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 March 31, 2005
[ ]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
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(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: 3,080,000 shares of Common Stock as
of June 22, 2005.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
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(1) The late filing of this Form 10-QSB makes the Registrant current with
respect to its '34 Act reporting requirements.
MAGIC COMMUNICATIONS GROUP, INC.
BALANCE SHEET
March 31, 2005
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 1,904
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TOTAL CURRENT ASSETS 1,904
EQUIPMENT, net 17,547
DUE FROM RELATED PARTY 1,500
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$ 20,951
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 34,052
Loan payable 50,000
Due to related parties 98,391
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TOTAL CURRENT LIABILITIES 182,443
STOCKHOLDERS' DEFICIT:
Preferred stock, $.0001 par value; authorized
1,000,000 shares; issued and outstanding -0- shares -
Common stock, $.0001 par value; authorized
50,000,000 shares; issued and outstanding
2,880,000 shares 288
Additional paid-in capital 83,865
Accumulated deficit (245,645)
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TOTAL STOCKHOLDERS' DEFICIT (161,492)
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$ 20,951
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The accompanying notes are an integral part of the financial statements.
MAGIC COMMUNICATIONS GROUP, INC.
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31,
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2005 2004
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(Unaudited) (Unaudited)
REVENUES $ 19,819 $ 363
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OPERATING EXPENSES:
Depreciation 4,320 4,320
Salaries 7,910 6,200
Equipment lease - 405
Professional fees 8,300 5,750
General and administrative 22,856 26,644
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TOTAL OPERATING EXPENSES 43,386 43,319
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NET LOSS $ (23,567) $ (42,956)
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BASIC AND DILUTED NET LOSS PER SHARE $ (0.01) $ (0.02)
==================== ===================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic and Diluted 2,813,333 2,530,000
==================== ===================
The accompanying notes are an integral part of the financial statements.
MAGIC COMMUNICATIONS GROUP, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
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2005 2004
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(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (23,567) $ (42,956)
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Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation 4,320 4,320
Changes in assets and liabilities:
Accounts payable 300 21,343
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TOTAL ADJUSTMENTS 4,620 25,663
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NET CASH USED IN OPERATING ACTIVITIES (18,947) (17,293)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Return of security deposits - 3,850
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NET CASH PROVIDED BY INVESTING ACTIVITIES - 3,850
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock issued for cash 20,000 -
Cash overdraft - 8,642
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NET CASH PROVIDED BY FINANCING ACTIVITIES 20,000 8,642
NET (DECREASE) INCREASE IN CASH 1,053 (4,801)
CASH, BEGINNING OF PERIOD 851 4,801
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CASH, END OF PERIOD $ 1,904 $ -
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Cash paid for:
Interest $ - $ -
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Taxes $ 309 $ 100
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The accompanying notes are an integral part of the financial statements.
MAGIC COMMUNICATIONS GROUP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(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 three months ended March 31, 2005 are not necessarily indicative
of results that may be expected for the year ending December 31, 2005. 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,
2004.
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 ($161,492) and working capital deficit
of ($180,539) at March 31, 2005. In addition, the Company's cash account is
$1,904. 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.
NOTE 3. COMMON STOCK
From March 24, 2005 through June 3, 2005, the Company sold 300,000 shares of its
common stock (100,000 shares on March 24, 2005 for $20,000 and 200,000 shares on
June 3, 2005 for $40,000). There were no underwriters. All securities were sold
for cash for aggregate gross proceeds of $60,000.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Three Months Ended March 31, 2005 vs. Three Months Ended March 31, 2004
Net sales increased from $363 in the three months ended March 31, 2004 to
$19,819 in the three months ended March 31, 2005. This increase is attributable
to a switch in telephone carriers in which a favorable flat rate pricing
structure was obtained. Operating expenses increased from $43,319 to $43,386.
The change in operating expenses was due to the following items: (i) an increase
in salaries from $6,200 in 2004 to $7,910 in 2005; (ii) a decrease in lease
payments for phone equipment (leases expired in March 2002) of $405 from $405
for the three months ended March 31, 2004 to $0 for the three months ended March
31, 2005; (iii) a decrease in general and administrative expenses of $3,788 from
$26,644 for the three months ended March 31, 2004 to $22,856 for the three
months ended March 31, 2005; and (v) an increase in professional fees of $2,550
from $5,750 in the three months ended March 31, 2004 to $8,300 in the three
months ended March 31, 2005. Since sales increased and operating expenses
increased, the Company's net loss decreased from ($42,956) in the three months
ended March 31, 2004 to ($23,567) in the three months ended March 31, 2005. The
number of pay telephones in service was approximately 150 telephones during the
three months ended March 31, 2004 and 80 telephones during the three months
ended March 31, 2005.
Liquidity and Capital Resources
On March 31, 2005 the Company had only $1,904 cash on hand. 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, 2004.
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.
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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds:
a. From March 24, 2005 through June 3, 2005, the company sold 300,000 shares of
its common stock (100,000 shares on March 24, 2005 for $20,000 and 200,000
shares on June 3, 2005 for $40,000). There were no underwriters. All securities
were sold for cash for aggregate gross proceeds of $60,000. The transaction
referred to herein is claimed to be exempt from registration in accordance rule
506D and section 4(2) of the 33 act as transactions by an issuer not involving
any public offering
b. All proceeds received were utilized for working capital and related corp.
expenses.
c. There were no Company repurchases of equity securities during the period
covered by this Form 10-QSB.
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Securityholders: 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
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.
June 22, 2005
Magic Communications, Inc.
(Registrant)
By: /s/ Stephen D. Rogers
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Stephen D. Rogers,
Chief Executive Officer and Chief
Accounting Officer