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 June 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
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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: _____ shares of Common Stock as of
____________.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [ X ]
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(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. Financial Information
MAGIC COMMUNICATIONS GROUP, INC.
BALANCE SHEET
JUNE 30, 2004
(Unaudited)
ASSETS
EQUIPMENT, net $ 30,508
SECURITY DEPOSITS 3,850
DUE FROM RELATED PARTY 4,300
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$ 38,658
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 69,363
Cash overdraft 22,250
Loan payable 50,000
Short-term loan 5,000
Due to related parties 78,198
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TOTAL CURRENT LIABILITIES 224,811
STOCKHOLDERS' DEFICIT:
Common stock, $.0001 par value; authorized 50,000,000
shares; issued and outstanding 2,530,000 shares 253
Preferred stock, $.0001 par value; authorized 1,000,000
shares; issued and outstanding -0- shares -
Additional paid-in capital 8,900
Accumulated deficit (195,306)
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TOTAL STOCKHOLDERS' DEFICIT (186,153)
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$ 38,658
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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 June 30, For the Six Months Ended June 30,
------------------------------------- ------------------------------------
2004 2003 2004 2003
----------------- ----------------- ----------------- ----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NET SALES $ 13,411 $ 20,591 $ 13,774 $ 46,221
OPERATING EXPENSES:
Depreciation 4,319 4,320 8,639 8,639
Salaries 7,600 7,000 13,800 13,000
Equipment lease 187 1,353 592 2,912
Professional fees 1,087 1,500 6,837 11,000
General and administrative 16,172 11,494 42,816 22,747
TOTAL OPERATING EXPENSES 29,365 25,667 72,684 58,298
NET LOSS $ (15,954) $ (5,076) $ (58,910) $ (12,077)
================= ================= ================= ================
BASIC AND DILUTED NET LOSS PER SHARE $ (0.01) $ (0.00) $ (0.02) $ (0.00)
================= ================= ================= ================
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 Six Months Ended June 30,
---------------------------------------
2004 2003
-------------------- ----------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (58,910) $ (12,077)
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Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation 8,639 8,639
Changes in assets and liabilities:
Cash Overdraft 22,250
Accounts payable and accrued expenses 11,020 9,341
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TOTAL ADJUSTMENTS 41,909 17,980
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NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (17,001) 5,903
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CASH FLOWS FROM INVESTING ACTIVITIES:
Return of security deposits 7,700 -
-------------------- ----------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 7,700 -
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related parties 4,500 -
-------------------- ----------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 4,500 -
NET INCREASE (DECREASE) IN CASH (4,801) 5,903
CASH, BEGINNING OF PERIOD 4,801 -
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CASH, END OF PERIOD $ - $ 5,903
==================== ================
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 SIX MONTHS ENDED JUNE 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 six months ended June 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 ($186,153) and working capital deficit
of ($224,811) at June 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
Six Months Ended June 30, 2004 vs. Six Months Ended June 30, 2003
Net sales decreased from $46,221 in the six months ended June 30, 2003 to
$13,744 in the six months ended June 30, 2004. This decrease is attributable to
a reduction in telephones and continued increase in cell phone usage. Operating
expenses increased from $58,298 or 126% of net sales to $72,684 or 528% of net
sales. The change in operating expenses was due to the following items: (i) an
increase in salaries of $800 from $13,000 in 2003 to $13,800 in 2004; (ii) a
decrease in lease payments for phone equipment (leases expired in March 2002) of
$2,320 from $2,912 for the six months ended June 30, 2003 to $592 for the six
months ended June 30, 2004; (iii) a increase in general and administrative
expenses of $20,069 from $22,747 for the six months ended June 30, 2003 to
$42,816 for the six months ended June 30, 2004; and (iv) a decrease in
professional fees of $4,163 from $11,000 in the six months ended June 30, 2003
to $6,837 in the six months ended June 30, 2004. Since sales decreased and
operating expenses increased, the Company's net loss increased from ($12,077) in
the six months ended June 30, 2003 to ($58,910) in the six months ended June 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 June 30, 2004 the Company had a cash overdraft of $22,250. 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.
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,
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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
Item 2. Changes in Securities and Small Business Issuer Purchases of Equity
Securities:
None
Item 3. Defaults Upon Senior Securities:
None
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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)
By: /s/ Stephen D. Rogers
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Stephen D. Rogers, President and
Chief Accounting Officer