U. S. Securities and Exchange
Commission Washington, D.C. 20549
Form 10-SB/A5
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Magic Communications, Inc.
(Name of Small Business Issuer in its charter)
Delaware 13-3926203
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5 West Main Street, Elmsford, New York 10523
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 914-345-0800
Securities to be registered under Section 12(b) of the Act:
Title of each class to be registered Name of each exchange on which each
class is to be registered
------------------------------------ -----------------------------------
Not Applicable Not Applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.0001 per share
(Title of Class)
FORWARD LOOKING STATEMENTS
THIS FORM 10-SB12G AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY
MAGIC COMMUNICATIONS, INC. (HEREINAFTER REFERRED TO AS MAGICCOMM AND/OR THE
"COMPANY") OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY CONSTITUTE
"FORWARD-LOOKING STATEMENTS" THOSE FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS
REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF MAGICCOMM AND MEMBERS OF
ITS MANAGEMENT TEAM AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE
BASED. READERS OF THIS DOCUMENT AND PROSPECTIVE PURCHASERS OF THE COMPANY'S
SECURITIES ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING
STATEMENTS FOR THE REASONS SET FORTH IN "RISK FACTORS".. THE COMPANY UNDERTAKES
NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO REFLECT CHANGED
ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES TO FUTURE
OPERATING RESULTS OVER TIME
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RISK FACTORS
1. Control by Principal Shareholders, Officers and Directors
The Company's principal shareholders, officers and directors will beneficially
own approximately twenty nine (29%) percent of the Company's Common Stock. As a
result, such persons may have the ability to control the Company and direct its
affairs and business. Such concentration of ownership may also have the effect
of delaying, deferring or preventing change in control of the Company. See
"Principal Stockholders."
2. Limited Working Capital, Need for Investment
As of June 30, 2003 the Company had $5,903 in current assets and $116,174 in
current liabilities for current asset deficit of ($110,271). During October,
2002, in an effort to make it more attractive to potential investors, the
Company reincorporated in Delaware and increased the number of shares which it
is authorized to issue from 200 shares without par value to 50,000,000 shares of
Common Stock, par value $.0001 per share and 1,000,000 shares of undesignated
preferred stock, par value $.0001 per share. The Company is also voluntarily
registering its common stock under the Securities Exchange Act of 1934, as
amended, in order to make the Company more attractive to potential investors.
However, no assurance can be given that the Company's efforts to restructure
itself will allow it to raise sufficient funds to expand its operations.
3. Questionable Market
The Company has been engaged since June 1997 in the business of marketing pay
telephones to location operators such as stores and shopping malls. As widely
reported in the media,, pay phone (land phone) usage has decreased in recent
years due to the widespread and increased usage of cellular phones. Until
recently pay phones were generally owned by the local or regional telephone
companies and there were no businesses such as the Company's. One may conclude
that the business opportunity that is presented by the Company's business has
been abandoned to it by the telephone companies because they have concluded that
the economic returns that are offered in the Company's market do not justify the
costs. This would raise serious questions as to whether the Company can operate
profitably.
4. Reliance on a Limited Number of Phone Service Providers - Availability
of Pay Phones
The Company's pay phones are provided through a limited number of manufacturers
and are configured for use with a particular phone service provider's long
distance service. The Company's rate sharing arrangements with long distance
service providers are responsible for a significant portion of its revenues. If
the Company's current long distance service provider, Qwest, were to cease
offering rate sharing agreements to the Company or were to materially alter its
terms, the Company would be required to find a new long distance provider. No
assurance is given that it could do so on acceptable or on any terms. The
Company believes that the name recognition and reputation of Qwest is an
important part of its marketing strategy and any substitute provider might not
give the Company those advantages. Furthermore, if the Company were to report
large profits, Qwest may review the Company's reports as filed with the
Securities and Exchange Commission and determine to change the Company's pricing
terms in a way that would reduce the Company's profit. In addition,
manufacturers of pay phones may go out of business or cease to offer phones to
the Company at historical price levels. Any of these developments would
adversely effect the Company's ability to operate.
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5. Regulation of Penny Stocks
The Company's securities, if and when available for trading, will be subject to
a Securities and Exchange Commission rule that imposes special sales practice
requirements upon broker-dealers who sell such securities to persons other than
established customers or accredited investors. For purposes of the rule, the
phrase "accredited investors" means, in general terms, institutions with assets
in excess of $5,000,000, or individuals having a net worth in excess of
$1,000,000 or having an annual income that exceeds $200,000 (or that, when
combined with a spouse's income, exceeds $300,000). For transactions covered by
the rule, the broker-dealer must make a special suitability determination for
the purchaser and receive the purchaser's written agreement to the transaction
prior to the sale. Consequently, the rule may affect the ability of broker-
dealers to sell the Company's securities and also may affect the ability of
purchasers in this offering to sell their securities in any market that might
develop therefore.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, and 15g-7 under the Securities Exchange Act of 1934,
as amended. Because the securities of the Company may constitute "penny stocks"
within the meaning of the rules, the rules would apply to the Company and to its
securities. The rules may further affect the ability of owners of Shares to sell
the securities of the Company in any market that might develop for them.
Shareholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse. Such patterns include (i) control
of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press
releases; (iii) "boiler room" practices involving high-pressure sales tactics
and unrealistic price projections by inexperienced sales persons; (iv) excessive
and undisclosed bid-ask differentials and markups by selling broker- dealers;
and (v) the wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired level, along with
the resulting inevitable collapse of those prices and with consequent investor
losses.
6. Intense Competition
The Company is offering pay phones to retail locations. The Company's operations
face competition from both local and regional carriers as well as other
independent coin phone operators. In another sense, private land line telephones
in houses and business as well as cellular phones compete with the Company's
offerings. Many of the companies competing with the Company have substantial
resources in terms of manpower and finances while others offer technologies
which the Company does not offer.
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7. Regulated Industry
Despite the deregulation trend of the 1980's and 1990's the telecommunications
industry remains subject to regulation by the Federal and State governments.
While the Company believes that it complies with all existing regulations, these
regulations could be altered or new ones could be enacted that have an adverse
effect on the Company's business.
8. Dependence upon Management; Limited Participation of Management
The Company currently has four individuals who are serving as its officers and
directors and its success will be largely dependant on the efforts of these
individuals.
9. Lack of Continuity in Management
The Company does not have an employment agreement with any of its officers and
directors, and as a result, there is no assurance that they will continue to
manage the Company in the future. A decision to resign by any officer or
director can occur without the vote or consent of the stockholders of the
Company.
10. Indemnification of Officers and Directors
The Company's Articles of Incorporation and applicable Delaware Law provide for
the indemnification of its directors, officers, employees, and agents, under
certain circumstances, against attorney's fees and other expenses incurred by
them in any litigation to which they become a party arising from their
association with or activities on behalf of the Company. The Company will also
bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the Company therefore
if it is ultimately determined that any such person shall not have been entitled
to indemnification. This indemnification policy could result in substantial
expenditures by the Company which it will be unable to recoup.
11. Director's Liability Limited
The Company's Articles of Incorporation exclude personal liability of
its directors to the Company and its stockholders for monetary damages for
breach of fiduciary duty except in certain specified circumstances. Accordingly,
the Company will have a much more limited right of action against its directors
than otherwise would be the case. This provision does not affect the liability
of any director under federal or applicable state securities laws.
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12. No Foreseeable Dividends
The Company has not paid dividends on its Common Stock and does not anticipate
paying such dividends in the foreseeable future. Accordingly, any return to
investors in the Company's stock would only occur if the Company were successful
in initiating a trading market. The Company may not ever be successful in
initiating a trading market for the common stock.
13. No Public Market Exists
There is no public market for the Company's common stock, and no assurance can
be given that a market will develop or that a shareholder ever will be able to
liquidate his investment without considerable delay, if at all. If a market
should develop, the price may be highly volatile. Factors such as those
discussed in this "Risk Factors" section may have a significant impact upon the
market price of the securities offered hereby. Owing to the low price of the
securities, many brokerage firms may not be willing to effect transactions in
the securities. Even if a purchaser finds a broker willing to effect a
transaction in these securities, the combination of brokerage commissions, state
transfer taxes, if any, and any other selling costs may exceed the selling
price. Further, many lending institutions will not permit the use of such
securities as collateral for any loans.
14. Rule 144 Sales
All of the outstanding shares of Common Stock held by present stockholders are
"restricted securities" within the meaning of Rule 144 under the Securities Act
of 1933, as amended.
As restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act and as required under applicable
state securities laws. Rule 144 provides in essence that a person who has held
restricted securities for a prescribed period may, under certain conditions,
sell every three months, in brokerage transactions, a number of shares that does
not exceed the greater of 1.0% of a company's outstanding common stock or, if
applicable, the alternative of the average weekly trading volume during the four
calendar weeks prior to the filing of a Form 144 with the Securities and
Exchange Commission. This alternative is not available to Company shareholders
and will remain unavailable even if Company shares are quoted on the OTCBB
because the OTCBB is not an "automated quotation system" and accordingly market
based volume limitations are not available for securities quoted only over the
OTCBB. As a result of revisions to Rule 144 which became effective on or about
April 29, 1997, there is no limit on the amount of restricted securities that
may be sold by a non-affiliate after the restricted securities have been held by
the owner for a period of two years. A sale under Rule 144 or under any other
exemption from the Act, if available, or pursuant to subsequent registrations of
shares of Common Stock of present stockholders, may have a depressive effect
upon the price of the Common Stock in any market that may develop. All of the
total 2,500,000 shares of common stock held by present stockholders of the
Company which were, for purposes of Rule 144, issued more than one year ago are
presently available for resales under Rule 144.
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15. Blue Sky Considerations
Because the securities registered hereunder have not been registered for resale
under the blue sky laws of any state, the holders of such shares and persons who
desire to purchase them in any trading market that might develop in the future,
should be aware that there may be significant state blue-sky law restrictions
upon the ability of investors to sell the securities and of purchasers to
purchase the securities. Accordingly, investors should consider the secondary
market for the Company's securities to be a limited one.
16. Individual Shareholder Income Tax Responsibility Until Termination of
Company's "S" Corporation Status
Until November 2002, the Company was an "S" Corporation and accordingly, while
it was not required to pay any federal or state income taxes, such taxes were
the responsibility of the individual shareholders. While "S" Corporation status
terminated in November 2002, individual shareholder responsibility for income
taxes prior to such date remain.
17. Independent Auditors' "Going Concern" Opinion
The auditors' opinion to our financial statements indicates that it was prepared
on the assumption that we continue as a going concern. Nevertheless, our
independent auditor believes there is "substantial doubt" that we will be able
to continue as a going concern. See "Independent Auditors' Report" on page F-1.
The auditor notes that we are dependent upon the Company's ability to generate a
revenue stream to meet its future financing requirements. We believe we are
taking the steps necessary towards developing and implementing our business plan
and are working towards generating sufficient levels of revenue to finance
operations that will lead to the elimination of such qualification from our
audited statements. However, we might never achieve profitability or generate or
sustain a revenue stream in the future. If we were to cease to be a "going
concern" our assets would be written down from the values currently shown in our
financial statements.
PART I
ITEM I. DESCRIPTION OF BUSINESS
General
The Company was originally formed as a New York corporation on January 16, 1997
(and reincorporated as a Delaware corporation in November 2002) for the purpose
of offering Internet kiosks where the public could access the Internet for a
fee. The internet Kiosks business proposals remain in their embryonic and
developmental stages, have not been activated and the Company has no current
plans to further pursue such activities. Since June 1997 the Company has engaged
in the business of contracting with various locations such as malls, gas
stations, stores and office buildings to install pay phones that are an
alternative to those provided by the primary local service provider (Verizon).
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The Company places its phones by offering larger payments to the store owner or
property owner than Verizon pays to retail location operators. The Company
realizes net revenues through the difference between what is in the coin box
when it is emptied and what it must pay to the property owner, Verizon and long
distance and local service providers as well as payments from others for toll
free calls. The Company's net revenues are principally comprised of: (i) the
difference between what the Company charges for local calls ($.25 in New York
and $.35 in New Jersey and Pennsylvania for a three minute call) and the $.042
that the Company pays to Verizon for each three (3) minute call; (ii) the
difference between the fixed rate per call that the Company pays to Qwest for
each long distance call and the rates which the Company charges for long
distance calls (as established by the Company); (iii)a commission of 50% paid by
Qwest (long distance carrier) on operator assisted services, such as collect,
reverse charges or credit card long distance calls made on the Company's phones;
and (iv) a payment of $.249 on each toll-free (800) call from Company phones by
major long distance carriers, such as: AT&T, MCI, Qwest, Sprint, etc., through a
contract with a call aggregator, Private Payphone Owners' Network ("PPON") which
computes all toll free calls made from Company phones and pays the Company
directly. The Company's expenses include the marketing expense to place
telephones, the cost of the phones and phone maintenance. The Company does not
have a written agreement with Verizon, but has a written agreement with Qwest as
well as the aggregator (PPON). Copies of such written Agreements are annexed
hereto as Exhibits 99.01 and 99.02.
As of September 30, 2002, the Company had approximately 150 pay phones placed in
locations in New York , New Jersey and Pennsylvania. These phones are marketed
through the Company's own employees, principally the Company's President,
through word-of-mouth. The Company hopes to raise funds through a private equity
offering to be able to increase its marketing effort so that it will have a
sufficient number of phones in operation to be able to earn a profit. No
assurance is given that the Company can accomplish this objective. The Company
is filing this Registration Statement because Management believes that as a
reporting Company with the potential of trading on the NASD Electronic Bulletin
Board ("OTCBB") or on the proposed BBX market, the Company will be better able
to attract investment capital. No assurance is given that investment capital can
be raised. The BBX is a proposed new marketplace that will eventually take the
place of the OTCBB. The BBX will have qualitative listing standards (such as
minimum number of stockholders), but will have no minimum share price, market
capitalization, or shareholder equity requirements. In addition, the BBX will
have an electronic trading system to allow order negotiation and automatic
execution. The new system is intended to bring increased speed and reliability
to trade executions, as well as improve the overall transparency of the
marketplace. A date has yet been set for commencement of BBX operations nor has
a specific date been set by it for acceptance of applications
The Company currently purchases its phones from North Atlantic Marketing and
during the calendar year ended December 31, 2002 purchased 20 telephones without
having purchased any additional telephones through June 30, 2003. The price for
phones in the twelve month period ending December 31, 2002 averaged $ 1,200 for
each individual telephone, which comprises: (i) the purchase price from
independent suppliers for all hardware; and (ii) wall installation, but does not
include wiring which is done by Verizon. In addition, the Company arranges for
the installation of the phones at the customers' place of business and pays
Verizon to connect the wires to the phones. The Company's marketing is conducted
primarily through the personal effects of its President and through "word of
mouth" in order to obtain customer leads.
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Competition
The Company expects to encounter substantial competition in its efforts to
locate pay telephones from both the local telephone company (Verizon) and from
other pay phone operators such as the Company. Many of these entities have
greater experience, resources and managerial capabilities than the Company. The
Company intends to compete primarily on the terms that it offers to location
owners. The Company's ability to place phones and the revenues derived from each
phone may be impaired by a general perception on the part of many consumers that
independent coin phone companies, such as the Company, charge higher rates to
consumers. The Company does not believe that this perception is accurate as to
the services that it provides.
Employees
The Company currently has 1 full time employee and 2 part time employees. Its
full time employee is engaged in sales and marketing and a service technician as
well as the Company's Secretary are employed part time. The Company's employees
do not have any collective bargaining agreement and management believes that the
Company's relations with its employees are satisfactory.
Recent Reorganization
During November, 2002, the Company effected a reincorporation merger to change
its state of incorporation from New York to Delaware. In connection with the
reincorporation, each outstanding share of the New York predecessor corporation
which was merged with and into the Company, was changed by operation of law and
as provided in Section 2.4.1 in the Agreement and Plan of Merger (the "Plan")
into 2,500,000 shares of the Company. The Plan is filed as Exhibit 3(d) to this
Registration Statement. The Company effected the reincorporation merger because
management believes that Delaware corporations are more attractive to potential
investors. Under New York law, officers, directors and the ten largest
shareholders of a corporation are personally liable for employee wages.
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ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
Year ended December 31, 2000 vs. Year ended December 31, 2001
Sales decreased in volume with prices staying the same from $162,820 in the year
ended December 31, 2000 to $122,787 in the year ended December 31, 2001 due, in
the opinion of management to increased use of cellular phones as widely reported
in the media^ Operating expenses increased from $164,095 or 101% of sales to
$166,194 or 135% of sales. The increase of operating expenses as a percentage of
sales was due to the following items: (i) an increase in depreciation of $5,521
from $28,075 in 2000 to $33,596 in 2001; (ii) an increase in salaries from
raises to employees of $14,629 from $43,821 in 2000 to $58,450 in 2001; (iii) an
increase in lease payments for phone equipment (leases expired in March 2002) of
$4,367 from 2000 to 2001; offset by (iv) a decrease in professional fees of
$9,261 from $13,928 in the year ended December 31, 2000 to $4,667 in the year
ended December 31, 2001; and (v) a decrease in general and administrative
expenses of $13,157 from $48,665 in year end 2000 to $35,528 in year end 2002.
The decrease in general and administrative expenses from 2000 to 2001 was caused
by a decrease in consulting expenses from less utilization of consultants and
supplies offset by an increase in insurance premiums. Since sales decreased
while operating expenses remained fairly constant, the Company's net loss
increased from ($1,245) in the year ended December 31, 2000 to ($43,407) in the
year ended December 31, 2001. The number of pay telephones in service during the
years ended December 31, 2000 and December 31, 2001 were approximately 150
telephones throughout these periods.
Nine Months ended September 30, 2001 vs. Nine Months ended September 30, 2002
Sales decreased in volume with prices staying the same from $112,914 in the nine
months ended September 30, 2001 to $69,021 in the nine months ended September
30, 2002 or 39% due in the opinion of management to an increase of usage of
cellular telephones as widely reported in the media ^ and increased carrier
charges ^. However, the Company was able to reduce operating expenses from
$121,825 in the period ended September 30, 2001 to $64,486 in the period ended
September 30, 2002, a decrease of $57,339 or 47%. Due to a reduction in salaries
of $34,250, equipment leases which expired in March 2002 of $13,669,
professional fees of $2,442 and general and administrative expenses of $6,658.
As a result of the foregoing, the Company's net income for the 2002 period was
$4,535 as compared to a net loss of ($8,911) in the 2001 period. The number of
pay telephones in service during the 9 month periods ended September 30, 2001
and September 30, 2002 were approximately 150 telephones throughout these
periods.
Liquidity and Capital Resources
On September 30, 2002 the Company had cash on hand approximately $11,864. It was
the opinion of Management that these funds would not be sufficient to enable the
Company to affect this registration under the Exchange Act and file periodic
reports until such time as it is able to generate revenues cash flow from its
operations. In fact, as of December 31, 2002 these funds had been fully expended
but management has not, as yet, found it necessary to disburse any additional
funds to sustain operations to date, but will do so, if and when deemed
necessary, as indicated hereinafter. Current funds having been expended and with
managements' assumption that the Company may not generate sufficient revenues
from operations, the Company will (a) be dependent upon management to fund
operations and/or (b) be dependent upon some form of debt or equity financing,
if available, and if available, under terms deemed reasonable to management The
management of the Company has orally committed to fund the Company on an "as
needed" basis for a period of one (1) year, with up to $50,000 in order to fund
operations for such 12 month period. Management has also verbally committed to
further fund up to an additional $50,000 if its' original estimate for funds
needed during such 12 month period proves to be understated. The funding
referred to is not subject to any limitations other than the dollar amounts
indicated.. The Company's auditors have included a "going concern" opinion in
their report on the Company's financial statements. See "Risk Factor 17
Independent Auditors' "Going Concern Opinion" for a discussion of the
significance of this qualification.
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ITEM III. DESCRIPTION OF PROPERTY
The Company currently leases 350 square feet of office space pursuant to a month
to month lease from a related party at a nominal cost. The Company believes that
its offices are sufficient for its current and short term anticipated needs and
that similar space is available in the general vicinity of its offices for
similar prices should the need arise.
ITEM IV. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 30, 2002, as adjusted for the
reincorporation merger into the Delaware corporation effected in November 2002,
information with respect to the beneficial ownership of the Company's
outstanding Common Stock by (i) each director and executive officer of the
Company, (ii) all directors and executive officers of the Company as a group,
and (iii) each shareholder who was known by the Company to be the beneficial
owner of more than 5% of the Company's outstanding Common Stock. Except as
otherwise indicated, the persons or entities listed below have sole voting and
investment power with respect to all shares of Common Stock beneficially owned
by them.
Name and Address of Number of Shares
Beneficial Owner1 Beneficially Owned1 Percentage of Class
-------------------------- ----------------------- ---------------------
Maureen Rogers 240,000 9.60%
Stephen D. Rogers 0 0
Edwin Osias 100 *
Boulder Hill, Inc. 240,000 3 9.60%
Karen Glenn 240,000 9.60%
Suzanne Keating 5,000 *
All officers and directors 245,000 9.80%
as a group (4persons)
* Represents less than 1% of the 2,500,000 outstanding shares of common
stock.
1 The address for each person is c/o Magic Communications, Inc., 5 West
Main Street, Elmsford, New York 10523.
2 Unless otherwise indicated, the Company believes that all persons named
in the table have sole voting and investment power with respect to all
shares of the Common Stock beneficially owned by them. A person is
deemed to be the beneficial owner of securities which may be acquired
by such person within 60 days from the date indicated above upon the
exercise of options, warrants or convertible securities. Each
beneficial owner's percentage ownership is determined by assuming that
options, warrants or convertible securities that are held by such
person (but not those held by any other person) and which are
exercisable within 60 days of the date indicated above, have been
exercised.
3 Boulder Hill, Inc. is a New York Corporation formed in March 1998 and
its sole shareholder is Georgia Rogers.
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Management has no plans to issue any additional securities to management,
promoters or their affiliates or associates and will do so only if such issuance
is in the best interests of shareholders of the Company and complies with all
applicable federal and state securities rules and regulations.
ITEM V. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors and executive officers currently serving the Company are as
follows:
Name Age Position Held and Tenure
Stephen D. Rogers 53 President and a Director since inception
Maureen Rogers 47 Vice President and a Director since inception
Edwin Osias 56 Director
Suzanne Keating 32 Secretary
The directors named above will serve until the first annual meeting of the
Company's stockholders. Thereafter, directors will be elected for one-year terms
at the annual stockholders' meeting. Officers will hold their positions at the
pleasure of the board of directors, absent any employment agreement, of which
none currently exists or is contemplated. There is no arrangement or
understanding between the directors and officers of the Company and any other
person pursuant to which any director or officer was or is to be selected as a
director or officer.
Biographical Information
STEPHEN D. ROGERS, President, has been in the communications business since 1997
along with his wife Maureen. He has installed and maintained hundreds of Public
Pay Phones and public access equipment including Internet kiosks in hotels,
hospitals, truck stops and multiple other locations. Prior to working in the
communication field, Mr. Rogers was a principal and founder in Magic
Restaurants, and its subsidiaries from September 1985 until December 1994, which
owned and operated over 30 restaurants throughout the Northeast. He graduated
from Queens College in 1971with a Bachelors degree in Psychology and Education
and is currently living in Westchester with his wife and 3 children.
MAUREEN ROGERS, Vice President and Secretary (the latter until late November
2002) has been in the communications business since January 1997 along with her
husband Stephen. In addition to the communications field, Mrs. Rogers is the
principal and founder of Just Desserts, a small baking business which she
continues to own and operate since 1992. She was born and raised in England and
is currently living in Westchester, New York with her husband and 3 children.
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EDWIN OSIAS, Director, is a former U.S. Naval Officer who worked from 1981
through 1985 with Chemical Bank as an officer, then from 1985 through 1998 as
the National Sales Manager for Tungsram and then from 1989 through 1994 as the
Executive Vice President for Sternberger Warehousing Trucking in Long Island
City, New York. He is currently the President and owner of Osias Sales Inc.
since 1994, a company which designs and produces custom ties and scarves for the
museum industry. He currently is married and resides in Long Island, New York.
SUZANNE KEATING, became Secretary of the Company in late November 2002, having
previously been employed by the Company since 1999 in administrative and
clerical capacities. Prior thereto and from 1994 until 1999, she was employed by
Magic Restaurant, Inc., holding positions from Accounts Payable Manager to
Office Manager until the firm filed for bankruptcy. From 1992 until 1994 Ms.
Keating was employed by Universal Hotels, a hotel management company. Ms.
Keating graduated in 1992 from the Westchester Business Institute in White
Plains, New York with an Associates Degree in Accounting and Business
Administration.
Indemnification of Officers and Directors
Article Ninth of the Company's Certificate of Incorporation provides for
indemnification of the Company's officers and directors to the fullest extent
permitted under the General Corporation Law of the State of Delaware ("DGCL").
SECTION 145 of the DGCL, as amended, applies to the Company and the
relevant portion of the DGCL provides as follows:
145. Indemnification of Officers, Directors, Employees and
Agents; Insurance.
(a) A corporation may indemnify any person who was or
is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
13
(b) A corporation may indemnify any person who was or
is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
(c) To the extent that a director, officer, employee
or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding
referred to in subsections (a) and (b) of this section, or in
defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection
therewith.
(d) Any indemnification under subsections (a) and (b)
of this section (unless ordered by a court) shall be made by
the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination
shall be made (1) by the board of directors by a majority vote
of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
14
(e) Expenses (including attorneys' fees) incurred by
an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may
be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of
this section shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another
capacity while holding such office.
(g) A corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him
against such liability under this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors,
officer and employees or agents, so that any person who is or
was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position
under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
15
(i) For purpose of this section, references to "other
enterprises" shall include employee benefit plans; references
to "fines" shall include any excise taxes assessed on a person
with respect to any employee benefit plan; and references to
"serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and
a person who acted in good faith and in a manner he reasonably
believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall,
unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is
therefore unenforceable.
ITEM VI. EXECUTIVE COMPENSATION
There are no written agreements or oral understandings as relates to executive
compensation. To date, there has not been any executive compensation paid or
accrued.
ITEM VII. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The New York predecessor to the Company was formed in January 1997 and sold 10
shares to its founder Maureen Rogers for $1,000. In connection with the
reincorporation merger into the Company, these shares were changed into
2,500,000 shares par value, $.0001 per share. Maureen Rogers then gifted all but
240,000 of her 2,500,000 shares to 109 persons or entities.
16
The Company has a 2 year consulting agreement with Magic Consulting Group, Inc.,
a company owned by Barbara Bennett, the adult niece of the Company's President
which provides consulting services. This is an oral agreement and no payments
have been made to date, however, the Company has accrued a payable of $52,306
for services performed. Magic Consulting was hired to assist and consult in
finding locations for communications equipment including public payphones and
public Internet terminals (kiosks). It assisted in designing a marketing package
as well as setting up appointments with various hotels in the New York
metropolitan area. The Company's President disclaims any beneficial interest in
this Agreement.
ITEM VIII. DESCRIPTION OF SECURITIES
General
The authorized capital stock of the Company currently consists of 50,000,000
shares of Common Stock, par value $.0001 per share, of which 2,500,000 were
issued and outstanding on the date of this filing, and 1,000,000 shares of
preferred stock, par value $.0001 per share, none of which were issued,
outstanding or designated as of the date of this filing.
Common Stock
Holders of Common Stock are entitled to one vote per share on all matters to be
voted on by stockholders generally, including the election of directors. Holders
of Common Stock do not have cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors if they chose to do so, and in such event, the
holders of the remaining shares will not be able to elect any persons to the
Board of Directors. The holders of Common Stock have no preemptive or other
subscription or conversion rights with respect to any stock issued by the
Company, The Common Stock is not subject to redemption, and the holders thereof
are not liable for further calls or assessments. Holders of Common Stock are
entitled to receive such dividends as may be declared by the Board of Directors
out of funds legally available therefore and to share pro-rata in any
distributions to the holders of Common Stock.
Transfer Agent
Continental Stock Transfer and Trust Company, 17 Battery Place, New York, New
York 10004.
Reports to Stockholders
The Company plans to furnish its stockholders with an annual report for each
fiscal year containing financial statements audited by its independent certified
public accountants. Additionally, the Company may, in its sole discretion, issue
unaudited quarterly or other interim reports to its stockholders when it deems
appropriate. The Company intends to comply with the periodic reporting
requirements of the Securities Exchange Act of 1934 for so long as it is subject
to those requirements.
17
Preferred Stock
The Preferred Stock is issuable with those rights, preferences, privileges and
the number of shares constituting each series to be fixed by our Board of
Directors without further action by the holders of common stock or Preferred
Stock. The Board of Directors could, without stockholder approval, issue
Preferred Stock with voting and conversion rights, which could dilute the voting
power of the holders of the Common Stock. The issuance of shares of Preferred
Stock by the Board of Directors could be utilized, under certain circumstances,
as a method of preventing a takeover of the Company. As of the date hereof, the
Board of Directors has not designated any series of Preferred Stock and has no
current plans to do so.
Stock Option Plan
Pursuant to the November 24, 2002 board of directors approval and subsequent
stockholder approval, the Company adopted its 2002 Non-Statutory Stock Option
Plan (the "Plan") whereby it reserved for issuance up to 1,500,000 shares of its
common stock. The Company intends to file a Registration Statement on Form S-8
so as to register those 1,500,000 shares of common stock underlying the
aforesaid options.
Management had issued 1,000,000 of the aforesaid options to certain current
members of its management team as well as other persons whom it considered to be
important to its current and proposed business activities. The individuals to
whom options were granted (Stephen D. Rogers, 250,00; Maureen Rogers, 500,000;
and Gary B. Wolff, 250,000) each thereafter agreed on December 13, 2002 with the
Company to void these options as if never issued and without receipt by any of
the option holders of any form of consideration.
As aforesaid, the board of directors, on November 24, 2002, adopted the
Company's 2002 Non-Statutory Stock Option Plan ("Plan") so as to provide a
critical long-term incentive for employees, non-employee directors, consultants,
attorneys and advisors of the Company and its subsidiaries, if any. The board of
directors believes that the Company's policy of granting stock options to such
persons will continue to provide it with a critical advantage in attracting and
retaining qualified candidates. In addition, the Plan is intended to provide the
Company with maximum flexibility to compensate plan participants. It is expected
that such flexibility will be an integral part of the Company's policy to
encourage employees, non-employee directors, consultants, attorneys and advisors
to focus on the long-term growth of stockholder value. The board of directors
believes that important advantages to the Company are gained by an option
program such as the 2002 Plan which includes incentives for motivating employees
of the Company, while at the same time promoting a closer identity of interest
between employees, non-employee directors, consultants, attorneys and advisors
on the one hand, and the stockholders on the other.
The principal terms of the Plan are summarized below, however it is not intended
to be a complete description thereof and such summary is qualified in its
entirety by the actual text of the Plan.
18
Summary Description of the Company's 2002 Non-Statutory Stock Option Plan
The purpose of the Non-Statutory Stock Option Plan ("Plan") is to provide
directors, officers and employees of, consultants, attorneys and advisors to the
Company and its subsidiaries, if any, with additional incentives by increasing
their ownership interest in the Company. Directors, officers and other employees
of the Company and its subsidiaries are eligible to participate in the Plan.
Options in the form of Non-Statutory Stock Options ("NSO") may also be granted
to directors who are not employed by the Company and consultants, attorneys and
advisors to the Company providing valuable services to the Company and its
subsidiaries. In addition, individuals who have agreed to become an employee of,
director of or an attorney, consultant or advisor to the Company and/or its
subsidiaries are eligible for option grants, conditional in each case on actual
employment, directorship or attorney, advisor and/or consultant status. The Plan
provides for the issuance of NSO's only, which are not intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code, as amended.
The board of directors of the Company or a Compensation Committee (once
established) will administer the Stock Option Plan with the discretion generally
to determine the terms of any option grant, including the number of option
shares, exercise price, term, vesting schedule and the post-termination exercise
period. Notwithstanding this discretion (i) the term of any option may not
exceed 10 years and (ii) an option will terminate as follows: (a) if such
termination is on account of termination of employment for any reason other than
death, without cause, such options shall terminate one year thereafter; (b) if
such termination is on account of death, such options shall terminate 15 months
thereafter; and (c) if such termination is for cause (as determined by the board
of directors and/or Compensation Committee), such options shall terminate
immediately. Unless otherwise determined by the board of directors or
Compensation Committee, the exercise price per share of common stock subject to
an option shall be equal to no less than 10 % of the fair market value of the
common stock on the date such option is granted. No NSO shall be assignable or
otherwise transferable except by will or the laws of descent and distribution or
except as permitted in accordance with SEC Release No.33-7646 as effective April
7, 1999.
The Stock Option Plan may be amended, altered, suspended, discontinued or
terminated by the board of directors without further stockholder approval,
unless such approval is required by law or regulation or under the rules of the
stock exchange or automated quotation system on which the common stock is then
listed or quoted. Thus, stockholder approval will not necessarily be required
for amendments which might increase the cost of the Stock Option Plan or broaden
eligibility except that no amendment or alteration to the Plan shall be made
without the approval of stockholders which would (a) decrease the NSO price
(except as provided in paragraph 9 of the Plan) or change the classes of persons
eligible to participate in the Plan or (b) extend the NSO period or (c)
materially increase the benefits accruing to Plan participants or (d) materially
modify Plan participation eligibility requirements or (e) extend the expiration
date of the Plan. Unless otherwise indicated the Stock Option Plan will remain
in effect until terminated by the board of directors.
19
PART II
ITEM I. MARKET PRICE AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
No public trading market exists for the Company's securities and all of its
outstanding securities are restricted securities as defined in Rule 144. There
were 110 holders of record of the Company's common stock on September 30, 2002,
as adjusted for the merger with the New York Corporation in November 2002. No
dividends have been paid to date and the Company's Board of Directors does not
anticipate paying dividends in the foreseeable future.
The Company plans to request or encourage a broker-dealer to act as a market
maker for the Company's securities. There are to date no understandings,
agreements or discussions in place with any such broker-dealer. Management
believes that establishing a trading market for the common stock would be in the
best interest of the Company's stockholders as it might facilitate capital
raising activities.
(a) MARKET PRICE. The Company's Common Stock is not quoted at the
present time.
Effective August 11, 1993, the Securities and Exchange Commission adopted Rule
15g-9, which established the definition of a "penny stock," for purposes
relevant to the Company, as any equity security that has a market price of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require: (i) that a broker or dealer approve a person's
account for transactions in penny stocks; and (ii) the broker or dealer receive
from the investor a written agreement to the transaction, setting forth the
identity and quantity of the penny stock to be purchased. In order to approve a
person's account for transactions in penny stocks, the broker or dealer must (i)
obtain financial information and investment experience and objectives of the
person; and (ii) make a reasonable determination that the transactions in penny
stocks are suitable for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Commission relating to the penny
stock market, which, in highlight form, (i) sets forth the basis on which the
broker or dealer made the suitability determination; and (ii) that the broker or
dealer received a signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
20
The National Association of Securities Dealers, Inc. (the "NASD"), which
administers NASDAQ, has recently made changes in the criteria for initial
listing on the NASDAQ Small Cap market and for continued listing. For initial
listing, a company must have net tangible assets of $4 million, market
capitalization of $50 million or net income of $750,000 in the most recently
completed fiscal year or in two of the last three fiscal years. For initial
listing, the common stock must also have a minimum bid price of $4 per share. In
order to continue to be included on NASDAQ, a company must maintain $1,000,000
in net tangible assets and a $1,000,000 market value of its publicly-traded
securities. In addition, continued inclusion requires two market-makers and a
minimum bid price of $1.00 per share. No assurance is given that the Company's
common stock will ever be listed on NASDAQ Small Cap or that any such listing,
if achieved, can be maintained. The failure of the Company to qualify its
securities or to meet the relevant maintenance criteria after such qualification
in the future may result in the discontinuance of the inclusion of the Company's
securities on a national exchange. In such events, trading, if any, in the
Company's securities may then continue in the non-NASDAQ over-the-counter
market. As a result, a shareholder may find it more difficult to dispose of, or
to obtain accurate quotations as to the market value of, the Company's
securities.
(b) HOLDERS. There are 110 holders of the Company's Common Stock.
Certificates evidencing the Common Stock issued by the Company to these persons
have all been stamped with a restrictive legend, and are subject to stop
transfer orders by the Company. For additional information concerning
restrictions that are imposed upon the securities held by current stockholders,
and the responsibilities of such stockholders to comply with federal securities
laws in the disposition of such Common Stock.
The Company has taken the following action to ensure that a public
re-distribution of the Shares does not take place:
i. a "restrictive" legend has been and will be placed on each
stock certificate issued to the present shareholders of the Company and their
permitted transferees;
ii. "stop transfer" order instructions have or will be placed
with respect to each such certificate;
iii. all shareholders have or will be placed on notice that
their securities will need to be sold in compliance with Rule 144 of the Act,
and may not be transferred otherwise;
iv. disclosure has been set forth throughout this Form 10SB
describing the above restrictions.
21
Redistribution - Rule 144
Rule 144 of the Securities Act lists criteria under which restricted securities
and securities held by affiliates or control persons may be resold without
registration. The rule prevents the creation of public markets in securities
when the issuers have not made adequate current information available to the
public. Preliminary Note to Securities Act Rule 144. The requirements of Rule
144(b) through (i) include provisions that:
1. current public information be available regarding the issuer of the
securities;
2. at least one year elapse between the time the securities are
acquired from an issuer or affiliate and the date the securities are resold
under the rule;
3. the amount of securities able to be sold is limited, depending on
whether the sale is by an affiliate or not;
4. the securities be sold in brokers' transactions or with a market
maker;
5. Commission Form 144 be filed depending on the size of the
transaction; and
6. the person filing the form has a bona fide intention to sell the
securities within a reasonable time following the filing of the form.
For non affiliated seller under Rule 144 there are exceptions to certain of the
requirements listed above for shares held for over two years.
(c) DIVIDENDS. The Company has not paid any dividends to date, and has
no plans to do so in the immediate future. Earnings, if any, will be retained to
fund the capital needs of the Company's planned business expansion.
ITEM II. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
No director, officer or affiliate of the Company, and no owner of record or
beneficial owner of more than 5.0% of the securities of the Company, or any
associate of any such director, officer or security holder is a party adverse to
the Company or has a material interest adverse to the Company in reference to
pending litigation.
ITEM III. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
22
ITEM IV. RECENT SALES OF UNREGISTERED SECURITIES
During January, 1997, the New York corporation which was merged with and into
the Company in November 2002, issued 10 shares to its founder, Maureen Rogers at
$100 per share for an aggregate consideration of $1,000. The transaction was
exempt pursuant to Section 4(2) of the Act as a transaction not involving any
public offering. Upon the merger of the New York Corporation with and into the
Company, these shares converted by operation of law as provided in the Agreement
and Plan of Merger into 2,500,000 shares. Ms. Rogers then made gifts of
2,260,000 to the Company's other 109 shareholders relying upon exemption
indicated below. The class of persons who received gifted securities limited to
family, friends and acquaintances of the Company's founder and management.
See also Part I, Item VIII with respect to the Company's 2002 Stock Option Plan
filed as an Exhibit hereto and pursuant to which certain options had been issued
but were immediately cancelled pursuant to mutual agreement. These options were
issued as follows:
Name No. of Options
Stephen D. Rogers 250,000
Maureen Rogers 500,000
Gary B. Wolff 250,000
Each of these options (originally issued on November 24, 2002) prior to being
voided, were exercisable at $.01 per share. No consideration was paid for such
options and none of these options were ever exercised nor was any consideration
paid to the option holders who agreed to cancellation.
As aforesaid, Maureen Rogers gifted an aggregate of 2,260,000 shares to 109
donees, each of whom made certain representations as to their intention to hold
their shares for investment. Each certificate for such shares has or will bear
an appropriate legend evidencing the restricted nature of each certificate
where applicable. The transaction was exempt pursuant to Section 4(2) of the Act
as a transaction not involving any public offering. As indicated above, the
class of persons who received gifted securities were limited to family, friends
and acquaintances of the Company's founder and management.
ITEM V. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Ninth of the Company's Certificate of Incorporation provides for
indemnification of the Company's officers and directors to the fullest extent
permitted under the General Corporation Law of the State of Delaware ("DGCL").
23
SECTION 145 of the DGCL, as amended, applies to the Company
and the relevant portion of the DGCL provides as follows:
145. Indemnification of Officers, Directors, Employees and
Agents; Insurance.
(a) A corporation may indemnify any person who was or
is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or
is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
24
(c) To the extent that a director, officer, employee
or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding
referred to in subsections (a) and (b) of this section, or in
defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection
therewith.
(d) Any indemnification under subsections (a) and (b)
of this section (unless ordered by a court) shall be made by
the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination
shall be made (1) by the board of directors by a majority vote
of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by
an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may
be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of
this section shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another
capacity while holding such office.
(g) A corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him
against such liability under this section.
25
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors,
officer and employees or agents, so that any person who is or
was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position
under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purpose of this section, references to "other
enterprises" shall include employee benefit plans; references
to "fines" shall include any excise taxes assessed on a person
with respect to any employee benefit plan; and references to
"serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and
a person who acted in good faith and in a manner he reasonably
believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall,
unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is
therefore unenforceable.
26
MAGIC COMMUNICATIONS GROUP, INC.
FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
INDEX
Page Number
--------------
FINANCIAL STATEMENTS:
Balance Sheet F - 2
Statements of Operations F - 3
Statements of Cash Flows F - 4
Notes to Financial Statements F - 5
MAGIC COMMUNICATIONS GROUP, INC.
BALANCE SHEET
SEPTEMBER 30, 2002
------------------
(Unaudited)
ASSETS
CASH $ 11,864
------------------
TOTAL CURRENT ASSETS 11,864
EQUIPMENT, net 81,703
SECURITY DEPOSITS 15,400
------------------
$ 108,967
==================
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 21,585
Due to related parties 63,623
------------------
TOTAL CURRENT LIABILITIES 85,208
STOCKHOLDER'S EQUITY:
Common stock, $.0001 par value;
authorized 50,000,000 shares;
issued and outstanding 2,500,000 shares 250
Preferred stock, $.0001 par value;
authorized 1,000,000 shares; -
issued and outstanding -0- shares
Additional paid-in capital 750
Retained earnings 22,759
------------------
TOTAL STOCKHOLDER'S EQUITY 23,759
------------------
$ 108,967
==================
The accompanying note is an integral part of the financial statements.
F-2
MAGIC COMMUNICATIONS GROUP, INC.
STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30,
---------------------------------------
2002 2001
------------ -----------
(Unaudited) (Unaudited)
SALES $ 69,021 $ 112,914
OPERATING EXPENSES:
Depreciation 12,639 12,959
Salaries 13,800 48,050
Equipment lease 11,697 25,366
Professional fees 2,225 4,667
General and administrative 24,125 30,783
-------- ---------
64,486 121,825
-------- ---------
NET INCOME (LOSS) $ 4,535 $ (8,911)
======== =========
BASIC AND DILUTED NET LOSS
PER SHARE $ 0.00 $ (0.00)
======= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
Basic and Diluted 2,500,000 2,500,000
========= =========
The accompanying note is an integral part of the financial statements.
F-3
MAGIC COMMUNICATIONS GROUP, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
---------------------------------------
2002 2001
------------ -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,535 $ (8,911)
-------- ---------
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation 12,959 12,639
Changes in assets and liabilities:
Other assets - 157
Accounts payable 171 (1,502)
-------- ---------
TOTAL ADJUSTMENTS 13,130 11,294
-------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 17,665 2,383
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - (9,547)
-------- ---------
NET CASH USED IN INVESTING
ACTIVITIES - (9,547)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments to)
related parties (5,800) 6,600
-------- ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES (5,800) 6,600
-------- ---------
NET INCREASE (DECREASE) IN CASH 11,865 (564)
CASH, BEGINNING OF PERIOD - 564
-------- ---------
CASH, END OF PERIOD $ 11,865 $ -
======== =========
The accompanying note is an integral part of the financial statements.
F-4
MAGIC COMMUNICATIONS GROUP, INC
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
-----------------------------------------------------
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements reflect all adjustments which,
in the opinion of management, are necessary for a fair presentation of the
financial position and the results of operations for the interim periods
presented. Certain financial information which is normally included in
financial statements prepared in accordance with generally accepted
accounting principles, but which is not required for interim reporting
purposes has been condensed or omitted.
F-5
MAGIC COMMUNICATIONS GROUP, INC.
FINANCIAL STATEMENTS
INDEX
Page Number
-------------------
INDEPENDENT AUDITORS' REPORT F - 1
FINANCIAL STATEMENTS:
Balance Sheet F - 2
Statements of Operations F - 3
Statements of Stockholders' Equity F - 4
Statements of Cash Flows F - 5
Notes to Financial Statements F - 6 to F - 9
INDEPENDENT AUDITORS' REPORT
Stockholder
Magic Communications Group, Inc.
We have audited the accompanying balance sheet of Magic Communications
Group, Inc. as of December 31, 2001 and the related statements of operations,
stockholder's equity and cash flows for the years ended December 31, 2001 and
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, the financial position of Magic Communications Group, Inc. as of
December 31, 2001 and the results of its operations and its cash flows for the
years ended December 31, 2001 and 2000 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has
incurred losses and has a working capital deficiency as more fully described in
Note 2. These issues raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Sherb & Co., LLP
----------------
Sherb & Co., LLP
Certified Public Accountants
New York, New York June 5, 2002,
except for Note 6 as to which the
date is November 24, 2002
F-1
MAGIC COMMUNICATIONS GROUP, INC.
BALANCE SHEET
DECEMBER 31, 2001
ASSETS
EQUIPMENT, net $ 73,705
SECURITY DEPOSITS 15,400
DUE FROM OFFICER 3,000
------------------
$ 92,105
==================
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 21,414
Due to related parties 72,423
------------------
TOTAL CURRENT LIABILITIES 93,837
STOCKHOLDER'S DEFICIT:
Common stock, $.0001 par value;
authorized 50,000,000 shares;
issued and outstanding 2,500,000 shares 250
Preferred stock, $.0001 par value;
authorized 1,000,000 shares;
issued and outstanding -0- shares -
Additional paid-in capital 750
Accumulated deficit (2,732)
------------------
TOTAL STOCKHOLDER'S DEFICIT (1,732)
------------------
$ 92,105
==================
The accompanying notes are an integral part of the financial statements.
F-2
MAGIC COMMUNICATIONS GROUP, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
----------------------------------
2001 2000
------------ -----------
(Unaudited) (Unaudited)
SALES $ 122,787 $ 162,820
OPERATING EXPENSES:
Depreciation 33,596 28,075
Salaries 58,450 43,821
Equipment lease 33,973 29,606
Professional fees 4,667 10,693
General and administrative 35,508 51,900
-------- --------
TOTAL OPERATING EXPENSES 166,194 164,095
-------- --------
NET LOSS $ (43,407) $ (1,275)
======== ========
BASIC AND DILUTED NET LOSS PER SHARE $ (0.02) $ (0.00)
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and Diluted 2,500,000 2,500,000
========= =========
The accompanying notes are an integral part of the financial statements.
F-3
MAGIC COMMUNICATIONS GROUP, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)
Common Stock Additional Total
------------------------ Paid-In Retained Stockholder's
Shares Amount Capital Earnings(Deficit) Equity (Deficit)
----------- ---------- ------------- --------------- ----------------
Balance, January 1, 2000 2,500,000 $ 250 750 $ 41,950 $ 42,950
Net loss - - - (1,275) (1,275)
----------- ---------- ------------- --------------- --------------
Balance, December 31, 2000 2,500,000 250 750 40,675 41,675
Net loss - - - (43,407) (43,407)
----------- ---------- ------------- --------------- --------------
Balance, December 31, 2001 2,500,000 $ 250 750 $ (2,732) $ (1,732)
=========== ========== ============= =============== ==============
The accompanying notes are an integral part of the financial statements.
F-4
MAGIC COMMUNICATIONS GROUP, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
----------------------------------
2001 2000
------------ -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (43,407) $ (1,275)
--------- ---------
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation 33,596 28,075
Changes in assets and liabilities:
Accounts payable (11,300) 3,646
--------- ---------
TOTAL ADJUSTMENTS 22,296 31,721
--------- ---------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (21,112) 30,445
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Return of security deposits 15,563 -
Capital expenditures (9,615) (45,601)
--------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 5,948 (45,601)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related parties 14,600 8,900
--------- ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 14,600 8,900
--------- ---------
NET DECREASE IN CASH (564) (6,256)
CASH, BEGINNING OF YEAR 564 6,820
--------- ---------
CASH, END OF YEAR $ - $ 564
========= =========
The accompanying notes are an integral part of the financial statements.
F-5
MAGIC COMMUNICATIONS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
1. DESCRIPTION OF BUSINESS:
------------------------
Magic Communications Group, Inc. ("Magic" or the "Company")
elected to file as an S Corporation in New York on January 16, 1997.
The Company was originally formed for the purpose of offering Internet
kiosks where the public could access the Internet for a fee. The
Company did not develop that business and the financial statements do
not include any amounts related to it. The Company's operations consist
primarily of owning and operating pay phones in New York, New Jersey
and Pennsylvania. This business commenced on February of 1997.
2. GOING CONCERN
-------------
The accompanying financial statements have been prepared on a
going-concern basis, which presumes that the Company will be able to
continue to meet its obligations and realize its assets in the normal
course of business.
As shown in the accompanying financial statements, the Company has a
history of losses with an accumulated deficit of $2,732 at December 31,
2001 and, as of that date, a working capital deficiency of $93,837.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to ultimately attain profitable
operations, generate sufficient cash flow to meet its obligations, and
obtain additional financing as may be required.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
A. Use of Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in
the United States of America requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reporting amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
B. Cash - The Company considers all highly liquid temporary cash
investments with an original maturity of three months or less
when purchased, to be cash equivalents.
C. Revenue recognition - The Company realizes net revenues
through the difference between what is in the coin box when it
is emptied and what it must pay to the property owner, Verizon
and long distance and local service providers as well as
payments from others for toll free calls.
F-6
D. Equipment - Equipment is recorded at cost. Expenditures for
major additions and betterment's are capitalized. Maintenance
and repairs are charged to operations as incurred.
Depreciation of equipment is computed by the straight-line
method over the assets estimated useful lives of ten years.
Upon sale or retirement of plant and equipment, the related
cost and accumulated depreciation are removed from the
accounts and any gain or loss is reflected in operations.
E. Security deposit - The Company makes a deposit in the amount
of $300 to Verizon for each pay telephone installed. The
purpose of these deposits is to secure amounts owed to Verizon
by the Company for monthly phone charges as describe in Note
5. This amount is returned to the Company after three years if
it is current with all it payments.
F. Fair value of financial instruments - The carrying amounts
reported in the balance sheet for cash, accounts payable, and
due to related parties approximate fair value based on the
short-term maturity of these instruments.
G. Income taxes - The Company follows Statement of
Financial Accounting Standards No. 109 - Accounting for
Income Taxes, which requires recognition of deferred tax
assets and liabilities for the expected future tax
consequences of events that have been included in the
financial statements or tax returns. Under this method,
deferred tax assets and liabilities are based on the
differences between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
Since the termination of the Company's S Corporation status in
November 2002 there are no material differences between the
financial statement and tax bases of assets and liabilities
using enacted tax rates in effect for the two months ended
December 31, 2002.
H. Stock based compensation - Financial Accounting Statement No.
123, Accounting for Stock Based Compensation, encourages, but
does not require companies to record compensation cost for
stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based
compensation using the intrinsic method prescribed in
Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations.
Accordingly, compensation cost for stock options is measured
as the excess, if any, of the quoted market price of the
Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock.
F-7
I. New Accounting Pronouncements - In July 2001, the Financial
Accounting Standards Board issued Statements of Financial
Accounting Standards No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets, effective for
fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be
amortized over their useful lives. The Company will apply the
new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of 2002. Application of
the non-amortization provisions of the Statement are not
expected to have a material effect on the Company's financial
position or operations.
In October 2001, the FASB issued Statement of Financial
Accounting Standards No. 144 ("SFAS 144"), "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supercedes
Statement of Financial Accounting Standards No. 121 ("SFAS
121"), "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" and certain
provisions of APB Opinion No. 30, "Reporting Results of
Operations - Reporting the Effects of Disposal of a Segment of
a Business and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions." SFAS 144 requires that
long-lived assets to be disposed of by sale, including
discontinued operations, be measured at the lower of carrying
amount or fair value, less cost to sell, whether reported in
continuing operations or in discontinued operations. SFAS 144
also broadens the reporting requirements of discontinued
operations to include all components of an entity that have
operations and cash flows that can be clearly distinguished,
operationally and for financial reporting purposes, from the
rest of the entity. The provisions of SFAS 144 are effective
for fiscal years beginning after December 15, 2001. Management
believes that the implementation of this standard will have no
impact on the Company's results of operations and financial
position.
4. EQUIPMENT:
---------
Equipment consists of the following at December 31, 2001:
Payphones $ 172,790
Less: accumulated depreciation (99,085)
-----------------
$ 73,705
=================
F-8
5. COMMITMENTS:
-----------
The Company rents office space from a related party on a month - to -
month basis at a nominal cost.
The Company has entered into third party agreements with Verizon, Qwest
and property or store owners of payphone locations. Verizon services
the local telephone calls made on the payphones owned and operated by
the Company. The Company pays Verizon $0.042 per minute for each call.
Qwest services the long-distance phone calls made on the payphones
owned and operated by the Company. The Company pays Qwest between $0.03
to $0.04 per minute on each long-distance call. The Company pays
Verizon and Qwest on a monthly basis. There is no expiration date on
the agreement with Verizon and the Qwest agreement renews annually. The
property or store owners allow the Company to place its phones on their
locations for a percentage of the money in the coin box of the
payphone.
6. DUE TO RELATED PARTIES:
-----------------------
At December 31, 2001, the Company has a payable to Magic Consulting of
$52,306 for consulting services performed. The Company also has
payables to various related parties in the amount of $20,117 and a
receivable from an officer in the amount $3,000. These transactions are
unsecured and non-interest bearing and have no specified payment terms.
7. SUBSEQUENT EVENTS
-----------------
In November 2002 the Company was merged into a Delaware corporation
which was created for the purpose of reincorporating the Company
accounted for as a reorganization of entities under common control. In
connection with the reincorporation merger the original shares of the
Company were changed into 2,500,000 shares, par value $.0001 per share.
All but 240,000 shares were gifted to 109 persons or entities. Shares
issued to an employee and a director of the Company will be treated as
compensation. The authorized capital stock of the Company consists of
50,000,000 shares of common stock, par value $.0001 per share, of which
2,500,000 were issued an outstanding as of the date of this filing, and
1,000,000 shares of preferred stock, par value $.0001 per share, none
of which were issued, outstanding or designated as of the date of this
filing.
On November 24, 2002, the board of directors and subsequent
shareholders approved the Company's 2002 Non-Statutory Stock Option
Plan (the "Plan") whereby it is reserved for issuance up to 1,500,000
shares of its common stock. Management has issued 1,000,000 of the
aforesaid options to certain members of its management team as well as
other persons whom it considers to be important to its current and
proposed business activities. All options are exercisable at $.01 per
share for a period of ten years from the date of issuance.
F-9
PART III
ITEM I. INDEX TO EXHIBITS
(b) Exhibits
*3(a) Articles of Incorporation
*3(b) Bylaws
*3(c) Certificate of Merger between the Company and Magic Communications
Group, Inc., a New York Corporation
***3(d) Agreement and Plan of Merger between the Company and Magic
Communications Group, Inc., a New York Corporation
*4(a) Specimen Stock Certificate
*10(a) 2002 Non-Statutory Stock Option Plan
**10 (b) Contract between Magic Communications, Inc. and Qwest
**10 (c) Contract between Magic Communications, Inc. and PPON
*21 Subsidiaries of the Company - None
ITEM 2. DESCRIPTION OF EXHIBITS
See Item I above.
* Filed with initial filing
** Filed with Amendment No. 1
*** Filed with Amendment No. 3
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Magic Communications, Inc.
By: /s/ Stephen Rogers
------------------
Stephen Rogers,
President
Date: October 9, 2003