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 September 30, 2002
[ ] 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 91-192-3501
(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: As of
November 12, 2002, the Registrant had outstanding 17,381,593,667 common shares.
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
BLAGMAN MEDIA INTERNATIONAL, INC.
AND SUBSIDIARIES
CONTENTS
PART I FINANCIAL STATEMENTS
ITEM 1 FINANCIAL STATEMENTS
PAGE 1 CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
SEPTEMBER 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001
PAGE 2 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2002 AND 2001 (UNAUDITED)
PAGE 3 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND
2001 (UNAUDITED)
PAGES 4 - 7 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF
SEPTEMBER 30, 2002 (UNAUDITED)
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITON AND RESULTS OF OPERATIONS
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
RISK FACTORS
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
PART I - FINANCIAL INFORMATION
Item 1. BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARIERS
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
ASSETS
September 30
2002 December 31
(Unaudited) 2001
CURRENT ASSETS
Cash $ 40,714 $ 199,924
Accounts receivable, net 675,341 5,894
Prepaid media and other current assets 965,484 264,326
Note and loan receivable - stockholder 146,437 146,437
Prepaid and refundable income taxes 330,445 -
Total Current Assets 2,158,421 616,581
PROPERTY & EQUIPMENT - NET 277,619 58,586
OTHER ASSETS
Deposits 6,903 4,496
Deposit on investment 222,643 155,000
Total Other Assets 229,546 159,496
TOTAL ASSETS 2,665,586 834,663
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses 8,968,473 342,242
Accrued compensation - officer 1,148,513 721,910
Notes and loans payable - current portion 1,928,644 50,000
Deferred revenue 1,364,866 240,000
Capital lease - current portion 19,452 -
Total Current Liabilities 13,429,948 1,354,152
LONG-TERM LIABILITIES
Notes and loans payable - long-term portion 972,612 445,500
Capital lease - long-term portion 52,833 -
Total Long-Term Liabilities 1,025,445 445,500
Total Liabilities 14,455,393 1,799,652
STOCKHOLDERS' DEFICIENCY
Preferred stock, series A, $.001 par value, super
convertible redeemable preferred stock, 10,000,000
shares authorized, 0 and 0 shares issued and
outstanding, respectively - -
Preferred stock, series B, $.001 par value, super
convertible redeemable preferred stock, 100 shares
authorized, 100 and 0 shares issued and outstanding,
respectively 1 1
Common stock, $.001 par value, 20,000,000,000 shares
authorized, 7,185,298,667 and 757,364,735 shares
issued and outstanding at September 30, 2002 and
December 31, 2001 respectively 7,185,299 757,364
Additional paid-n capital 24,929,675 23,952,341
Accumulated deficit (29,474,071) (7,693,438)
2,640,904 17,016,268
Subscriptions receivable (15,334) (15,334)
Deferred stock based compensation (14,415,377) (17,965,923)
Total Stockholders' Deficiency (11,789,807) (964,989)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY 2,665,586 834,663
BLAGMAN MEDIA INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For The Three For The Three For The Nine For The Nine
Months Ended Months Ended Months Ended Months Ended
September 30 September 30 September 30 September 30
2002 2001 2002 2001
REVENUES - NET $ 234,417 $ 396,520 $ 4,026,385 $ 589,114
COST OF REVENUES 189,127 9,655 2,770,107 14,206
GROSS PROFIT 45,290 386,865 1,256,278 574,908
OPERATING EXPENSES
Officers' compensation 81,967 179,166 591,500 537,500
Employee compensation and taxes 478,834 49,939 1,534,581 162,469
Bad debt 328,500 - 922,500 -
Professional and consulting fees 2,918,617 1,312,327 9,289,729 2,889,718
Management fee 62,502 - 371,775 -
Commissions - 35,251 16,406 122,686
Other general and administrative 266,018 247,422 582,490 358,599
Advertising 1,760 55,260 11,110 101,380
Travel and entertainment 30,299 18,522 102,682 59,917
Rent 124,376 38,579 309,762 79,782
Amortization 32,889 - 157,263 -
Auto 6,364 4,235 20,242 25,585
Telephone 5,616 4,317 66,352 19,919
Depreciation 21,837 3,867 75,954 11,451
Loss on impairment of goodwill 2,792,205 - 2,792,205 -
Loss on impairment of customer base
Intangible 5,855,286 - 5,855,286 -
Total Operating Expenses 13,007,070 1,948,885 22,699,837 4,369,006
LOSS FROM OPERATIONS (12,961,780) (1,562,020) (21,443,559) (3,794,098)
OTHER INCOME (EXPENSE)
Interest expense - other (52,676) (3,889) (115,035) (3,889)
Interest expense - related party - - - (323)
Interest income - 41,528 - 23,817
Other income 7,289 - 7,289 -
Gain (loss) on disposal of assets 850 - (229,328) -
Total Other Income (Expense) (44,537) 37,639 (337,074) 19,605
NET LOSS (13,006,317) (1,524,381) (21,780,633) (3,774,493)
LOSS PER SHARE
Net loss (13,006,317) (1,524,381) (21,780,633) (3,774,493)
Preferred stock dividends - (476,015) - (476,015)
NET LOSS AVAILABLE TO COMMON
SHAREHOLDERS (13,006,317) (2,000,396) (21,780,633) (4,250,508)
NET LOSS PER COMMON SHARE -
BASIC AND DILUTED (.00) (.03) (.00) (.05)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC AND DILUTED 7,147,386,579 64,050,888 5,122,828,051 91,323,518
BLAGMAN MEDIA INTERNATIONAL, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For The Nine For The Nine
Months Ended Months Ended
September 30 September 30
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (21,780,633) $ (3,774,493)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 233,216 7,048
Provision for bad debt 922,500 -
Stock-based acquisition of subsidiary - 71,919
Stock issued for compensation and services 9,269,667 2,698,453
Loss on sale and retirement of fixed assets - net 225,583 -
Loss on impairment of goodwill 2,792,205 -
Loss on impairment of customer base 5,855,286 -
Changes in operating assets and liabilities, net of
the effects of the acquisition of Century Media,
Inc.:
(Increase) decrease in:
Accounts receivable 723,495 (70,308)
Prepaid media and other current assets 495,487 -
Prepaid insurance - (44,910)
Prepaid and refundable income taxes (330,445) -
Increase (Decrease) in:
Accounts payable and accrued expenses 2,004,893 420,723
Deferred revenue 201,325 (175,000)
Net Cash Provided By (Used In) Operating
Activities 612,579 (866,568)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 850 -
Purchases of property and equipment (5,240) 2,201
Deposit for investment (67,643) (150,000)
Payments for deposits (6,527) -
Refund of deposits 4,120 -
Payment for acquisition of Century Media, Inc., net
of cash acquired (513,719) -
Net Cash Used In Investing Activities (588,159) (147,799)
CASH FLOWS FROM FINANCING ACTIVITIES:
Line of credit - (26,009)
Proceeds from notes payable 2,467 445,500
Proceeds from stockholder loan 119,000 (3,013)
Payments on loans payable (296,940) (27,449)
Proceeds from stock issuance - 1,000,000
Payment on leases payable (8,157) -
Net Cash (Used In) Provided by Financing Activities (183,630) 1,389,029
NET (DECREASE) INCREASE IN CASH (159,210) 374,662
CASH - BEGINNING OF PERIOD 199,924 179,744
CASH - END OF PERIOD 40,714 554,406
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest 97,563 3,889
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING INFORMATION:
The Company acquired $52,239 of equipment through capitalized leases during the
three months ended March 31, 2002.
The Company issued 2,146,982,227 shares of common stock with a fair value of
$1,901,582 for the acquisition of Century Media, Inc. including payoff of
existing debentures, options and notes on the books of the aquiree during the
three months ended March 31, 2002.
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
The accompanying unaudited financial statements have been prepared
in accordance with accounting principles generally accepted in the
United States of America and the rules and regulations of the
Securities and Exchange Commission for interim financial
information. Accordingly, they do not include all the information
necessary for a comprehensive presentation of financial position
and results of operations.
It is management's opinion, however that all material adjustments
(consisting of normal recurring adjustments) have been made which
are necessary for a fair financial statements presentation. The
results for the interim period are not necessarily indicative of
the results to be expected for the year.
The accompanying September 30, 2002 condensed consolidated
financial statements of the Company include the accounts of the
parent entity, its wholly owned subsidiaries and Blagman-Century
Media, Inc. f/k/a Century Media, Inc. since the date of
acquisition (See Note 3). All significant inter-company
transactions and balances have been eliminated in consolidation.
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 revenues
and expenses during the reported period. Actual results could
differ from those estimates.
For further information, refer to the financial statements and
footnotes for the year ended December 31, 2001 included in the
Company's Form 10-KSB/A filed April 30, 2002.
NOTE 2 STOCKHOLDERS' DEFICIENCY
On July 25, 2002, the Board of Directors of the Company increased
the total authorized common stock from 5,000,000,000 to
20,000,000,000, par value $0.001 per share.
During the nine months ended September 30, 2002, 4,280,951,696
shares of common stock with a fair value of $5,503,686 were issued
for consulting services, of which 3,614,070,000 shares having a
fair value of $4,167,261 were issued for services to be performed
from the date of issuance of the shares through December 2006.
The fair value of the issued shares was based upon the market
price of the Company's stock on the date of grant.
Additionally, during the nine months ended September 30, 2002,
management of the Company deemed that 5,426,000,000 shares were
fraudulently issued and therefore were not recorded on the books
of Blagman Media International, Inc. as of September 30, 2002. If
these shares had been recorded on the books, the Company would
have recognized an additional charge of $4,304,300 to professional
and consulting fees.
NOTE 3 ACQUISITION
The Company incorporated a wholly owned subsidiary, Blagman USA,
Inc., a California company, for the purpose of initiating future mergers.
Pursuant to an Agreement and Plan of Reorganization dated March 4,
2002, effective March 22, 2002, Blagman Media International, Inc.
(the "Company") acquired 100% of the outstanding stock of Century
Media, Inc., a California corporation ("Century") by merging
Blagman USA, Inc., into Century. The surviving entity operates on
a combined basis under the name Blagman-Century Media. The
consolidation of the two company's results in a full service
integrated direct marketing venture. Certain principals of
Century have entered into consulting arrangements for services
after closing and the professional staffs of the two entities were combined.
Pursuant to the transaction, the Company acquired all of the
capital stock of Century for cash and common stock of the Company,
assumed current debt obligations and unexercised option and stock
appreciation rights of Century and assumed accrued and ongoing
trade and other ordinary course obligations and relationships.
Prior to the closing, the parties negotiated with the holders of
portions of the outstanding Century debt to restructure the term
and payments of such debt and in certain cases, to allow for the
issuance of shares of common stock of the Company in lieu of cash
payments. Currently, Blagman Century remains obligated on certain
contingent obligations including $1.25 million from the TMT Media
Corporation acquisition by Century in 2000 (See Note 4).
At closing, holders of Century shares received twenty cents per
Century share, of which two and one-half cents was payable in cash
and the balance of seventeen and one-half cents was payable by the
delivery of shares of common stock of the Company, for a total of
$903,292, and 71,882,805 options.
In connection with the transaction and prior to closing, the
Company, through written consent of shareholders holding a
majority of its outstanding shares of common stock, increased the
number of authorized shares of its common stock to 5,000,000,000.
NOTE 4 LITIGATION
Subsequent to the Blagman Century merger transaction described in
Note 3, TMT Media Corporation has asserted that under the April
2000 acquisition agreement, as a result of the transaction between
the Company and Century, it is entitled, as of April 22, 2002, to
the $1,250,000 contingent amount and to the payment in full of the
balance of $609,564 due on the $700,000 note delivered in the 2000
acquisition of TMT by Century.
The Company and Century dispute this position and are seeking to
resolve the matter. In May 2002, TMT initiated a proceeding TMT
Media Corporation vs. Blagman Century Media, Inc. et al. (Superior
Court of California, County of Los Angeles, Case BC273368) against
the Company, Century and Robert Blagman personally, claiming the
accelerated amount of $1,859,564. Management has filed a general
denial to TMT's allegations and has asserted numerous affirmative defenses.
In March 2002, the Company advised authorities, market members and
regulators and initiated an internal reconciliation investigation
relating to a substantial amount of common shares of the Company
improperly and fraudulently issued and possible transferred,
including possible improper releases of restrictions and transfers
of restricted securities warrant negotiations or an exemption from
registration, without the knowledge of the Company ("Curative
Review Process"). The Curative Review Process is continuing. The
company has filed a registration statement on Form S-8 for a 2002
Employee Stock Compensation Plan ("Registration Statement"). In
connection with the Curative Review Process, the Company
subsequently placed stop transfer orders on all of the original
certificates and derivatives of those certificates, advised market
members and depositories of its actions and has been working with
these parties and its transfer agent and other resources to
ascertain which shares of Common Stock need to remain in commerce
to recognize the interests of the transferee, which shares should
be cancelled or returned to the Company and therefore removed from
registration ("Removed Shares") and which shares are held by or
were delivered to parties who were eligible to receive and hold
the same pursuant to the Plan. The Company intends to file an
amendment to this Registration Statement as soon as practicable
when the reconciliation in the Curative Review Process is complete
to withdraw the Removed Shares from registration. In connection
with this, the Company has had suit filed against them by Suburban
Capital Corp pending in the Circuit Court of Cook County,
Illinois. The Company has responded to this matter and is
actively cooperating in other investigations relating to the
plaintiff and others. The Company expects additional litigation
from the plaintiff and is intending to assert the indemnification
and disgorgement rights under its agreements with the plaintiff.
The Company has initiated a complaint against Voxcorp, Inc. in the
Superior Court of California in the County of Los Angeles for
breach of contract, fraud and deceit, intentional
misrepresentation of facts, and rescission. Voxcorp, Inc. filed a
general denial to the complaint, has asserted numerous affirmative
defenses, and has filed a cross-complaint alleging breach of
written contract, breach of the implied covenant of good faith and
fair dealing, conversion, common counts, breach of fiduciary
duties, fraud and deceit, negligent misrepresentation, imposition
of constructive trust and/or resulting trust, intentional and
tortious inducement to breach and interference with contract and
prospective economic advantage, and unfair trade practices. The
Company has filed a general denial to the allegations. The
parties are currently seeking a business settlement.
NOTE 5 PRO FORMA INFORMATION
The table below reflects unaudited pro-forma combined results of
the Company as if the acquisitions had taken place on January 1, 2001:
Nine months ended September 30, 2002 and 2001:
2002 2001
Revenues $6,540,092 $6,895,119
Costs and expenses 4,317,223 4,881,804
Net loss 21,967,420 3,198,240
Net loss per share - basic and diluted (0.00) (0.08)
NOTE 6 GOING CONCERN
The Company's financial statements for the nine months ended
September 30, 2002 have been prepared on a going concern basis
which contemplated the realization of assets and the settlement of
liabilities and commitments in the normal course of business. The
Company incurred a net loss of $21,780,633 for the nine months
ended September 30, 2002, has a working capital deficiency of
$11,271,527 and a stockholders' deficiency of $11,789,807. The
Company's working capital deficiency as of September 30, 2002 may
not enable it to meet such objectives as presently structured.
The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
The ability of the Company to continue as a going concern is
dependent on the Company's ability to raise additional capital,
and implement its business plan. Management believes that actions
presently taken to obtain additional funding and the potential for
an increase in advertising media billings provide the opportunity
for the Company to continue as a going concern.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
Blagman Media International, Inc. ("the Company") is a global
direct response marketing and advertising agency that produces
response-driven commercials for television, radio and all other media
and is engaged in media buying, media planning, research driven
demographic analysis, commercial production and post production as
well as "edit rescue" for under-performing marketing projects, and
other associated transactional media business projects
On August 2, 1999, Blagman Media International, Inc., a
privately held entity owned by Robert Blagman ("Blagman - 99')
completed a reverse acquisition with Unisat, Inc., an inactive,
public non-reporting company, founded in 1961 and formerly known as
Combined Companies, Inc. On the same date (August 2, 1999), Unisat,
Inc. changed its name to Blagman Media International, Inc. ("Blagman
- 61" or the "Company). The transaction was structured as a share
exchange, in which Robert Blagman exchanged all of his shares in
Blagman -99 for 8,200,000 common shares of Unisat, Inc. In April
2000, the Company entered into a share exchange agreement with MNS
Eagle Equity Group I ("MNS"), an inactive, reporting Nevada
corporation, which resulted in the Company becoming the parent
entity. After the filing of a Report on Form 8-K, the Company became
the successor reporting entity to MNS Eagle.
Pursuant to an Agreement and Plan of Reorganization dated March
4, 2002, effective March 22, 2002, the Company acquired 100% of the
outstanding stock of Century Media, Inc., a California corporation
("Century Media") by merging Blagman USA, Inc., an existing
California corporation formed in 2001 to act as a transitory wholly
owned subsidiary of the Company for acquisitions, into Century Media.
The original Century Media entity is the surviving entity and
operates on a combined basis under the industry name Blagman-Century
Media, Inc. The consolidation of the two companies resulted in a
full service integrated direct marketing venture. Certain principals
of Century Media have entered into consulting arrangements to provide
services to Blagman-99. Since the merger, both entities have been
attempting to identify synergy and to streamline operations, with
limited results. References in this 10-QSB to the Company refer to
both of the Blagman entities to MNS Eagle Equity Group I, and to
Century Media.
In November 2002, Blagman-Century Media amended its Articles of
Incorporation to change its name to Century-Media, Inc.
Results of Operations
Nine months Ended September 30, 2002 Compared to Nine months Ended
September 30, 2001 (includes the operations of Century-Media from
March 1 to September 30, 2002)
The operating aspects of the Company have been conducted
principally through Blagman-99 and Century Media, Inc. (the operating
subsidiary). The results of operations at September 30, 2002
compared to the operations of Blagman - 61 and Blagman - 99 during
the nine months ended September 30, 2001 to the results for the nine
months ended September 30, 2002 and, in addition, include the
operations of Century Media for the period March 1, 2002 through
September 30, 2002.
Net Revenues
Net revenues (principally from advertising and media placements,
commissions and revenue sharing arrangements) for the nine-month
period ended September 30, 2002 as compared to the same period in
2001 increased from $589,114 to $4,026,385 (583.4%). The increase in
revenues between the two periods of $3,437,271 is attributable to
Century Media's gross media billings of $14,402,024 (this compares to
$21,983,101 for the same period the prior year). Additional billings
generated from Blagman stem from the Red Skelton show, which was
billed through Voxcorp. These billings did not continue during the
full second quarter nor were there any billings in the third quarter
(See "Legal Proceedings"). While billings at Century Media
constituted the predominant portion of the overall billings,
effective January 1, 2002, Blagman transferred most of its ongoing
media billings to Century Media in anticipation of the merger and
pursuant to the interim management arrangements between the entities.
As a result, very little in the way of billings was generated by
Blagman outside of Voxcorp.
Gross profit for the period increased from $574,908 to
$1,256,278 (118.5%) with $382,017 attributable to the bookings of
Blagman. The gross profit margins principally reflect the changes in
the scale of the revenues, since the nature of the Company's business
provides margins that tend to be proportionate to its revenues. The
changes in gross revenues also reflect the Century Media business,
which included both media time purchased by Century Media and billed
to its clients and prepaid media time where only the commissions are
reflected as revenue. Blagman-99 generally uses only prepaid media
and its revenues therefore consist only of commissions.
During the third quarter, Century Media ceased buying media for
its two primary clients, Hoover and Whitney Information Systems.
This had the effect of significantly reducing the impact of Century
Media billings on the Company. Going forward, all billings are
anticipated to be generated by Blagman.
Cost of Revenues
Cost of revenues (principally consisted of media acquisition and
airtime costs accrued in the period) for the nine months ended
September 30, 2002, which increased from $14,206 to $2,770,107
(19400%) primarily because of the addition of the Century Media
operations (of the total costs reported, only $82,421 is attributed
to Blagman). In general, the Company incurs media costs in direct
proportion to its operating revenues and, therefore, the increase in
costs was principally related to the increase in advertising
revenues.
Operating Expenses
Total operating expenses increased from $4,369,006 to
$22,699,837 (419.6%) for the nine month period ended September 30,
2002 principally because of the $9,269,667 charge for non-cash
related consulting compensation under existing and new consulting
agreements, $8,647,491 from the impairment of goodwill and customer
base intangible (good will relates to prior Century acquisitions
while customer base intangible relates to the acquisition of Century)
and other the expenses related to the operations of Century Media,
including the $371,775 management fee which has accrued to Century
executives who provided services through a loan-out entity. The
increased operating expenses also included $1,372,112 in personnel
related costs and $236,781 in rent incurred by Century. The Company
anticipates that the fixed categories of costs will continue to
decline in future periods as management rationalizes the costs of the
former Century operations to revenues and is better able to manage
and predict those costs and needs. Additionally, all personnel
expenses at the Century Media operation have been eliminated.
Operating Costs will be commensurate with increased activities and
revenues if successful acquisitions are undertaken or business
expands. Minimal new expenses are accruing from Century Media
operations and relate primarily to the accrual of interest and lease
related expenses.
During the nine months ended September 30, 2002, 4,280,951,696 shares of
common stock with a fair value of $5,503,686 were issued for consulting
services, of which 3,614,070,000 shares having a fair value of $4,167,261
were issued for services to be performed from the date of issuance of the
shares through December 2006. The fair value of the issued shares was based
upon the market price of the Company's stock on the date of grant.
The operating expenses continue to be substantial due to the
Company's status as a public entity and the professional fees and
related travel and other expenses incurred in connection with a
public entity. Overhead is also affected by the addition of the
Century physical location and additional staffing (most of which was
significantly reduced or eliminated in its entirety during the later
part of the third quarter). Professional fees continue to grow due
to the Curative Review Process and related matters. While certain
public company expenses have been moderated, the burden of public
company status and the improper stock issues continue to require
major commitments of time, energy and resources of the Company's
limited management team and, to some extent, these issues have pre-
empted the business of the Company because executives were required
to devote a substantial portion of their time to these matters rather
than to day-to-day sales and marketing activities. In addition to
the transaction with Century, the Company devoted a substantial
amount of time and effort to seeking other acquisition opportunities
and resolving and ending relationships that have not been productive.
In connection with the Century transaction, the staffs and space have
been integrated and streamlined to reduce overhead. The underlying
business and revenue policies at Century are being evaluated in an
effort to address and resolve its significant payables and determine
its value as an ongoing business enterprise.
Expenses and costs associated with the departure of three high-
level Century Media executives have further contributed to the
increased operating expenses and are expected to continue until such
time as all issues related to their departure have been settled. The
departure has had the direct affect of increasing legal expenses.
The indirect cost is currently being evaluated by management and, in
all likelihood, will deal primarily with the retention or loss of
Century Media clients.
Interest Expense and Outstanding Loans
Net interest income/expense in the nine-month period decreased
from income of $19,605 to expense of $115,035 principally because of
the Century Media transaction. Prior to the Century transaction, the
Company generally committed to time expenditures only when there was
assurance of payment from its clients resulting in minimal interest
expense.
At December 30, 2001 and September 30, 2002, the Company had
loans of $146,437 due from shareholders who have deferred salary and
have received certain short-term advances, and taken advances from
the Company. Robert Blagman, the chief executive officer, has
deferred a portion of his salary and signing bonus. Mr. Blagman has
also deferred 100% of his salary, expenses and signing bonus for all
of third quarter 2002. Pursuant to a pre-existing Board commitment
which allows him to maintain up to 51% equity ownership in the
Company, he may elect to use all or a portion of his deferred salary
and signing bonus amounts to acquire additional shares in the
Company.
The Company had outstanding loans (short and long-term portions)
totaling $2,973,541 at September 30, 2002 compared to $495,500 at
December 31, 2001. This significant increase reflects principally
the debt obligation of Century Media that existed at the time of the
transaction including $424,725 due former Century Media shareholders
and the $1,859,564 claimed by TMT Media, Inc. to be due to it (See
"Legal Proceedings). When factoring these Century Media debts away
from Blagman, the amount of outstanding loans would equal $52,466 at
BMII alone.
Losses
While net revenue increased during the period, an increase in
total operating expenses from $4,369,006 (during the nine months
ended September 30, 2001) to $22,699,837 (at September 30, 2002)
which equates to an $18,330,831 (419.6%) increase over the nine
months ended September 30, 2001. The resulting loss of $21,780,633
through the September 30, 2002 quarter end compared to a
loss of $3,774,493 for the same period in 2001 (a 477% increase in
period-to-period). The increased operating expenses in 2002 consisted
principally of the $9,269,667 recorded for share issuances in compensatory
transactions, the added expenses from the Century Media operations,
professional fees, officers' compensation incurred (but not paid), travel,
entertainment and other operating expenses.
Liquidity and Capital Resources
For the nine months ended September 30, 2002, compared to December
31, 2001, the Company's available cash decreased from $199,924 to
$40,714 and current assets increased from $616,581 to $2,158,421 (250%).
Accounts payable and accrued expenses at September 30, 2002 were $8,968,473
compared to $342,242 at December 31, 2001, a 2520% increase principally due to
the Century Media transactions. At September 30, 2002, deferred revenue had
increased to $1,364,866 from $240,000 (469%) at December 31, 2001 due to an
increase in overall media billings (this is an actual improvement
from the June 30 quarter end and is primarily the result of reduced
operations from Century Media in the third quarter).
In connection with sustaining its current operations, and in
order to pursue initiatives to expand the Company's operations
internally and through strategic alliances or acquisitions with other
industry partners, additional capital funding will be required. The
Company hopes to raise these funds through an increase in general
business profits from additional advertising accounts as well as an
organic increase in current media billing and from significantly
reduced operating expenses associated with the operations of Century
Media. However, if the outstanding obligations and if Century Media
cannot be rationalized so that the payables can be resolved, the
Company may be required to limit or discontinue the Century Media
activities altogether. Affiliations and associations with other
advertising agencies will also expand the Company's ability to
increase cash flow and revenues without adding staff. Management is
continuing to evaluate these opportunities along with overhead and
cost cutting measures that address strategic financial needs and the
Century Media obligations.
During the current period, the market price of our common shares
remained at precipitously low levels. Management believes that there
are several underlying factors, all of which are currently the
subject of our ongoing internal investigation and the Curative Review
Process. First, the Company apparently was one of the entities
targeted in an organized pattern of depressing prices through "short-
selling" by a group pursuing a coordinated effort to effect and
profit from a falling share price and from attempts to extort
favorable stock issuances from the Company without fair
consideration. Another factor apparently affecting our price was the
market reaction to the improper issuance of company equities
undertaken without authority by Suburban Capital and subsequent
market transactions by Suburban and its associates. Management
initiated the internal investigation and referrals to appropriate
regulatory agencies for their action and is cooperating in
independent regulatory proceedings. While actions from these
referrals may reduce future manipulation, it cannot eliminate the
impact of the downward price spiral. Because of these activities
management believes that the market price of its shares has not been
reflective of our actual business operations. The Company is
continuing to pursue the investigation and corrective activity
relating to this equity and intends to actively seek indemnification
and disgorgement remedies. In connection with the investigation, the
Company has requested that improper securities or related funds be
paid to the Company. Certain persons holding improper shares have
asserted a claim against the company and other claims and
counterclaims by the Company are likely. In late May 2002 the
Company issued a letter of inquiry followed by stop transfer orders
covering the securities they believe were fraudulently issued.
Additional stop orders may be required as the Company continues its
investigation.
In January 2002 the Company signed a letter of intent to acquire
RC Romine & Co. and issued 75 million shares in anticipation of that
transaction. Suburban Capital identified this transaction
opportunity and the equity was issued at its instruction. Management
does not currently intend to pursue this transaction and will seek
restitution or return of the equity.
In the Curative Review Process, management concluded that
5,426,000,000 shares had been fraudulently issued during the six
months ended June 30, 2002. The issuance is not recorded at
September 30, 2002. If the shares had been recorded the Company
would have recognized an additional charge of $4,304,300 to
professional and consulting fees. Future financial statement
adjustments concerning fraudulently issued shares may be required to
accommodate legitimate shareholder considerations and those
adjustments may require restatements of the financial results to
accommodate the accounting treatment of such shares.
On July 12, 2001, the Company entered into an equity line of
credit agreement for up to $15 million in credit with Gazelle Group
LLP ("Gazelle") and DRH Investment Company LLC ("DRH"). This
agreement covers a total of 450,000,000 Common Shares pursuant to the
equity line of credit agreement from time to time during a three-year
period beginning on the date of the agreement. However, because the
amount of issuable securities is tied to the market price of the
Company's common shares, based on current market price ranges, it
would not be able to draw against the equity line of credit on
reasonable terms at this time. As a practical matter, access to the
equity line also requires an effective registration statement for the
resale of such securities and no registration statement is in effect.
In addition, because there is no effective registration statement,
the terms of the Series B Preferred shares entitle the holders,
unless otherwise negotiated, to payment of an amount equal to
approximately $21,000 a month in the aggregate. This amount has not
been paid or reflected as an obligation at September 30, 2002. If
not sooner converted or redeemed, the Series B Preferred shares are
convertible on June 30, 2003.
Management has postponed the full integration of Century Media
evaluating other opportunities and pursuing other initiatives to
expand the Company's operations internally and through strategic
alliances or acquisitions with other industry partners. These
endeavors will be funded in part from operations but will also
require additional capital funding which the Company hopes to raise
through debt or equity financing arrangements, if appropriate
financing is available, on reasonable and acceptable terms. During
the balance of 2002, management intends to continue to focus a
significant effort toward re-building the business which has suffered
through the many activities that have diverted management's attention
from its core business. The integration and assimilation of Century
Media was a primary diversion and will continue to require time and
effort on the part of management until issues related to the
significant debt burden and payables have been fully addressed.
While these obligations remain those of Century Media, Inc., Blagman
Media International, Inc. is expending the human resources at present
to deal with the mounting problems. The losses at Century Media have
been larger than expected due to lower then expected revenues
(expenses were not adjusted accordingly on a timely basis) and as a
result, an inability to address existing debt obligations.
If additional working capital does not become available,
management believes that the working capital now available together
with funds generated from operations will be insufficient to meet
essential capital requirements for the next 12 months. The Company
currently maintains a working capital deficiency as well as a
stockholders deficiency. As a result, the Company's financial
statements for the period ended September 30, 2002 have been prepared
on a going concern basis which contemplated the realization of assets
and the settlement of liabilities and commitments in the normal
course of business. The Company incurred a net loss of $21,780,633
for the nine months ended September 30, 2002 principally because of
non-cash charges of $9,269,667 for consulting fees, the losses from
the assimilation of Century Media operations and the $8,647,491 of
impairment to goodwill and customer base intangible. The Company has
current liabilities of $13,429,948 (including certain significant
non-cash charges) and a stockholders deficiency at September 30, 2002
of $11,789,807. It may not be able it to meet its objectives as
presently structured. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
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.
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
Subsequent to the Century Media transaction, TMT Media
Corporation asserted that under the April 2000 acquisition agreement
with Century Media, as a result of the transaction between the
Company and Century Media, it is entitled, as of April 22, 2002, to a
$1,250,000 contingent amount and to the payment in full of the
balance of $609,564 due on the $700,000 note delivered in the 2000
acquisition of TMT by Century Media. The Company and Century Media
dispute this position and are seeking to resolve the matter. In May
2002, TMT filed a lawsuit captioned TMT Media Corporation vs. Blagman
Century Media, Inc. et al. in Superior Court of California, County of
Los Angeles, Case No. BC273368, naming the Company, Century Media and
Robert Blagman personally, seeking the accelerated amount of
approximately $1,859,564. The named defendants have filed a general
denial to TMT Media's allegations and have asserted numerous
affirmative defenses. Mr. Blagman has demurred to the allegations
raised against him.
Suburban Capital Corp. v. Robert Blagman and Blagman Media
International, Inc., No. 02 CH 12321, is pending in the Circuit Court
of Cook County, Illinois, County Department, Chancery Division. This
litigation was initiated to seek delivery of shares allegedly due on
account of two loans claimed to have been advanced by Suburban. The
Company has delivered shares to the Court pending delivery of the
originally pledged shares by the plaintiff. This matter is a result
of the Company's actions in connection with the internal
investigations on stock activities by the plaintiff and others. The
Company has responded to this matter and is actively cooperating in
other investigations related to the plaintiff, including pending
regulating investigations. The Company anticipates additional
litigation from the plaintiff and is intending to assert the
indemnification and disgorgement rights under its agreements with the
plaintiff and others.
Blagman Media International, Inc. vs. Voxcorp, Case No. SC
071975, is pending before the Superior Court of California in the
County of Los Angeles - - West District. Blagman Media
International, Inc. initiated this lawsuit for breach of contract,
fraud and deceit, intentional misrepresentation of facts, and
rescission. Blagman Media International has filed a general denial
to Voxcorp's cross-complaint and asserted numerous affirmative
defenses to each cause of action. As of the date here of the parties
are pursuing a mutually acceptable business conclusion.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the nine months ended September 30, 2002,4,280,951,696 shares of
common stock with a fair value of $5,503,686 were issued for consulting
services, of which 3,614,070,000 shares having a fair value of $4,167,261
were issued for services to be performed from the date of issuance of the
shares through December 2006. The fair value of the issued shares was
based upon the market price of the Company's stock on the date of grant.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Amendment to Articles of Incorporation
of Blagman-Century Media dated October 31, 2002 and filed with
Nevada Secretary of State on November 5, 2002 (filed herewith).
99.1 Certification of Chief Executive Officer Pursuant to
18 U.S.C. 1350, as adopted pursuant to 906 of The
Sarbanes-Oxley Act of 2002
(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 20, 2002 /s/Robert Blagman
Robert Blagman, President