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, 2003
[ ] 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
(Address of principal executive offices)
(914) 345-0800
(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[X]No[ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 2,500,000 shares of Common
Stock as of December 18, 2003.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
MAGIC COMMUNICATIONS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet - September 30, 2003 (Unaudited)
Statements of Operations (Unaudited) -
Three Months and Nine Months Ended September 30, 2003 and 2002
Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 2003 and 2002
Notes to Financial Statements (Unaudited) -
Nine Ended September 30, 2003 and 2002
Item 2. Management's Discussion and Analysis or Plan of Operation
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
MAGIC COMMUNICATIONS GROUP, INC.
BALANCE SHEET
SEPTEMBER 30, 2003
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 4,698
------------
TOTAL CURRENT ASSETS 4,698
EQUIPMENT, net 39,148
SECURITY DEPOSITS 15,400
DUE FROM RELATED PARTY 3,800
------------
$ 63,046
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 48,868
Due to related parties 67,306
------------
TOTAL CURRENT LIABILITIES 116,174
STOCKHOLDERS' 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 5,903
Accumulated deficit (59,281)
------------
TOTAL STOCKHOLDERS' DEFICIT (53,128)
------------
$ 63,046
============
The accompanying notes are an integral part of the financial statements.
MAGIC COMMUNICATIONS GROUP, INC.
STATEMENTS OF OPERATIONS
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ----------- ----------
(Unaudited) (Unaudited)(Unaudited) (Unaudited)
NET SALES $ 63,734 $ 35,304 $ 109,955 $ 69,021
---------- ---------- ----------- ----------
OPERATING EXPENSES:
Depreciation 8,639 4,320 17,278 12,639
Salaries 7,000 3,000 20,000 13,800
Equipment lease 523 713 3,435 11,697
Professional fees 25,425 - 36,425 3,775
General and administrative 31,191 7,159 53,938 22,575
---------- ---------- ----------- ----------
TOTAL OPERATING EXPENSES 72,778 15,192 131,076 64,486
---------- ---------- ----------- ----------
NET INCOME (LOSS) $ (9,044)$ 20,112 $ (21,121)$ 4,535
========== ========== =========== ==========
BASIC AND DILUTED NET LOSS
PER SHARE $ (0.00)$ 0.01 $ (0.01)$ 0.00
========== ========== =========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic and Diluted 2,500,000 2,500,000 2,500,000 2,500,000
========== ========== =========== ==========
The accompanying notes are an integral part of the financial statements.
MAGIC COMMUNICATIONS GROUP, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
----------------------------------------------
2003 2002
---------------------- ---------------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (21,121) $ 4,535
---------------------- ---------------------
Adjustments to reconcile net income (loss)
to net cash (used in) provided
by operating activities:
Depreciation 17,278 12,959
Changes in assets and liabilities:
Accounts payable and accrued expenses 9,341 171
---------------------- ---------------------
TOTAL ADJUSTMENTS 26,619 13,130
---------------------- ---------------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES 5,498 17,665
---------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES - -
---------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to related parties (800) (5,800)
---------------------- ---------------------
NET CASH USED IN FINANCING ACTIVITIES (800) (5,800)
---------------------- ---------------------
NET INCREASE IN CASH 4,698 11,865
CASH, BEGINNING OF PERIOD - -
---------------------- ---------------------
CASH, END OF PERIOD $ 4,698 $ 11,865
====================== =====================
The accompanying notes are an integral part of the financial statements.
MAGIC COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(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 six months ended September 30, 2003 are not necessarily
indicative of results that may be expected for the year ending December 31,
2003. 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, 2002.
NOTE 2. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
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 ($53,128) and working capital deficit of
($111,476) at September 30, 2003. In addition, the Company's only current asset
is cash of $4,698. 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. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies under what circumstances a contract with initial investments meets the
characteristics of a derivative and when a derivative contains a financing
component. SFAS No. 149 is effective for contracts entered into or modified
after June 30, 2003. The Company does not expect that the adoption of SFAS No.
149 will have a significant effect on the Company's financial statement
presentation or disclosures.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
establishes standards for how an issuer classifies and measures in its statement
of financial position certain financial instruments with characteristics of both
liabilities and equity. SFAS No. 150 requires that an issuer classify a
financial instrument that is within its scope as a liability (or an asset in
some circumstances) because that financial instrument embodies an obligation of
the issuer. SFAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003 and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. SFAS No. 150 is to be
implemented by reporting the cumulative effect of a change in accounting
principle for financial instruments created before the issuance date of SFAS No.
150 and still existing at the beginning of the interim period of adoption.
Restatement is not permitted. The Company does not expect that the adoption of
SFAS No. 150 will have a significant effect on the Company's financial statement
presentation or disclosures.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Nine Months Ended September 30, 2003 vs. Nine Months Ended September 30, 2002
Net sales increased from $69,021 in the nine months ended September 30, 2002 to
$109,955 in the nine months ended September 30, 2003. This increase is directly
attributable to a reduction in telephone expenses when the Company changed its
local service provider. Operating expenses increased from $64,486 or 93% of net
sales to $131,076 or 119% of net sales. The change in operating expenses was due
to the following items: (i) an increase in salaries of $6,200 from $13,800 in
2002 to $20,000 in 2003; (ii) a decrease in lease payments for phone equipment
(leases expired in March 2002) of $8,262 from $11,697 for the nine months ended
September 30, 2002 to $3,435 for the nine months ended September 30, 2003; (iii)
a increase in general and administrative expenses of $31,363 from $22,575 for
the nine months ended September 30, 2002 to $53,938 for the nine months ended
September 30, 2003; and (iv) an increase in professional fees of $32,650 from
$3,775 in the nine months ended September 30, 2002 to $36,425 in the nine months
ended September 30, 2003 associated with additional registration costs. The
number of pay telephones in service during the nine months ended September 30,
2002 and September 30, 2003 were approximately 150 telephones throughout these
periods.
Liquidity and Capital Resources
On September 30, 2003 the Company had only $4,698 cash on hand. It was the
opinion of Management that this lack of significant 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 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 contained in the Company's 10-KSB for the year ended
December 31, 2002.
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.
Item III. Controls and Procedures.
Our management, under the supervision and with the participation of 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 their evaluation, our
chief executive officer and chief accounting officer have 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
Item 2. Changes in Securities. None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
Exhibits
(a) 31 302 Certification by President and Chief Accounting Officer
32 906 Certification by President and Chief Accounting Officer
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MAGIC COMMUNICATIONS, INC.
(Registrant)
/s/ Stephen D. Rogers
By:______________________________
Date: December 19, 2003 Stephen D. Rogers, President
and Chief Accounting Officer