER 31, 1999
------------------ -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 27,810 $ -
Accounts receivable 297,278 479,054
Other current assets 11,504 1,918
Prepaid expenses 32,678 -
Note receivable - stockholder 75,000 -
Loan receivable - stockholder 43,948 38,948
------------------ -----------------
Total Current Assets 488,218 519,920
PROPERTY AND EQUIPMENT - NET 75,564 6,942
------------------ -----------------
TOTAL ASSETS $ 563,782 $ 526,862
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Notes and loans payable - current portion $ 63,607 $ 80,152
Line of credit - 74,713
Accounts payable and accrued expenses 319,909 460,587
------------------ -----------------
Total Current Liabilities 383,516 615,452
LONG-TERM LIABILITIES
Notes and loans payable - 50,000
------------------ -----------------
Total Liabilities 383,516 665,452
------------------ -----------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.001 par value, 100,000,000 shares authorized,
19,583,373 and 12,069,873 shares issued and outstanding 19,582 12,070
Additional paid-in capital 4,496,676 24,630
Accumulated deficit (4,312,203) (175,290)
------------------ -----------------
204,055 (138,590)
Subscriptions receivable (23,789) -
------------------ -----------------
Total Stockholders' Equity (Deficiency) 180,266 (138,590)
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 563,782 $ 526,862
================== =================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE FOR THE NINE FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 2000
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES - NET $ 1,403,136 $ 1,998,538 $ 454,494 $ 648,710
COST OF REVENUES 1,139,901 1,665,451 349,902 712,542
------------ ------------ ------------ ------------
GROSS PROFIT (LOSS) 263,235 333,087 104,592 (63,832)
------------ ------------ ------------ ------------
OPERATING EXPENSES
Officers' compensation 909,920 109,286 109,920 24,060
Employee compensation and taxes 159,728 172,556 36,630 74,879
Travel and entertainment 156,462 - 24,658 -
Other general and administrative 157,826 18,004 55,720 7,356
Professional and consulting fees 2,586,109 15,082 1,780,348 5,062
Rent 61,206 23,630 22,962 7,089
Telephone 21,366 12,643 5,890 4,716
Advertising 148,538 - 25,471 -
Auto 8,583 6,841 223 2,225
Depreciation 8,154 - 3,838 -
------------ ------------ ------------ ------------
Total Operating Expenses 4,217,892 358,042 2,065,660 125,387
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (3,954,657) (24,955) (1,961,068) (189,219)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Subsidiary acquisition cost (179,220) - - -
Interest expense (8,613) (6,089) (2,172) (1,898)
Interest income 5,577 1,201 2,386 482
------------ ------------ ------------ ------------
Total Other Income (Expense) (182,256) (4,888) 214 (1,416)
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (4,136,913) $ (29,843) $ (1,960,854) $ (190,635)
============ ============ ============ ============
Net (loss) income per common share - basic and diluted $ (0.20) - (0.11) 0.02
============ ============ ============ ============
Weighted average number of common shares outstanding - basic and diluted 20,533,226 8,200,000 17,324,787 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 NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED SUBSCRIPTIONS
SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE TOTAL
----------- ----------- ----------- ----------- ----------- -----------
<S> <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 subscribed to 2,045,417 2,044 1,285,456 - (15,334) 1,272,166
Stock issued for compensation and services 5,068,083 5,068 3,032,770 - - 3,037,838
Stock issued for settlement of debt 350,000 350 74,650 - (8,455) 66,545
Stock issued in MNS Acquisition 50,000 50 79,170 - - 79,220
Net loss, September 30, 2000 - - - (4,136,913) - (4,136,913)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30, 2000 19,583,373 $ 19,582 $ 4,496,676 $(4,312,203) $ (23,789) $ 180,266
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2000 ENDED SEPTEMBER 30, 1999
------------------------ ------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income $ (4,136,913) $ (29,843)
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Depreciation 8,154 -
Stock based acquisition cost of subsidiary 79,220 -
Stock issued for compensation and services 3,037,838 -
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 181,776 19,974
Other current assets (9,586) -
Prepaid expenses (32,678) -
Loan receivable - stockholder (5,000) 5,253
Increase (Decrease) in:
Accounts payable and accrued expenses (140,678) (40,249)
---------------------- ------------------------
Net cash (used in) provided by operating activities (1,017,867) (44,865)
---------------------- ------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (76,776) -
Note receivable stockholder (75,000) -
---------------------- ------------------------
Net cash used in investing activities (151,776) -
---------------------- ------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance 1,287,500 -
Repayment of loans (15,334) (3,760)
Line of credit - net (74,713) 9,982
---------------------- ------------------------
Net cash provided by financing activities 1,197,453 6,222
---------------------- ------------------------
NET INCREASE (DECREASE) IN CASH 27,810 (38,643)
CASH - BEGINNING OF PERIOD - 67,342
---------------------- ------------------------
CASH - END OF PERIOD $ 27,810 $ 28,699
====================== ========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for - Interest $ 8,613 $ 6,089
====================== ========================
</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 September 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 nine months ended September 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 September 30, 2000 have not been included in
the computation of diluted earnings per share since the effect would be
anti-dilutive.
(L) SEGMENT INFORMATION
The Company follows Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information."
During the nine months ended September 30, 2000, the Company only operated
in one segment therefore segment disclosure has not been presented.
(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,
8
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
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 October 31, 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 September 30,
2000:
<TABLE>
<S> <C>
Computer equipment $ 38,690
Furniture and fixtures 51,831
Office equipment 13,880
Leasehold improvements 2,876
--------------
107,277
Less: Accumulated depreciation (31,713)
--------------
Property and equipment - net $ 75,564
==============
</TABLE>
Depreciation expense was $8,154 for the period ended September 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 September 30,
2000:
Note payable, interest at 6% due March 31, 2001. In addition,
the Company had 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).
<TABLE>
<S> <C>
$ 50,000
Loan payable, interest at 9.5%, due on demand. 13,607
---------------
63,607
Less current portion 63,607
---------------
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 750,000 shares of common stock for cash totaling
$112,500.
The Company issued 3,813,083 shares of common stock for compensation,
consulting, legal and other services having a fair value of $1,800,662
based upon the per share fair value at the issuance date.
The Company issued 350,000 shares of common stock for the settlement of a
debt of $66,545 and a subscription receivable of $8,455.
In connection with its acquisition of MNS Eagle, the Company issued 50,000
shares of common stock 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 September 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.
As of September 30, 2000, the options issued under the loan guarantee
agreement expired and were not exercised.
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 SEPTEMBER 30: AMOUNT
----------------------------- -----------------
<S> <C>
2001 $ 109,068
2002 109,068
2003 63,623
</TABLE>
(B) CONSULTING AGREEMENTS
On December 2, 1999, the Company originally 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. The Company is currently employing the same consulting
firm on a month to month basis.
On December 1, 1999, the Company entered into a five-year agreement with a
consultant whereby the consultant was to provide advisory business
services. The
11
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
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 issued 50,000
shares of common stock as consideration during the period ended
September 30, 2000.
(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 92% of revenues were derived from two customers for the
period ended September 30, 2000. Approximately 81% of accounts receivable
were due from three customers having balances an excess of 10% as of
September 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 nine months ended September 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 September 30, 2000
are as follows:
12
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforward $ 1,447,800
----------------
Total gross deferred tax assets 1,447,800
Less valuation allowance (1,447,800)
----------------
Net deferred tax assets $ -
================
</TABLE>
At September 30, 2000, the Company had a net operating loss carryforward
of approximately $4,258,300 for U.S. Federal income tax purposes available
to offset future taxable income expiring on various dates beginning in
2016 through 2018.
The valuation allowance at January 1, 2000 was $32,370. The net change in
the valuation allowance during the period ended September 30, 2000 was an
increase of approximately $1,415,430.
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.
13
<PAGE>
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
(UNAUDITED)
(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.
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 RECISION 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.
NOTE 11 SUBSEQUENT EVENT
On October 20, 2000 the Company executed a letter of intent to acquire a
controlling equity interest in Tri-Gate Entertainment, Inc., a Bermuda
corporation, ("Tri-Gate"). Under the terms of the letter of intent, the
Company will initially acquire 51% of Tri-Gate in exchange for 1,900,000
shares of the Company's restricted rule 144 common stock and would be
granted an option to acquire the remaining 49% equity interest in
Tri-Gate. In the event that a definitive acquisition agreement has not
been executed and delivered by 90 days, either party may terminate the
letter of intent without liability on the part of either party.
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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 SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
Net Revenues (principally from advertising placements, commissions and
revenue sharing arrangements) for the three month period ended September 30,
2000 as compared to the same period in 1999 decreased from $648,710 to $454,494
(30%). The reduction was
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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
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's revenues commencing
in the second quarter of 2000. The decrease in revenues between the two years
of $194,216 (30%) was not reflected in gross profits, which increased from a
loss of $63,832 in the third quarter of 1999 to a gross profit of $104,592 in
the third quarter of 2000, reflecting an increase of $168,424 (264%). The
gross profit margins reflect both the changes in revenues, since the nature
of the Company's business provides margins which tend to be proportionate to
its revenues, and the improved operating results because of efficiencies from
the use of computer tracking systems which began to be reflected during the
third quarter of 2000. For the comparable nine month periods in 2000 and
1999, gross profit was $263,235 in 2000 and $333,087 in 1999, representing a
$69,852 (21%) 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 $1,940,273 (1547%) increase in total
operating expenses (consisting principally of the $1,800,622 in Non-Cash
Compensation described below) from $125,387 during the three months ended
September 30, 1999 to $2,065,660 for the three months ended September 30, 2000
resulted in a loss (before other expenses of $214) in 2000 of $1,961,068
compared to operating losses of $189,219 for the three month period in 1999 or a
1037% increase in operating losses. During the three months ended September 30,
2000, the Company issued 3,813,083 common shares as compensation for prior
services to various consultants and 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 $1,800,662 in non cash
compensation, which has been reflected as a portion of both the Professional and
Consulting Fees and Other General and Administrative Expenses (collectively
"Non-Cash Compensation").
The increase in operating costs also resulted from the Company's status
as a public entity which accounted for a $36,735 increase in cash
professional fees and a $74,588 aggregate increase in other cash general and
administrative expenses (partially offset by a decrease of $38,267 in travel
and similar costs) during the three month period ended September 30, 2000 as
compared to the same period in 1999. In addition, the Company experienced
aggregate increases from $103,655 to $152,448 (147%) in cash compensation to
officers and in other compensation related costs, rents, advertising and
related items, principally in connection with the expanded operating
requirements and the need for some 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. The increases experienced over prior quarters
were partially offset by the increased use of the computer tracking system
and technology systems, by management's increased experience with public
company status which has allowed them to redirect more of their efforts to
day-to-day operating activities and the retention of professionals familiar
with public company requirements generally. Also, management believes that it
has now addressed the cumulative effects of the direct and indirect Non-Cash
Compensation and other equity
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commitments and dilution matters which arose from the Unistat and NMS
transactions from the Company's early experiences as a public entity and from
deferrals of cash compensation by officers and consultants.
COST OF REVENUES
Cost of revenues (principally consisting of media acquisition and
airtime costs) for the three months ended September 30, 2000 decreased from
$712,542 to $349,902 representing a decrease of $362,640 (51%) primarily due
to the impact of the loss of the large insurance company account, partially
offset by the improved efficiencies realized from the integration of the
computer tracking systems. As a general matter, the Company incurs media
costs in direct proportion to operating revenues and, therefore, the decrease
in costs was principally related to the decrease in advertising revenues. For
the nine months ended September 30, 2000, the cost of revenues decreased from
$1,665,451 to $1,339,901 representing a decrease of $525,550 (32%), again,
due primarily to the reduced media purchases because of the loss of the large
insurance company account.
GENERAL AND ADMINISTRATIVE EXPENSES
Total general and administrative expenses increased from $125,389 to
$2,065,660 (1547%) for the three month period ended September 30, 2000 and
from $358,042 to $4,217,892 (1078%) for the nine months ended September 30,
1999 and 2000 respectively. The increase consisted principally of the
$1,800,662 of Non-Cash Compensation and the increase in cash professional
fees from $5,062 to $36,735 for the three months and $15,082 to $256,950 for
the nine months ended September 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, all of which were partially offset by the savings
from computer tracking and reduced travel and entertainment costs. The
Non-Cash Compensation amount which was reflected in this and the prior
quarter is not expected to be a recurring item in future periods because
obligations from the prior entities and other commitments have generally been
satisfied. 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
increased from $1,898 to $2,172 (14%). In the nine month period ended September
30, 2000, the interest expense increased from $6,089 to $8,613 (41%) 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 September 30, 2000, the Company had loans of $128,948 due from shareholders
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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.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 2000, compared to December 31,
1999, the Company's available cash increased by $27,810, but was offset by a
decrease in accounts receivable from $479,054 to $297,278 resulting in a
decrease in current assets from $519,920 to $488,218 (6%) from December 31,
1999 until September 30, 2000. However, the accounts payable at September 30,
2000 was $319,909 compared to $460,587 at December 31, 1999, a 31% decrease.
Those shifts in accounts receivable and accounts payable were the result of
the impact of the loss of the large insurance company account, the initial
impact from new accounts and improved internal controls. Management
anticipates that additional accounts now being acquired by the Company will
replace all, or a substantial portion, of the lost revenues from the
insurance 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 nine months ended September 30, 2000, the Company issued
7,513,500 common shares of which 2,045,417 were issued for new capital,
50,000 were issued in connection with the MNS transaction and 5,418,083
common shares were issued as Non-Cash Compensation. These transactions
resulted in 19,583,373 common shares outstanding at September 30, 2000.
During the first nine months of 2000, the Company received additional paid-in
capital of $1,285,456, 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 $180,266
at September 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 or acquisitions
with other industry partners. These endeavors will require additional capital
funding which the Company hopes to raise 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.
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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.
FORWARD-LOOKING STATEMENTS
Safe Harbor statement under the Private Securities Litigation Reform Act
of 1995: Except for historical information contained herein, the matters
discussed in this filing are forward-looking statements that involve risks and
uncertainties, including but not limited to economic, competitive, governmental
and technological factors affecting the Company's operations, markets, products
and prices and other factors discussed in the Company's various filings with the
Securities and Exchange Commission.
PART 2. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended September 30, 2000, the Company issued
4,918,116 common shares of which 33 constituted the balance of 50,000 shares
issued in connection with the MNS transaction and 3,813,083 common shares
were issued as Non-Cash Compensation as described in Part 1. During the nine
months ended September 30, 2000, the Company received additional paid-in
capital of $1,285,486, 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 $180,266
at September 30, 2000 compared to a deficit of $138,590 at December 31, 1999.
The additional capital was applied to meet working capital requirements.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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: November 11, 2000 /s/ Robert Blagman
-----------------------------------
Robert Blagman, President
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