UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT For the transition period from _______ to ____________
Commission file number: 0-50090
MAGIC COMMUNICATIONS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3926203
--------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5 West Main Street, Elmsford, New York 10523
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(Address of principal executive offices)
(914) 345-0800
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(Issuer's telephone number)
Check whether the registrant (1) filed all reports required to be filed by
Section l3 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes[ ] (1)No[ X ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: _____ shares of Common Stock as of
____________.
Transitional Small Business Disclosure Format (Check one):
Yes[ ] No [ X ]
----------------------
(1) The Registrant filed its Form 10-KSB for year ended December 31, 2003
on March 4, 2005. Each of its Forms 10-QSB for quarters ended March 31, 2004,
June 30, 2004 and September 30, 2004 were or are being filed in May 2005.
Subsequent to the filing of such Forms 10-QSB, the Registrant will remain
delinquent in its '34 Act reporting requirements until such time as it files its
Form 10-KSB for year ended December 31, 2004 as well as its Form 10-QSB for
quarter ended March 31, 2005.
PART I
MAGIC COMMUNICATIONS GROUP, INC.
BALANCE SHEET
SEPTEMBER 30, 2004
(Unaudited)
ASSETS
EQUIPMENT, net $ 26,187
DUE FROM RELATED PARTY 4,300
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$ 30,487
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 81,552
Cash overdraft 8,991
Loan payable 50,000
Short-term loan 5,000
Due to related parties 93,889
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TOTAL CURRENT LIABILITIES 239,432
STOCKHOLDERS' DEFICIT:
Common stock, $.0001 par value; authorized 50,000,000
shares; issued and outstanding 2,530,000 shares 253
Preferred stock, $.0001 par value; authorized 1,000,000
shares; issued and outstanding -0- shares -
Additional paid-in capital 8,900
Accumulated deficit (218,098)
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TOTAL STOCKHOLDERS' DEFICIT (208,945)
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$ 30,487
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The accompanying notes are an integral part of the financial statements.
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MAGIC COMMUNICATIONS GROUP, INC.
STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, For the Nine Months Ended September 30,
---------------------------------------- ---------------------------------------
2004 2003 2004 2003
------------------- ------------------ ------------------ -----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NET SALES $ 13,835 $ 63,734 $ 27,609 $ 109,955
------------------- ------------------ ------------------ -----------------
OPERATING EXPENSES:
Depreciation 4,320 8,639 12,959 17,278
Salaries 5,371 7,000 19,171 20,000
Equipment lease 138 523 730 3,435
Professional fees 13,160 25,425 19,997 36,425
General and administrative 13,638 31,191 56,455 53,938
------------------- ------------------ ------------------ -----------------
TOTAL OPERATING EXPENSES 36,627 72,778 109,312 131,076
------------------- ------------------ ------------------ -----------------
NET LOSS $ (22,792) $ (9,044)$ (81,703) $ (21,121)
=================== ================== ================== =================
BASIC AND DILUTED NET LOSS PER SHARE $ (0.01) $ (0.00) $ (0.03) $ (0.01)
=================== ================== ================== =================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and Diluted 2,530,000 2,500,000 2,530,000 2,500,000
=================== ================== ================== =================
The accompanying notes are an integral part of the financial statements.
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MAGIC COMMUNICATIONS GROUP, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
----------------------------------------
2004 2003
----------------- ----------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (81,703) $ (21,121)
----------------- ----------------
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation 12,959 17,278
Changes in assets and liabilities:
Cash overdraft 8,991 -
Accounts payable and accrued expenses 23,209 9,341
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TOTAL ADJUSTMENTS 45,159 26,619
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NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (36,543) 5,498
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Return of security deposits (11,550) -
----------------- ----------------
NET CASH PROVIDED BY INVESTING ACTIVITIES (11,550) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related parties 20,192 (800)
----------------- ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 20,192 (800)
NET INCREASE IN CASH (27,901) 4,698
CASH, BEGINNING OF PERIOD 4,801 -
----------------- ----------------
CASH, END OF PERIOD $ - $ 4,698
================= ================
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest $ - $ -
================= ================
Cash paid for taxes $ 100 $ -
================= ================
The accompanying notes are an integral part of the financial statements.
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MAGIC COMMUNICATIONS GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and the instructions to Form 10-QSB. Accordingly, they do not include all
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. Operating
results for the nine months ended September 30, 2004 are not necessarily
indicative of results that may be expected for the year ending December 31,
2004. For further information, refer to the audited financial statements and
footnotes thereto included in the Company's Form 10-KSB for the year ended
December 31, 2003.
NOTE 2. GOING CONCERN
The accompanying financial statements have been prepared in conformity with U.S.
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has incurred recurring losses
resulting in a stockholders' deficit of ($208,945) and working capital deficit
of ($239,432) at September 30, 2004. In addition, the Company's cash account is
$0. These factors raise substantial doubt about the Company's ability to
continue as a going concern. The accompanying financial statements do not
include any adjustments relating to the recoverability and classification of
recorded assets, or the amounts and classification of liabilities that might be
necessary in the event the Company cannot continue in existence.
In view of these matters, the continued existence of the Company is dependent
upon its ability to meet its financing requirements and, ultimately, the success
of its planned future operations. There can be no assurance that the Company
will obtain the necessary financing nor that the planned future operations will
be successful.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Nine Months Ended September 30, 2004 vs. Nine Months Ended September 30, 2003
Net sales decreased from $109,955 in the nine months ended September 30, 2003 to
$27,609 in the nine months ended September 30, 2004. This decrease is
attributable to a reduction in telephones and continued increase in cell phone
usage. Operating expenses decreased from $131,076 or 120% of net sales to
$109,312 or 396% of net sales. The change in operating expenses was due to the
following items: (i) an decrease in salaries of $829 from $20,000 in 2003 to
$19,171 in 2004; (ii) a decrease in lease payments for phone equipment (leases
expired in March 2002) of $2,705 from $3,435 for the nine months ended September
30, 2003 to $730 for the nine months ended September 30, 2004; (iii) a increase
in general and administrative expenses of $2,517 from $53,938 for the nine
months ended September 30, 2003 to $56,455 for the nine months ended September
30, 2004; and (v) a decrease in professional fees of $16,428 from $36,425 in the
nine months ended September 30, 2003 to $19,997 in the nine months ended
September 30, 2004. Since sales decreased and operating expenses decreased, the
Company's net loss increased from ($21,121) in the nine months ended September
30, 2003 to ($81,703) in the nine months ended September 30, 2004. The numbers
of pay telephones in service was approximately 150 telephones during the three
months ended March 31, 2003 and 100 telephones during the three months ended
March 31, 2004.
Liquidity and Capital Resources
On September 30, 2004 the Company had a cash overdraft of $8,991. It was the
opinion of Management that the lack of funds would not enable the Company to
affect its registration under the Exchange Act and file periodic reports until
such time as it is able to generate revenues/cash flow from its operations.
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. The Company's auditors
have included a "going concern" opinion in their report on the Company's
financial statements contained in the Company's 10-KSB for the year ended
December 31, 2003.
Need for Additional Financing
The Company believes that its existing capital will be insufficient to meet the
Company's cash needs, including costs of compliance with the continuing
reporting requirements of the Securities Exchange Act of 1934, as amended. The
Company may rely upon issuance of its securities to pay for services necessary
to meet reporting requirements.
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Off -Balance Sheet Arrangements
The Company does not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on its financial condition, changes in its financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.
Forward-Looking Statements
When used in this form 10-QSB, or in any document incorporated by reference
herein, the words or phrases "will likely result", "are expected to," "will
continue," "is anticipated," "estimate," "project," or similar expressions are
intended to identify "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties including changes in economic conditions in the
Company's market area, changes in policies by regulatory agencies, fluctuations
in interest rates, demand for loans in the Company's market area and
competition, that could cause actual results to differ materially from
historical earnings, if any, and those presently anticipated or projected. The
Company wishes to caution readers not to place undue reliance on any such
Forward- looking statements, which speak only as to the date made. The Company
wishes to advise readers that the factors listed above, or in its 10-SB
Registration Statement Risk Factor Section, could affect the Company's financial
performance and could cause the Company's actual results for future periods to
differ materially from any opinions or statements expressed with respect to
future periods in any current statements. The Company does not undertake, and
specifically disclaims any obligation, to publicly release the result of any
revisions, which may be made to any forward-looking statements to reflect events
or circumstances after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.
Item 3. CONTROLS AND PROCEDURES
Our management, Stephen D. Rogers, our chief executive officer and chief
accounting officer, conducted an evaluation of our "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 (the "Exchange
Act") Rules 13a-14(c)). Based on his evaluation, our chief executive officer and
chief accounting officer has concluded that as of the Evaluation Date, our
disclosure controls and procedures are effective to ensure that all material
information required to be filed in this Quarterly Report on Form 10-QSB has
been made known to them in a timely fashion.
There have been no significant changes (including corrective actions with regard
to significant deficiencies or material weaknesses) in our internal controls or
in other factors that could significantly affect these controls subsequent to
the Evaluation Date set forth above.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
None
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Item 2. Changes in Securities and Small Business Issuer Purchases of
Equity Securities:
None
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Shareholders:
None
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
None
Exhibit Number Description
31.1 Section 302 Certification of Chief Executive Officer
and Chief Financial Officer
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of The Sarbanes-Oxley
Act of 2002
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 20, 2005
Magic Communications, Inc.
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(Registrant)
/s/ Stephen D. Rogers
By:
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Stephen D. Rogers, President and
Chief Accounting Officer