UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
________________________
AMENDMENT
NO. 2 TO FORM 8-K
________________________
CURRENT
REPORT
Pursuant
To Section 13 OR 15(d) of The Securities Exchange Act of
1934
EDULINK,
INC.
(Exact
Name of Registrant as Specified in Charter)
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Nevada
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95-4562316
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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1122
Coney Island Avenue, Suite 210, Brooklyn, New
York
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11230
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code:
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(718)
947-1100
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(Former
Name or former address, if changed since last report.)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
□
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
□
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR
240.14-12)
□
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
□
Pre-commencement communications pursuant to Rule 13-e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Explanatory
Note
This
Amendment No. 2 to Form 8-K is filed to include financial statements
through
July 31, 2006.
FORWARD
LOOKING STATEMENTS
This
Form 8-K and other reports filed by Registrant from time to time with the
Securities and Exchange Commission (collectively the “Filings”) contain or may
contain forward looking statements and information that are based upon
beliefs
of, and information currently available to, Registrant’s management as well as
estimates and assumptions made by Registrant’s management. When used in the
filings the words “anticipate”, “believe”, “estimate”, “expect”, “future”,
“intend”, “plan” or the negative of these terms and similar expressions as they
relate to Registrant or Registrant’s management identify forward looking
statements. Such statements reflect the current view of Registrant with
respect
to future events and are subject to risks, uncertainties, assumptions and
other
factors relating to Registrant’s industry, Registrant’s operations and results
of operations and any businesses that may be acquired by Registrant. Should
one
or more of these risks or uncertainties materialize, or should the underlying
assumptions prove incorrect, actual results may differ significantly from
those
anticipated, believed, estimated, expected, intended or planned.
Although
Registrant believes that the expectations reflected in the forward looking
statements are reasonable, Registrant cannot guarantee future results,
levels of
activity, performance or achievements. Except as required by applicable
law,
including the securities laws of the United States, Registrant does not
intend
to update any of the forward-looking statements to conform these statements
to
actual results.
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Section
1
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-
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Registrant’s
Business and Operations
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Item
1.01
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Entry
into a Material Definitive
Agreement.
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On
August
10, 2006, EduLink, Inc., a Nevada corporation (“EduLink”, the “Company”, “we”,
or “us”), certain EduLink Shareholders; Mega Media Group, Inc., a New York
Corporation (“MMG”), and MMG Shareholders, entered into a Stock Purchase
Agreement and Share Exchange (the “Merger Agreement”) pursuant to which MMG will
become a wholly-owned subsidiary of the Company (the “Merger”).
On
August
11, 2006 (the “Closing Date”), we acquired all of the outstanding capital stock
of MMG in exchange for the issuance to the MMG Shareholders, upon the increase
in the authorized capital stock, of a total number of shares of Edulink
common
stock, which will represent, and equate to, 90% of Edulink’s issued and
outstanding common stock after the transaction is closed. Such shares will
be
restricted in accordance with Rule 144 of the 1933 Securities Act. As further
consideration for the acquisition, on the Closing Date, Edulink obtained
from a
majority of its shareholders duly executed irrevocable proxies to vote
their
shares for a period of 120 days or until such time as 90% of EduLink’s shares
are issued to the MMG Shareholders, and delivered them to MMG and its
shareholders, along with the aforementioned EduLink shareholders’ share
certificates to be held in escrow. Upon the closing of the Merger, MMG
became a
wholly-owned subsidiary of us. Upon the increase in the authorized capital
stock, and issuance to the MMG Shareholders of 90% of the outstanding common
stock, the former stockholders of the Company will own 10% of the issued
and
outstanding Common Stock of EduLink.
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Section
2
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-
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Financial
Information
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Item
2.01
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Completion
of Acquisition or Disposition of
Assets.
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Overview
On
August
11, 2006, the Merger described in Item 1.01 was completed (the “Closing”). After
the Closing, the Company had outstanding 1,500,000,000 shares of Common
Stock,
of which 745,310,596 shares of Common Stock constitutes the Company’s current
“public float”. As a result of the Merger, MMG’s Shareholders became the
majority shareholders of us.
Shares
of
our Common Stock were approved for public trading on the Over the Counter
(OTC)
Bulletin Board Market in November 1999 and traded under the symbol (MYIQ.OB)
until May 3, 2000. The Company’s shares resumed trading on the OTC Bulletin
Board on July 24, 2000 after filing a registration statement on Form
10.
Changes
Resulting from the Merger
We
intend
to discontinue our business of web-based integrated learning content management
and delivery systems. Instead, we will operate our business through our
wholly-owned subsidiary MMG, which is a multi-media holding company operating
its business through its wholly-owned subsidiaries, Mega Media Studios,
Inc.,
Mega Media Records, Inc. d/b/a Skeleton Key Entertainment, Mega Media Film,
Inc., Mega Media Sports Entertainment, Inc. and Echo Broadcasting Group,
Inc.
MMG also has a non-operating subsidiary, VSE Magazine, Inc. MMG focuses
its
business in mainstream entertainment and media and Russian ethnic media.
We have
also relocated our principal executive offices to those of Mega Media Group
at
1122 Coney Island Avenue, Suite 210, Brooklyn, New York 11230, and our
new
telephone number is (718) 947-1100.
Under
Nevada law, the Board of Directors of Edulink approved the completion of
the
Merger and its related transactions without stockholder approval, as Nevada
Revised Statutes does not require stockholder approval from the acquiring
entity
in an acquisition. The Merger and its related transactions were approved
by the
MMG Board of Directors and the requisite number of MMG stockholders by
written
consent in lieu of a meeting on August 10, 2006.
We
were
originally incorporated in Nevada in January 1994 as URREA Enterprises,
Inc., a
development stage company that attempted to engage in the business of extracting
minerals. On October 27, 1999, EduLink merged with and into URREA in exchange
for 388,800,000 shares of URREA common stock, with URREA surviving the
merger.
At the time, URREA had no assets or liabilities and a net asset value of
$0.
EduLink entered into the merger in order to achieve the value of trading
its
common equity on the OTC Bulletin Board, including obtaining liquidity
for its
shareholders. Immediately after the merger, URREA changed its name to EduLink,
Inc. EduLink discontinued URREA’s mineral extraction business and engaged in the
design, development and production of web-based integrated learning content
management and delivery systems. Upon the effectiveness of the Merger,
the
Company succeeded to the business of MMG, which will be continued as its
sole
line of business.
Description
of Business
Unless
otherwise indicated or the context otherwise requires, all references below
to
“EduLink” or the “Company” means EduLink, Inc., Mega Media Group, Inc. and its
wholly-owned subsidiaries on a combined basis after the Merger.
Overview
MMG
is a
multi-media holding company based in Brooklyn, New York, which commenced
operations in 2004. MMG operates its business through its wholly-owned
subsidiaries, Mega Media Studios, Inc., Mega Media Records, Inc. d/b/a
Skeleton
Key Media, Mega Media Film, Inc., Mega Media Sports Entertainment, Inc.
and Echo
Broadcasting Group, Inc. MMG also has a non-operating subsidiary, VSE Magazine,
Inc. MMG focuses its business in mainstream entertainment and media and
Russian
ethnic media. These subsidiaries offer a broad range of services, including
talent management, music publishing, recording, music production and
distribution, video production and distribution, radio broadcasting and
Russian
ethnic programming. In addition to the aforementioned services, we also
invest
in and develop various entertainment properties, balancing acquisitions
of
existing media properties, such as purchasing existing recordings and publishing
catalogs with an earnings history, with the development and acquisition
of newer
media ventures, such as mobile and new technology media projects, and signing
and developing emerging musical artists. Our executive offices are in “Soho” in
New York City and our recording studios, editing facilities and radio broadcast
studios are in Brooklyn, New York. We currently employ over fifty professionals
in our two offices, including recording and music publishing executives,
professional talent managers and radio personalities.
MMG’s
Products and Services and their Markets
We
provide our multi-media and entertainment products and services through
our
wholly-owned subsidiaries. MMG’s focus is in two primary areas: (1) Mainstream
Entertainment and Media, and (2) Russian Ethnic Media.
Mainstream
Entertainment and Media
MMG's
mission is to invest in and develop a broad range of entertainment properties,
balancing acquisitions of existing media properties, such as purchasing
existing
recordings and publishing catalogs with an earnings history, with the
development and acquisition of newer media ventures, such as mobile and
new
technology media projects, and signing and developing emerging musical
artists.
In addition to acquiring and developing both established and emerging media
properties, MMG will also develop a management division to serve the needs
of
artists.
Russian
Ethnic Media
MMG's
subsidiaries, Echo Broadcasting Group and VSE Magazine, are Russian-American
media companies that deliver media products that are contemporary, entertaining,
fun and relevant to the ethnic Russian community in North America. Working
with
cutting-edge news networks and contributing staff in the entertainment
and
fashion industries both in the United States and the Former Soviet Union,
MMG is
able to deliver a unique blend of content that resonates with the "second
generation" Russian mentality: distinctly American with a European
flair.
Mega
Media Records, Inc. d/b/a Skeleton Key Entertainment is
comprised of the following divisions, including recorded music, publishing,
talent management and new media ventures:
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Recorded
Music:
Skeleton Key Recordings
provides a full-service forum for pop/rock, alternative and urban
music
artists. All the services of a major record label are provided,
including
funding, artist development, recording services (with access
to Mega
Media's recording studios), promotions, marketing, artwork creation
and
retail distribution. DVD projects are also produced in-house in Mega
Media's video facilities.
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The
record label division provides a "one-stop shopping" forum for artists,
because
all services of a major record label are provided in-house at MMG, including
promotions, marketing, artist development and access to music recording
and
video facilities. MMG will also be able to provide co-publishing and management
services to artists signed to MMG's record label division, enabling MMG
to act
as a true partner to a recording artist by actively participating in all
facets
of the artist's career. Mega Media Records already has an impressive roster
of
talent that includes rap legends Junior Mafia, platinum hip-hop producer
Minnesota, R&B sensation Kenny Wray. MMG's state-of-the-art recording and
editing studios in Brooklyn, and its satellite studios in mid-town Manhattan,
provide a comfortable and functional setting for all MMG artists to create
and
record their art. MMG's goal is to acquire both established and new recording
artists, balancing risk by tapping into the existing fan base of established
artists while investing in unknown artists who management believes have
the
potential to be the superstars of tomorrow.
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§
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Publishing
Division:
Skeleton Key Music Publishing
focuses on acquiring various music properties and offers quality
world-wide music administration services, which include royalty
collections, accounting services, copyright registrations, song-plugging
services, songwriter workshops and talent
development.
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o
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Skeleton
Key Special Projects,
through its “I.D.
Compilations”
series, offers custom branded compilation albums to a select
group of
clients from the fashion, nightlife and entertainment
arenas.
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The
publishing division will focus on acquiring various music publishing properties.
Initially, we will attempt to acquire small music publishing catalogs with
a
demonstrated earnings history. MMG will also purchase publishing interests
in
recently-released and soon-to-be released individual musical compositions
that
show earnings potential. Finally, MMG will attempt to sign promising
producer-writers and artist-writers to exclusive co-publishing agreements
pursuant to which MMG will co-own all compositions written during the respective
terms of such agreements and act as the exclusive administrator of the
compositions subject to such agreements. The publishing division has not
yet
acquired any properties and there can be no assurance that it will be able
to do
so on terms acceptable to it or at all.
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Talent
Management Division:
Skeleton Key Urban Management and Skeleton Key Pop/Rock
Management
are separate divisions of Skeleton Key that provide management
and career
development services to artists, producers, music executives,
songwriters
and entertainment companies.
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The
management division will provide entertainment management services to writers,
producers and recording artists, in addition to acting as consultants to
industry executives. MMG will manage the artists signed to the record label
division of MMG, as well as manage artists signed to third-party record
companies. MMG will allocate most of its resources to established writers,
producers and artists, but will also manage promising talent on a speculative
basis. This division is still in its early stage of development.
The
new
media division will invest in small new media companies, such as independent
ring tone and real tone aggregators. This division, engaging in perhaps
the most
speculative area of the music business, will focus is on identifying and
investing in newly-formed music companies that are introducing important
services and technologies to an industry that is rapidly changing. The
traditional record industry model of delivering physical product via retail
outlets such as record shops is quickly becoming a thing of the past, while
digital delivery via the Internet and mobile devices will likely grow
exponentially over the next few years. Neither MMG nor Mega Media Records
has
invested in or developed any new media technologies and there can be no
assurance that it will do so.
Mega
Media Film
is a
full-service film studio with a virtual 3D chromatic room and a 4A virtual
studio. This studio is utilized to produce music videos for recording artists
and multimedia projects. In addition to being used for music-based projects,
Mega Media Film produces TV commercials, infomercials, and other video-related
products. Mega Media Film has a talented staff of animators, visual effect
designers, and editors. Mega Media Film also produces independent films
and
various DVD projects. The virtual 3D studio allows the production of video
products at a fraction of the cost of traditional films. Most of the video
products filmed today require the use of large, physical sets. This is
costly
and time-consuming, since actual physical labor is required along with
permits,
adequate on-location space and extensive personnel. Mega Media Film's graphic
designers can create life-like virtual sets by using this new technology
without
the hassles of traditional filming.
Mega
Media Studios
is a
multi-room, state-of-the-art, 7000 square foot facility located in
Brooklyn, just minutes outside of Manhattan. Studio A features a 96
channel Euphonix console, custom Dynaudio Munro monitors, and two large
isolation booths for the ultimate accommodations in live recording. Studio
B is the perfect MIDI-based writing room with vocal booth. Mega Media Studio's
personnel are experienced, professional and helpful. The studios are
fully-equipped to handle projects from commencement to conclusion, and
provide
the perfect environment for artists to create their magic.
Mega
Media Sports Entertainment
specializes in the creation of instructional sports videos, taking today’s
popular athletes and sports figures and producing modern, exciting and
informative instructional/ fitness videos.
Echo
Broadcasting, Inc.
is a
Russian-American entertainment and media company acquired by MMG in October
2005. Driven from within by its consumer brand - Evolution of Entertainment
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Echo’s Interactive and Publishing division is contemporary, entertaining,
fun and relevant to the Ethnic Russian consumers in North America. Working
with cutting-edge news networks and contributing staff in the entertainment
and
fashion industries both in the United States and the Former Soviet Union,
Echo
is able to deliver a unique blend of content that resonates with the Second
Generation mentality - distinctly American with a European flair. Echo is
a media partner in many major Russian events and concerts in the New York
Metropolitan Area. Echo operates the following divisions:
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Interactive
Division:
is
an internet portal, which was launched in the summer of 2005
and is a
single in-language source of information on leisure, nightlife
and
entertainment for the ethnic Russians in New York. VSERU makes
mainstream
entertainment accessible to the Russian-speaking audience, with
a wide
variety of features, comprehensive and searchable listings and
events
calendars.
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Radio
Division:
Radio
VSE
-
87.7FM. Debuting in 2003, Radio VSE broadcasts 24/7 has become
the largest
independent, commercial Russian language radio station in the
New York Tri
State Area. Radio VSE rapidly developed loyal listeners and has
become a
primary source of information for Russian-speaking New Yorkers.
The
current format of Radio VSE is divided into three categories
- talk radio,
music programming and the news, including national and international
headlines, lifestyle and entertainment. Another staple of the
programming
is live broadcasting from Russia, Ukraine, Germany and Israel.
The guest
list of the talk shows ranges from politicians and governmental
officials
to Russian celebrities on tour in the United States. All broadcasting
on
Radio VSE is live, with listener participation and call-in segments.
Radio
VSE's portable studio and road crew are on the road daily on the streets
of Little Odessa, interacting with the audience and producing
entertaining
live segments from NYC's hotspots.
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VSE
Magazine, Inc.
is
presently a non-operating subsidiary. VSE Magazine was operating and published
in 2004 and mid-2005 but was discontinued thereafter due to market conditions
and the inability to finance further publications. At this time, management
intends to re-launch the magazine in late 2006 or early 2007.
Market
for MMG’s Products and Services
There
are
two primary markets for MMG's products and services. First, MMG, through
Skeleton Key Entertainment, focuses on recorded urban and pop/rock music
that
appeals to mainstream America. We also have plans to distribute this content
abroad, depending on demand. Skeleton Key also provides music publishing
and
talent management services to mainstream artists, producers and songwriters.
Second, MMG focuses on providing Russian-ethnic entertainment content to
the
Russian-American community through its popular radio station, live promotions
and recorded ethnic music projects.
Mainstream
Entertainment and Media
Music
and
entertainment is an international form of communication in every culture
of the
world. According to the Recording Industry Association of America’s (“RIAA”)
website (http://www.riaa.com/news/marketingdata/),
it is
estimated that worldwide annual music sales are $40(1) billion,
and US sales account for one third of that total. In addition, the market
is
much greater when you include management, concerts, DVD sales and
publishing.
The
recording industry which went through several down years of sales due to
piracy
has seen other revenue streams increase. In fact, this year alone sales
of
singles and online digital sales have resulted in an overall increase of
21
percent(2) over
last
year. Other new revenue streams have been opened to the industry. Ringtones
have
become very popular and have become and important and promising revenue
stream
for the industry with project annual sales of $500 million for 2005, sales
for
2003 were $68 million and $245 million for 2004. Publishing income, which
has
seen steady growth with $493 million in 2004-an increase of 4.5% on 2003
and
19%(3) over the past five years, is expected to more the double over the
next
five years. DVD sales which have become an enormous profit center for the
industry have had a steady increase in sales. For 2004, the sales of DVDs
grew
to $15.5 billion, that’s an increase of 33 percent from 2003 and consumers spent
an additional $5.7 billion renting DVDs.
_________
(1)
Figures are based on research by RIAA (Recording Industry Association of
America)
(2)
Data
from Nielsen SoundScan
(3) Publishing
figures obtained from IFPI Market Research
Russian
Ethnic Media
The
current estimated Russian speaking population in the United States is over
6
million, with over 1.4 million(4) residing in the New York Metropolitan
Area.
The present annual advertising market aimed to the Russian community in
the US
is at approximately $50 million according to Press Release Group. Through
the
last several years many national brands and major advertising agencies
have
acknowledged that ethnic advertising is necessary for the continued growth
of
product sales. In fact, many of the major advertising agencies have set
up
ethnic advertising divisions for this purpose. The Spanish speaking market
has
reached $4.5 billion in annual advertising budgets.
“The
size
of Russian-American population in the New York Metropolitan Area is 1,420,000
people. This market has high purchasing power, its average household income
reaches $47,100 and accedes that of other ethnic groups. Average age of
the
Russian-speaking population is 46 years old. Average household size in
the
Russian-American market is 2.2 people, with high number of one-person household
and high number of extended family households. 61% of Russian-speakers
have at
least one credit card and 69% frequently use the Internet. All mass media,
including Radio, Print and Television, are quite popular among Russian-speakers.
Radio and Television have highest media reach, approximately 50%-55%.”
Press
Release Group,
We
expect
the Russian advertising market to reach $450 million in the next five years.
Our
Russian Ethnic Media division is positioned in Radio, Print and Internet
to
benefit from the anticipated increase in the future advertising budgets.
Presently, our Radio division has 27.7 percent market share of the Russian
audience in the New York Metropolitan Area and our interactive division
has up
to 60,000 unique visitors per month and is only in its third month of operation.
Market
Since
the
metamorphosis of the Soviet Union into a more open society, North America
has
become home to over 6.5 million Ethnic Russians, with 1.6 million residing
in
the New York Tri-State area. Today, the New York Metropolitan area is the
seventh largest Russian-speaking city in the world.
All
indicators show that this is one of the most affluent and rapidly growing
ethnic
markets in the country. Highly educated and trained, Ethnic Russian immigrants
are relentless about rebuilding their lives to a higher standard than they
led
in the country of origin. As a result many of these immigrants have attained
a
high degree of success in their respective fields: medical, legal, business,
research, computer programming, real estate and manufacturing. As a market
it is
a great, virtually unexplored consumer base, which is craving for new trends
and
products.
________________
(4)
Figures obtained from Press Release Group 2005 research report.
Demographics
Millions
of dollars are invested annually into the advertising on the Ethnic Russian
Market and here are some of the reasons why:
DEMOGRAPHICS
(Continued)
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·
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All
data based on studies conducted by the Research Institute for
New
Americans and the Press Release
Group.
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Distribution
Methods for MMG’s Products and Services
Our
audio
and audio-visual content, both physical and digital, is currently distributed
in
North America through Sony/RED distribution. Our original content is broadcast
via MMG's radio station, VSE Radio. Our branded compilation album projects
will
be distributed through our various clients' retail outlets. For non-North
American distribution, we intend to enter into territory-by-territory deals
for
each project concerned.
Development
Strategy
Our
development strategy consists of aggressively negotiating with and signing
known
recording artists, successful producers and songwriters, acquiring
income-generating publishing catalogs, signing popular talent to management
contracts, increasing the radio station's profile to generate more advertising
dollars, actively marketing the recording studio and video facility to
other
record labels and entertainment companies to generate a profit center from
third
party commercial projects, and doing branded compilation projects for
recognizable national corporate clients to increase our profile. Our research
and development is handled in-house and is treated as a general overhead
cost
that is not passed on to our customers.
Sales
and Marketing Strategy
Our
sales
and marketing for all products and services is handled in a variety of
ways: (1)
through our Public Relations company, 5W PR, (2) through in-house marketing
and
promotion personnel, (3) through in-house advertising coordinators and
salespeople, (4) through the marketing and promotional staff at Sony/RED,
and
(5) by engaging thirds party independent contractors to supplement the
efforts
of our in-house staff on a project by project basis.
Competition
Despite
our size, we believe we are uniquely positioned to compete with major record
labels and publishing companies, such as Jive Records and Bad Boy Entertainment,
because of our strong executive staff and creative deal making. Our closest
competitors on the recorded music side are Asylum/Warner Music Group,
Fontata/Universal Music Group, Imperial/EMI and Koch Records. We believe
our
Radio VSE is the most popular of its kind and competes with some minor
local
competitors in New York.
Intellectual
Property
Most
of
our print and radio content and original programming are proprietary and
protected. We have copyrights in songs secured through our music publishing
division and copyrights in master recordings secured through our recorded
music
divisions. We also expect that the Mega Media and Skeleton Key brands will
have
value beyond corporate identities so we can engage in merchandising
activities.
RISK
FACTORS
An
investment in our common stock is highly speculative and involves a high
degree
of risk. Therefore, you should consider all of the risk factors discussed
below,
as well as the other information contained in this document. You should
not
invest in our common stock unless you can afford to lose your entire investment
and you are not dependent on the funds you are investing.
Please
note that throughout this report, the words “we”, “our”, “us” or the “Company”
refer to EduLink, Inc., Mega Media, Inc. and its wholly-owned
subsidiaries.
Risks
Associated with our Operations
We
have a limited operating history in which to evaluate our business.
We
were
incorporated in Nevada in January 1994. The company has limited revenues
to date
and has a limited operating history upon which an evaluation of our future
success or failure can be made. Current company assets may not be suitable
for
development to the projected forecast for 2007-2008. No assurances of any
nature
can be made to investors that the company will be profitable.
We
have
experienced significant operating losses since we were formed in January
1994.
The Company incurred net losses of approximately $2,550,305 and $1,451,841
for
the years ended January 31, 2006 and 2005.
The
Company will continue to have a high level of operating expenses and will
be
required to make significant up-front expenditures in connection with the
commencement of income-generating activities (including, but not limited
to,
salaries of executive, marketing, engineering and other personnel). The
Company
expects to incur additional losses until such time as it is able to generate
sufficient revenues to finance its operations and the costs of expansion.
There
can be no assurance that the Company will be able to generate such revenues
and
operate profitably.
We
will require additional funds to achieve our current business strategy
and our
inability to obtain additional financing could cause us to cease our business
operations.
Even
with
the proceeds from this offering, we will need to raise additional funds
through
public or private debt or sale of equity to achieve our current business
strategy. Such financing may not be available when needed. Even if such
financing is available, it may be on terms that are materially adverse
to your
interests with respect to dilution of book value, dividend preferences,
liquidation preferences, or other terms. Our capital requirements to implement
our business strategy will be significant. However, at this time, we can
not
determine the amount of additional funding necessary to implement such
plan. We
intend to assess such amount at the time we will implement our business
plan.
Furthermore, we intend to effect future acquisitions with cash and the
issuance
of debt and equity securities. The cost of anticipated acquisitions may
require
us to seek additional financing. We anticipate requiring additional funds
in
order to fully implement our business plan to significantly expand our
operations. We may not be able to obtain financing if and when it is needed
on
terms we deem acceptable. Our inability to obtain financing would have
a
material negative effect on our ability to implement our acquisition strategy,
and as a result, could require us to diminish or suspend our acquisition
strategy.
If
we are
unable to obtain financing on reasonable terms, we could be forced to delay,
scale back or eliminate certain product and service development programs.
In
addition, such inability to obtain financing on reasonable terms could
have a
material negative effect on our business, operating results, or financial
condition to such extent that we are forced to restructure, file for bankruptcy,
sell assets or cease operations, any of which could put your investment
dollars
at significant risk.
If
we are unable to retain the services of our executive officers, Aleksandr
Shvarts, David Kokakis, Esq., Gennady Pomeranets, CPA, and Eric Schwartz,
or if
we are unable to successfully recruit qualified managerial personnel and
employees with experience in business and the entertainment industry, we
may not
be able to continue our operations.
Our
success depends to a significant extent upon the continued service of our
executive officers, Aleksandr Shvarts, Chief Executive Officer, David Kokakis,
Esq., Chief Operating Officer, Gennady Pomeranets, CPA, Chief Fianancial
Officer, and Eric Schwartz, Executive Vice President. Loss of the services
of
any of our executive officers could have a material adverse effect on our
growth, revenues, and prospective business. We do not maintain key-man
insurance
on the lives of our executive officers. In addition, in order to successfully
implement and manage our business plan, we will be dependent upon, among
other
things, successfully recruiting qualified managerial personnel and employees
with experience in business and the entertainment industry. Competition
for
qualified individuals is intense.
There
can
be no assurance that we will be able to find, attract and retain existing
employees or that we will be able to find, attract and retain qualified
personnel on acceptable terms.
There
may be potential liabilities associated with the Company that we were not
aware
of at the time of the Merger.
The
Company may have liabilities that we did not discover or may have been
unable to
discover during our pre-acquisition investigation. Any indemnities or warranties
may not fully cover such liabilities due to their limited scope, amount
or
duration, the financial limitations of the indemnitor or warrantor, or
for other
reasons. Therefore, in the event we are held responsible for the foregoing
liabilities, the Company's operations may be materially and adversely
affected.
Our
principal stockholders, officers and directors own a controlling interest
in our
voting stock and investors will not have any voice in our
management.
In
connection with the acquisition of MMG and its wholly-owned operating
subsidiaries, MMG Shareholders, including several of which are now officers
and
directors, will hold an aggregate of 90% of EduLink’s outstanding shares of
common stock, and in the aggregate, has the right to cast 90% of the votes
in
any vote by our stockholders. Thus, these stockholders, acting together,
will
have the ability to control substantially all matters submitted to our
stockholders for approval, including:
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election
of our board of directors;
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removal
of any of our directors;
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adoption
of measures that could delay or prevent a change in control or
impede a
merger, takeover or other business combination involving
us.
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As
a
result of their ownership and positions, our directors and executive officers
collectively are able to influence all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. In addition, sales of significant amounts of shares held
by our
directors and executive officers, or the prospect of these sales, could
adversely affect the market price of our common stock. Management's stock
ownership may discourage a potential acquirer from making a tender offer
or
otherwise attempting to obtain control of us, which in turn could reduce
our
stock price or prevent our stockholders from realizing a premium over our
stock
price.
It
is likely that additional shares of our stock will be issued in the normal
course of our business development, which will result in a dilutive affect
on
our existing shareholders.
We
will
issue additional stock as required to raise additional working capital
in order
to secure intellectual properties, undertake company acquisitions, recruit
and
retain an effective management team, compensate our officers and directors,
engage industry consultants and for other business development
activities.
If
we fail to adequately manage our growth, we may not be successful in growing
our
business and becoming profitable.
We
expect
our business and number of employees to grow over the next year. We expect
that
our growth will place significant stress on our operation, management,
employee
base and ability to meet capital requirements sufficient to support our
growth
over the next 12 months. Any failure to address the needs of our growing
business successfully could have a negative impact on our chance of
success.
If
we acquire or invest in other businesses, we will face certain risks inherent
in
such transactions.
We
may
acquire, make investments in, or enter into strategic alliances or joint
ventures with, companies engaged in businesses that are similar or complementary
to ours. If we make such acquisitions or investments or enter into strategic
alliances, we will face certain risks inherent in such transactions. For
example, we could face difficulties in managing and integrating newly acquired
operations. Additionally, such transactions would divert management resources
and may result in the loss of artists or songwriters from our rosters.
We cannot
assure you that if we make any future acquisitions, investments, strategic
alliances or joint ventures that they will be completed in a timely manner,
that
they will be structured or financed in a way that will enhance our
creditworthiness or that they will meet our strategic objectives or otherwise
be
successful. Failure to effectively manage any of these transactions could
result
in material increases in costs or reductions in expected revenues, or both.
“Penny
Stock” rules may make buying or selling our common stock
difficult.
Trading
in our securities is subject to the “penny stock” rules. The SEC has adopted
regulations that generally define a penny stock to be any equity security
that
has a market price of less than $5.00 per share, subject to certain exceptions.
These rules require that any broker-dealer who recommends our securities
to
persons other than prior customers and accredited investors, must, prior
to the
sale, make a special written suitability determination for the purchaser
and
receive the purchaser’s written agreement to execute the transaction. Unless an
exception is available, the regulations require the delivery, prior to
any
transaction involving a penny stock, of a disclosure schedule explaining
the
penny stock market and the risks associated with trading in the penny stock
market. In addition, broker-dealers must disclose commissions payable to
both
the broker-dealer and the registered representative and current quotations
for
the securities they offer. The additional burdens imposed upon broker-
dealers
by such requirements may discourage broker-dealers from effecting transactions
in our securities, which could severely limit the market price and liquidity
of
our securities. Broker- dealers who sell penny stocks to certain types
of
investors are required to comply with the Commission’s regulations concerning
the transfer of penny stocks. These regulations require broker-dealers
to:
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a suitability determination prior to selling a penny stock to
the
purchaser;
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the purchaser’s written consent to the transaction; and
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Provide
certain written disclosures to the
purchaser.
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Risks
Associated with the Entertainment, Media and Communications
Industries
Competition
from providers of similar products and services could materially adversely
affect MMG’s revenues and financial condition.
The
music
industry in which we compete is a rapidly evolving, highly competitive
and
fragmented market, which is based on consumer preferences and requires
substantial human and capital resources. We expect competition to intensify
in
the future. There can be no assurance that MMG will be able to compete
effectively. We believe that the main competitive factors in
the entertainment, media and communications industries include
effective marketing and sales, brand recognition, product quality, product
placement and availability, niche marketing and segmentation and value
propositions. They also include benefits of one's company, product and
services, features and functionality, and cost. Many of our competitors are
established, profitable and have strong attributes in many, most or all of
these areas. They may be able to leverage their existing relationships
to offer alternative products or services at more attractive pricing or
with better customer support. Other companies may also enter our markets
with better products or services, greater financial and human resources
and/or
greater brand recognition. Competitors may continue to improve or expand
current
products and introduce new products. We may be perceived as relatively
too small
or untested to be awarded business relative to the competition. To be
competitive, we will have to invest significant resources in
business development, advertising and marketing. We may also have to
rely on strategic partnerships for critical branding and relationship leverage,
which partnerships may or may not be available or sufficient. We cannot
assure
that it will have sufficient resources to make these investments or that
we will
be able to make the advances necessary to be competitive. Increased competition
may result in price reductions, reduced gross margin and loss of market
share. Failure to compete successfully against current or future competitors
could have a material adverse effect on the Company’s business, operating
results and financial condition.
We
compete with other recorded music companies and music publishers to identify
and
sign new recording artists and songwriters who subsequently achieve long-term
success and to renew agreements with established artists and songwriters.
In
addition, our competitors may from time to time reduce their prices in
an effort
to expand market share and introduce new services, or improve the quality
of
their products or services. We may lose business if we are unable to sign
successful artists or songwriters or to match the prices or the quality
of
products and services, offered by our competitors. Our Publishing Division
will
compete not only with other music publishing companies, but also with
songwriters who publish their own works. Our Recorded Music Division is
to a
large extent dependent on technological developments, including access
to and
selection and viability of new technologies, and is subject to potential
pressure from competitors as a result of their technological developments.
For
example, our Recorded Music Division may be adversely affected by technological
developments that facilitate the piracy of music, such as Internet peer-to-peer
file-sharing and CD-R activity; by its inability to enforce our intellectual
property rights in digital environments; and by its failure to develop
a
successful business model applicable to a digital online environment. It
also
faces competition from other forms of entertainment and leisure activities,
such
as cable and satellite television, pre-recorded films on videocassettes
and DVD,
the Internet and computer and videogames.
The
speculative nature of the entertainment, media and communications industry
may
result in our inability to produce products or services that receive sufficient
market acceptance for us to be successful.
Certain
segments of the entertainment, media and communications industry are highly
speculative and historically have involved a substantial degree of risk.
For
example, the success of a particular film, video game, program or recreational
attraction depends upon unpredictable and changing factors, including the
success of promotional efforts, the availability of alternative forms of
entertainment and leisure time activities, general economic conditions,
public
acceptance and other tangible and intangible factors, many of which are
beyond
our control. If we complete a business combination with a target business
in
such a segment, we may be unable to produce products or services that receive
sufficient market acceptance for us to be successful.
Due
to the nature of our business, our results of operations and cash flows
may
fluctuate significantly from period to period.
Our
net
sales, operating income and profitability, like those of other companies
in the
music business, are largely affected by the number and quality of albums
that we
release, our release schedule, and, more importantly, the consumer demand
for
these releases. We also make advance payments to recording artists and
songwriters, which impact our operating cash flows. The timing of album
releases
and advance payments is largely based on business and other considerations
and
is made without regard to the timing of the release of our financial results.
We
report results of operations quarterly and our results of operations and
cash
flows in any reporting period may be materially affected by the timing
of
releases and advance payments, which may result in significant fluctuations
from
period to period.
Changes
in technology may reduce the demand for the products or services we may
offer
following a business combination.
The
entertainment, media and communications industries are substantially affected
by
rapid and significant changes in technology. These changes may reduce the
demand
for certain existing services and technologies used in these industries
or
render them obsolete. We cannot assure you that the technologies used by
or
relied upon or produced by a target business with which we effect a business
combination will not be subject to such occurrence. While we may attempt
to
adapt and apply the services provided by the target business to newer
technologies, we cannot assure you that we will have sufficient resources
to
fund these changes or that these changes will ultimately prove
successful.
If
our products or services that we market and sell are not accepted by the
public,
our profits may decline.
Certain
segments of the entertainment, media and communications industries are
dependent
on developing and marketing new products and services that respond to
technological and competitive developments and changing customer needs
and
tastes. We cannot assure you that the products and services of a target
business
with which we effect a business combination will gain market acceptance.
Any
significant delay or failure in developing new or enhanced technology,
including
new product and service offerings, could result in a loss of actual or
potential
market share and a decrease in revenues.
The
recorded music industry has been declining and may continue to decline,
which
may adversely affect our prospects and our results of operations.
Illegal
downloading of music from the Internet, CD-R piracy, industrial piracy,
economic
recession, bankruptcies of record wholesalers and retailers and growing
competition for consumer discretionary spending and retail shelf space
may all
be contributing to a declining recorded music industry. Additionally, the
period
of growth in recorded music sales driven by the introduction and penetration
of
the CD format has ended. While DVD-Audio, Dual Disc and downloadable digital
files are thought to represent potential new avenues for growth, no significant
new legitimate audio format has yet emerged to take the place of the CD.
The
value of worldwide sales fell as the music industry witnessed a decline
of 4.9%
from 1999 to 2000, 5.7% from 2000 to 2001, 6.7% from 2001 to 2002 and 7.6%
from
2002 to 2003. Although we believe that the recorded music industry should
continue to improve as evidenced by the year-over-year growth in U.S. music
physical unit sales year-to-date through year-end 2004, the industry may
relapse
into a period of decline as witnessed from 1999 to 2003 and we cannot assure
you
as to the timing or the extent of any improvement in the industry. A declining
recorded music industry is likely to lead to reduced levels of revenue
and
operating income generated by our Recorded Music business. Additionally,
a
declining recorded music industry is also likely to have a negative impact
on
our Music Publishing business, which generates a significant portion of
its
revenues from mechanical royalties, primarily from the sale of music in
CD and
other recorded music formats.
There
may be downward pressure on our pricing and our profit margins.
There
are
a variety of factors which could cause us to reduce our prices and erode
our
profit margins. They are, among others, increased price competition among
record
companies resulting from the Universal and Sony BMG recorded music duopoly,
price competition from the sale of motion pictures in DVD-Video format
and
videogames, the ever greater price negotiating leverage of mass merchandisers
and big box retailers, the increased costs of doing business with mass
merchandisers and big box retailers as a result of complying with operating
procedures that are unique to their needs and the adoption by record companies
of initially lower-margin formats such as Dual Disc and DVD-Audio.
Our
prospects and financial results may be adversely affected if we fail to
identify, sign and retain artists and songwriters and by the existence
or
absence of superstar releases and by local economic conditions in the countries
in which we operate.
We
are
dependent on identifying, signing and retaining artists with long-term
potential, whose debut albums are well received on release, whose subsequent
albums are anticipated by consumers and whose music will continue to generate
sales as part of our catalog for years to come. The competition among record
companies for such talent is intense. Competition among record companies
to sell
records is also intense and the marketing expenditures necessary to compete
have
increased as well. We are also dependent on signing and retaining songwriters
who will write the hit songs of today and the classics of tomorrow under
terms
that are economically attractive to us. Our competitive position is dependent
on
our continuing ability to attract and develop talent whose work can achieve
a
high degree of public acceptance. Our financial results may be adversely
affected if we are unable to identify, sign and retain such artists and
songwriters under terms that are economically attractive to us. Our financial
results may also be affected by the existence or absence of superstar artist
releases during a particular period. Some music industry observers believe
that
the number of superstar acts with long-term appeal, both in terms of catalog
sales and future releases, has declined in recent years. Additionally,
our
financial results are generally affected by the general economic and retail
environment of the countries in which we operate, as well as the appeal
of our
recorded music catalog and our music publishing library.
We
may have difficulty addressing the threats to our business associated with
home
copying and Internet downloading.
The
combined effect of the decreasing cost of electronic and computer equipment
and
related technology such as CD burners and the conversion of music into
digital
formats have made it easier for consumers to create unauthorized copies
of our
recordings in the form of, for example, CDs and MP3 files. A substantial
portion
of our revenue comes from the sale of audio products that are potentially
subject to unauthorized consumer copying and widespread dissemination on
the
Internet without an economic return to us. If we fail to develop effective
means
of protecting our intellectual property (whether copyrights or other rights
such
as patents, trademarks and trade secrets) or entertainment-related products
or
services, our results of operations, financial position and prospects may
suffer
Organized
industrial piracy may lead to decreased sales.
The
global organized commercial pirate trade is a significant threat to the
music
industry. Worldwide, industrial pirated music (which encompasses unauthorized
physical copies manufactured for sale but does not include Internet downloads
or
home CD burning) is estimated to have generated over $4.5 billion in
revenues in 2003, according to IFPI. IFPI estimates that 1.7 billion
pirated units were manufactured in 2003. According to IFPI estimates,
approximately 35% of all music CDs sold worldwide in 2003 were pirated.
Unauthorized copies and piracy contributed to the decrease in the volume
of
legitimate sales and put pressure on the price of legitimate sales. They
may
have an adverse effect on our business.
The
recorded music industry is under investigation by Eliot Spitzer, the Attorney
General for the State of New York, regarding its practices in promoting
its
records to radio stations.
On
September 7, 2004 and November 22, 2004, Eliot Spitzer, the Attorney
General of the State of New York, served Warner Music Group with requests
for
information in the form of subpoenas duces tecum in connection with an
industry-wide investigation of the relationship between music companies
and
radio stations, including the use of independent promoters. The investigation
is
pursuant to New York Executive Law §63(12) and New York General Business Law
§349, both of which are consumer fraud statutes. It is too soon to predict
the
outcome of this investigation but it has the potential to result in changes
in
the manner in which the recorded music industry promotes its records, which
could adversely affect our business.
If
we are unable to protect our intellectual property rights competitors may
be
able to use our technology or intellectual property rights, which could
weaken
our competitive position.
We
own
several intellectual property assets. Our success depends in part on our
ability
to obtain and enforce intellectual property rights for those assets, both
in the
United States and in other countries. In those circumstances, we may file
applications for patents, copyrights and trademarks as our management deems
appropriate. We cannot assure you that these applications, if filed, will
be
approved, or that we will have the financial and other resources necessary
to
enforce our proprietary rights against infringement by others. Additionally,
we
cannot assure you that any patent, trademark or copyright obtained by us
will
not be challenged, invalidated or circumvented.
If
we are alleged to have infringed on the intellectual property or other
rights of
third parties it could subject us to significant liability for damages
and
invalidation of our proprietary rights.
Our
business is highly dependent upon intellectual property, a field that has
encountered increasing litigation in recent years. If third parties allege
that
we have infringed on their intellectual property rights, privacy rights
or
publicity rights or have defamed them, we could become a party to litigation.
These claims and any resulting lawsuits could subject us to significant
liability for damages and invalidation of our proprietary rights and/or
restrict
our ability to publish and distribute the infringing or defaming content.
There
can be no assurance that we would prevail in any such litigation. If we
were to
lose a litigation relating to intellectual property, we could be forced
to pay
monetary damages and to cease the sale of certain products or the use of
certain
technology. Any of the foregoing may adversely affect our business.
Radio
VSE leases airtime from a third party, WNYW 87.7 FM in New York, which
must
comply with comprehensive, complex and sometimes unpredictable federal
regulations, which could have an adverse effect on our businesses if WNYW’s FCC
license is revoked or not renewed and we can no longer lease airtime from
WNYW.
Our
broadcasting operations are dependent on leasing airtime from a third party,
WNYW 87.7 FM in New York, which owns licenses from the FCC, which regulates
the
radio and television broadcasting industries in the United States. The
radio and
television broadcasting industries in the United States are subject to
extensive
and changing regulation by the FCC. Among other things, the FCC is responsible
for the following:
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assigning
frequency bands for broadcasting;
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determining
the particular frequencies, locations and operating power of
stations;
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issuing,
renewing, revoking and modifying station licenses;
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determining
whether to approve changes in ownership or control of station
licenses;
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regulating
equipment used by stations; and
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adopting
and implementing regulations and policies that directly affect
the
ownership, operation, programming and employment practices of
stations.
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The
FCC
has the power to impose penalties for violation of its rules or the applicable
statutes. While in the vast majority of cases licenses are renewed by the
FCC,
we cannot be sure that WNYW’s license will be renewed at the expiration date.
Even if WNYW’s license is renewed, we cannot be sure that the FCC will not
impose conditions or qualifications that could cause problems in our businesses
or that WNYW will renew our lease for airtime.
A
number
of federal rules governing broadcasting have changed significantly in recent
years and additional changes may occur, particularly with respect to the
rules
governing digital audio broadcasting, satellite radio services, multiple
ownership and attribution. We cannot predict the effect that these regulatory
changes may ultimately have on our operations.
The
FCC has recently begun more vigorous enforcement of its indecency rules
against
the broadcast industry, which could have a material adverse effect on our
business and our leasing airtime form WNYW.
The
FCC’s
rules prohibit the broadcast of obscene material at any time and indecent
material between the hours of 6 A.M. and 10 P.M. Broadcasters risk
violating the FCC’s indecency rules because of the FCC’s broad definition of
such material, coupled with the spontaneity of live programming.
Recently,
the FCC has begun more vigorous enforcement of its indecency rules against
the
broadcasting industry as a whole. Two Congressional committees have recently
conducted hearings relating to indecency. Legislation has also been introduced
in Congress that would increase the penalties for broadcasting indecent
programming, and depending on the number of violations engaged in, would
automatically subject broadcasters to license revocation, renewal or
qualifications proceedings in the event that they broadcast indecent material.
The FCC has indicated that it is stepping up its enforcement activities
as they
apply to indecency, and has threatened to initiate license revocation
proceedings against broadcast licensees for future ‘‘serious indecency
violations.’’ The FCC has found on a number of occasions recently, chiefly with
regard to radio stations, that the content of broadcasts has contained
indecent
material. The FCC issued fines to the offending licensees. Moreover, the
FCC has
recently begun imposing separate fines for each allegedly indecent
‘‘utterance,’’ in contrast with its previous policy, which generally considered
all indecent words or phrases within a given program as constituting a
single
violation.
The
Communications Act provides that the FCC must renew a broadcast license
if (i)
the station involved has served the ‘‘public interest, convenience and
necessity’’ and (ii) there have been no ‘‘serious violations’’ of the Act or FCC
rules, and no ‘‘other violations’’ of the Act or rules which ‘‘taken together,
would constitute a pattern of abuse.’’ If the Commission were to determine that
indecency or other violations by WNYW falls within either or both of those
definitions, the agency could (x) grant the license renewal applications
of WNYW
with burdensome conditions, such as requirements for periodic reports,
(y) grant
the applications for less than the full eight-year term in order to allow
an
early reassessment of WNYW, or (z) order an evidentiary hearing before
an
administrative law judge to determine whether renewal of WNYW’s license should
be denied. If WNYW’s license renewal was ultimately denied, the station would be
required to cease operation permanently. As a result Radio VSE would have
to
lease airtime from another station.
Legislation
is pending in Congress which would, among other things, (i) increase very
substantially the fines for indecent broadcasts, (ii) specify that all
indecency
violations are “serious” violations for license renewal purposes and (iii)
mandate an evidentiary hearing on the license renewal application of any
station
that has had three indecency violations during its license term.
Management
is fully aware of these risks, and believes that these are manageable risks
and
does not post real threats to the Company’s healthy development.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The
following discussion and analysis provides information which management
believes
is relevant to an assessment and understanding of our results of operations
and
financial condition. The discussion should be read in conjunction with
our
financial statements and notes thereto appearing in this prospectus.
Background
on Company
Overview
Mega
Media Group, Inc. commenced operations in 2004. We operate our business
through
several wholly-owned subsidiaries: Mega Media Film, Inc., Mega Media Studios,
Inc., Mega Media Sports Entertainment, Inc., Echo Broadcasting Group, Inc.,
VSE
Magazine, Inc. and Mega Media Records, Inc. d/b/a Skeleton Key Entertainment.
These subsidiaries offer a broad range of services, including talent management,
music publishing, recording, music production and distribution, video production
and distribution, radio broadcasting and Russian ethnic programming. In
addition
to the aforementioned services, we also invest in and develop various
entertainment properties, balancing acquisitions of existing media properties,
such as purchasing existing recordings and publishing catalogs with an
earnings
history, with the development and acquisition of newer media ventures,
such as
mobile and new technology media projects, and signing and developing emerging
musical artists. Our executive offices are in “Soho” in New York City and our
recording studios, editing facilities and radio broadcast studios are in
Brooklyn, New York. We currently employ over fifty professionals in our
two
offices, including recording and music publishing executives, professional
talent managers and radio personalities.
Revenue
We
derive
revenue from sales of advertisements and program sponsorships to local
advertisers, independent promotion agreements, ticket and other revenue
related
to special events we sponsor throughout the year and management fees
from our
subsidiaries. Advertising revenue is affected primarily by the advertising
rates
our radio stations and magazine are able to charge as well as the overall
demand
for radio advertising time in a market. For the three months ended July
31, 2006
our advertising revenue increased by $263,795 to $838,024 as compared
to
$574,229 for the three months ended July 31, 2005. Other revenue, consisting
of
studio services, for the three months ended July 31, 2006 have declined
by
$103,524 due to the restructuring and modernization of our video and
recording
studios.
Operating
Expenses
Our
significant broadcast expenses are (i) employee salaries and commissions,
(ii)
programming expenses, (iii) advertising and promotion expenses, (iv) rental
of
premises for studios, (v) rental of transmission tower space and (vi) music
license royalty fees. We strive to control these expenses by centralizing
certain functions such as finance, accounting, legal, human resources and
management information systems and the overall programming management
function.
Airlease
Expenses
For
the
three months ended July 31, 2006 airlease expense increased by $312,215
to
$568,588 as compared to $256,373 for the three months ended July 31,
2005. The
increase is principally attributable to changing from AM to FM
frequencies.
Selling,
General and Administrative Expenses
Selling,
General and Administrative expenses increased by $277,554 to $864,269
for the
months ended July 31, 2006 from $586,715 in 2005. Selling expenses are
a
significant part of our expenditures and relate directly to the marketing
and
development of products. We anticipate similar expenditures for the foreseeable
future.
Net
Loss
We
have a
net loss of $764,691 for three months ended July 31, 2006 as compared
to a net
loss of $227,605 for the three months ended July 31, 2005. The increase
in net
loss is primarily attributable to the increase of our airlease, selling,
general
and administrative expenses.
Revenue
We
derive
revenue from sales of advertisements and program sponsorships to local
advertisers, independent promotion agreements, ticket and other revenue
related
to special events we sponsor throughout the year and management fees
from our
subsidiaries. Advertising revenue is affected primarily by the advertising
rates
our radio stations and magazine are able to charge as well as the overall
demand
for radio advertising time in a market. For the six months ended July
31, 2006
our advertising revenue increased by $347,787 to $1,533,393 as compared
to
$1,185,606 for the six months ended July 31, 2005. Other revenue, consisting
of
studio services, for the three months ended July 31, 2006 has declined
by
$186,604 due to the restructuring and modernization of our video and
recording
studios.
Operating
Expenses
Our
significant broadcast expenses are (i) employee salaries and commissions,
(ii)
programming expenses, (iii) advertising and promotion expenses, (iv)
rental of
premises for studios, (v) rental of transmission tower space and (vi)
music
license royalty fees. We strive to control these expenses by centralizing
certain functions such as finance, accounting, legal, human resources
and
management information systems and the overall programming management
function.
Airlease
Expenses
For
the
three months ended July 31, 2006 airlease expense increased by $251,286
to
$1,014,838 as compared to $763,552 for the six months ended July 31,
2005. The
increase is principally attributable to changing from AM to FM
frequencies.
Selling,
General and Administrative Expenses
Selling,
General and Administrative expenses increased by $513,110 to $1,625,283
for the
months ended July 31, 2006 from $1,112,173 in 2005. Selling expenses
are a
significant part of our expenditures and relate directly to the marketing
and
development of products. We anticipate similar expenditures for the foreseeable
future.
Net
Loss
We
have a
net loss of $1,324,770 for six months ended July 31, 2006 as compared
to a net
loss of $612,387 for the six months ended July 31, 2005. The increase
in net
loss is primarily attributable to the increase of our airlease and selling,
general and administrative expenses.
Liquidity
and Capital Resources
Cash
used
in operating activities was 1,010,653 for the six months ended July 31,
2006 as
compared to $488,881 during the six months ended July 31, 2005. The increase
in
cash used in operating activities reflects the outlays necessary to achieve
the
growth in revenues, which should ultimately result in positive operating
cash
flow.
Cash
used
in investing activities was $126,944 for the six months period ended
July 31,
2006 as compared to $960,610 for the six months period ended July 31,
2005. The
decrease in cash used by investing activities is primarily due to the
purchase
of property and equipment and the creation of master recordings that
occurred
during 2005.
Cash
provided by financing activities was $1,144,342 for the six months period
ended
July 31, 2006 as compared to $1,463,642 for the six months ended July
31, 2005.
The decrease in cash provided by financing activities is primarily due
to the
capital contributions and loans from shareholders.
Revenue
We
derive
revenue from sales of advertisements and program sponsorships to local
advertisers, independent promotion agreements, ticket and other revenue
related
to special events we sponsor throughout the year and management fees from
our
subsidiaries. Advertising revenue is affected primarily by the advertising
rates
our radio stations and magazine are able to charge as well as the overall
demand
for radio advertising time in a market. For the year ended January 31,
2006 our
revenue increased by $2,516,718 to $2,598,148 as compared to $81,430 in
the year
ended January 31, 2005.
Operating
Expenses
Our
significant broadcast expenses are (i) employee salaries and commissions,
(ii)
programming expenses, (iii) advertising and promotion expenses, (iv) rental
of
premises for studios, (v) rental of transmission tower space and (vi) music
license royalty fees. We strive to control these expenses by centralizing
certain functions such as finance, accounting, legal, human resources and
management information systems and the overall programming management
function.
Selling,
General and Administrative Expenses
Our
Selling, General and Administrative expenses increased to $2,274,604 during
the
Current Year from $734,464 in 2005. Selling expenses are a significant
part of
our expenditures and relate directly to the marketing of products. We anticipate
similar expenditures for the foreseeable future.
Operating
Loss
Our
operating Loss for the year ended January 31, 2006 or the “Current Year,”
increased by $1,671,449 to $2,270,974 as compared to $599,525 in the year
ended
January 31, 2005 or the “Previous Year.” The increase is primarily related to
the increase of our operating expenses.
Liquidity
and Capital Resources
Our
Current Year’s Working Capital deficiency is $963,754.
Cash
flows used in operating activities were $1,442,438 in the Current Year
as
compared to $574,350 in the Previous Year. The increase in the cash used
by
operating activities was primarily the result of company expansion.
Cash
flows used in investing activities were $1,066,596 for the year ended January
31, 2006 as compared to $523,974 for the year ended January 31, 2005. The
increase in cash used by investing activities is primarily due to the purchase
of property and equipment and creation of master record.
Cash
flows from financing activities were $2,521,232 for the year ended January
31,
2006 as compared to $1,098,544 in previous year. The increase in cash provided
by financing activities is primarily due to the capital contributions and
loan
from shareholders.
Off-Balance
Sheet Arrangements
We
do not
have any off balance sheet arrangements that are reasonably likely to have
a
current or future effect on our financial condition, revenues, results
of
operations, liquidity or capital expenditures.
Mega
Media Sports, Inc., Mega Media Film, Inc., VSE Magazine, Inc. and Mega
Media
Records, Inc., currently doing business as Skeleton Key Entertainment,
were
incorporated in New York on February 5, 2004.
Mega
Media Sports Entertainment, Inc. was incorporated in New York on August
24,
2004.
Employees
The
Company has over fifty (50) employees.
Properties
The
Company’s offices in New York City total 5,500 square feet. Its offices and
studio facilities in Brooklyn, New York total 7,000 square feet. Both offices
are leased for $14,000 and $11,993.00 respectively. The Company owns much
of its
studio and radio broadcasting equipment and leases the remainder.
Legal
Proceedings
Previously
we were subject to a debt collection lawsuit in the Supreme Court of New
York,
Kings County, filed by Progress Printing Co. alleging breach of contract
for
printing services for the sum of $26,034.52. The matter was recently settled
for
$15,000 to be paid in installments over the next four months.
Previously,
we were subject to an unmeritorious lawsuit, which was ultimately dismissed,
filed by Loof, Inc. ("Loof") in the United States District Court for the
Eastern
District of New York. On September 14, 2005, Loof filed an Amended Complaint
in
the United States District Court for the Eastern District of New York against
BTY Development Associates, LLC ("BTY"), Lev Paukman, Anna Paukman, New
Life
Broadcasting Company, VSE Magazine, Inc. ("VSE"), Echo Broadcasting Group,
Inc.
("Echo"), New Life Broadcasting-NYC, Inc., Russian Language Media, Inc.,
and
Russian Language Broadcasting Corp., alleging copyright infringement, unfair
competition, breach of contract, misappropriation of software, conversion,
violations of New York's Business Law, trade secret infringement, and piercing
of the corporate veil. The suit was dismissed in February 2006.
Government
Regulation
There
are
no direct governmental approvals required for our products and services.
See
“Risk Factors” regarding government regulations.
Directors
and Executive Officers
The
following table sets forth information regarding the members of the Company’s
Board of Directors and its executive officers following the Closing Date.
The
directors listed below will serve until the next annual meeting of the
Company’s
stockholders.
|
Name
|
Age
|
Position
|
|
Aleksandr
Shvarts
|
37
|
Chief
Executive Officer, Director
|
|
David
Kokakis, Esq.
|
33
|
Chief
Operating Officer, Acting President, Director
|
|
Gennady
Pomeranets, CPA
|
35
|
Chief
Financial Officer
|
|
Eric
Schwartz
|
45
|
Executive
Vice President
|
|
Dr.
Lev Paukman
|
64
|
Director
|
The
principal occupation for the past five years (and, in some instances, for
prior
years) of each of our directors and officers are as follows:
Aleksandr
Shvarts
Mr.
Shvarts has more than fifteen years of experience in the financial community.
He
has implemented and supervised numerous marketing plans for public and
private
companies. His specialty is in forecasting and creating business strategies
for
start-up companies based on careful analysis of economic, political and
general
market conditions. Outside of the financial world, he has been involved
in
numerous entertainment activities, including live concerts promotions,
radio
programming, and video production and recording artist development. Mr.
Shvarts
created and implemented the overall business strategy for the Company.
Mr.
Shvarts is the brother of Eric Schwartz.
On
November 8, 2000, Mr. Shvarts pled guilty one count of securities fraud
and he
also pled guilty to superseding information, charging three counts of conspiracy
to commit securities fraud. The charges related to Mr. Shvarts activities
at
Global Equities Group, Inc. in connection with an initial public offering
in
1996. Mr. Shvarts was sentenced to 41 months of imprisonment. Mr. Shvarts
was
released from prison on December 3, 2002. He was also required to make
restitution in the amount of $837,436.80. Mr. Shvarts was also disciplined
by
the NASD for his role in the foregoing. Mr. Shvarts is continuing to make
payments in compliance with his restitution obligations
David
Kokakis, Esq.
Mr.
Kokakis is an entertainment attorney who has represented major talents
in the
music business, including multi-platinum-selling rock acts, such as Godsmack,
successful urban artists, such as Lil Bow Wow, 3LW, Blu Cantrell and Three
6
Mafia, and Grammy-winning producers and songwriters, such as Raphael Saadiq.
He
has developed a specialty in representing independent record companies,
such as
Jellybean Recordings and Pookie Entertainment, and consulting for major
record
labels that seek to implement new business models, including Island Def
Jam and
Warner Music Group. He practiced law for the past six years in the New
York
entertainment department of Greenberg Traurig, LLP, currently the world's
largest entertainment law firm, and prior to that at a boutique entertainment
law firm in New York that specialized in artist representation. He has
a
background in artist management, production and studio engineering, and
is also
an entrepreneur who owns restaurants and bars in New York City and northern
New
Jersey. Mr. Kokakis is responsible for overseeing business development,
acquisitions and the general operations of MMG.
Gennady
Pomeranets, CPA
Mr.
Pomeranets is a certified public accountant with years of experience in
fashion,
entertainment, audio recording and video production industries. He is a
graduate
of Brooklyn College and practiced at Frederick Kantor & Co, CPAs, PC,
LCS&Z Glickman Lutz LLP, and H.J. Berhman & Co LLP. He has been a
managing director of a local New York public accounting firm with diversified
clientele serving varieties of industries and communities. Mr. Pomeranets
has
extensive experience in entertainment industry and is currently serving
as a
director of September 11 Family Group Marina Gertsberg Memorial Fund
Inc.
Eric
Schwartz
Beginning
his career as a musician, performer, and recording artist in the late '70s
and
early '80s, Mr. Schwartz has an in-depth knowledge of the music business.
As
Executive Director of Interlude Recording Studios in New York City, he
successfully booked many internationally known recording artists, including
Roberta Flack, Gil Goldstein, Alex Sipiagin, KRS-ONE, and Mad Lion. He
also
served for eleven years as Executive Producer of the renowned fifty-two
person
floor show at Rasputin Supper Club in Brooklyn, where his work received
rave
reviews from local, national and international publications. He was solely
responsible for arranging and recording the scores for the shows, creating
multimedia video concepts, creating conceptual designs, and the general
management and production of the show. Mr. Schwartz is responsible for
managing
MMG's recording and media facilities, as well as programming and content
for the
MMG operated radio station. Mr. Schwartz is the brother of Mr. Alex
Shvarts.
Dr.
Lev Paukman
Dr.
Paukman is one of the most distinguished members of the Russian-speaking
Community of New York. Since the late 70s Dr. Paukman has practiced medicine
in
prestigious NY City hospitals like NY Methodist, Mt Sinai, Victory Memorial
Medical Center, just to name a few. His medical research has been published
in
major medical journals. Despite the demanding schedule imposed by his private
practice, Dr. Paukman is a committed public servant, who works tirelessly
on
behalf of the Ethnic Russian Community. He is an active Board Member of
the
United Jewish Appeal, Council of Jewish Immigrant Community Organization,
Bnei
Zion, and other Charitable and Civic organizations. Renown for his personal
generosity and compassion to those less fortunate has received numerous
awards
for his relentless philanthropic activities and communal involvement. He
has
been an active political liaison to the Russian Community. Recently he
has begun
an active campaign to educate Russian community against the addictions
of drugs
in teenagers. In 2003 Dr. Paukman implemented his vision of creating a
vehicle
that would unite the Ethnic Russians of New York, be one source of information
and entertainment and be a bridge between the mainstream and ethnic New
Yorkers.
The vision was Radio VSE.
Board
of Directors Composition and Committees
Immediately
following the Merger, the Company’s Board of Directors is comprised of three
directors: Aleksandr Shvarts, David Kokakis, and Dr. Lev Paukman.
Director
Compensation
Following
the Merger, the Company may compensate non-management directors through
the
issuance of stock awards including, without limitation, stock options,
restricted stock awards, stock grants and/or stock appreciation rights.
The
Company intends to make such awards pursuant to a stock option plan or
employee
incentive plan to be approved by the Company.
Audit
Committee Financial Expert
Within
90
days of the closing of Merger, the Company will appoint an independent
director
to serve on the Company’s Audit Committee as an audit committee financial
expert. This person shall be independent (as such term is used in Item
7(d)(3)(iv) of Schedule 14A under the Exchange Act).
Executive
Officer Employment Agreements
The
Company has executed employment contracts with all executive officers.
The term
of each contract is two years and the compensation information is included
below
in the section entitled “Executive Compensation”.
Indemnification
of Directors and Officers
As
permitted by the provisions of the Nevada Revised Statutes (“NRS”), the
Company has the power to indemnify any person made a party to an action,
suit or
proceeding by reason of the fact that they are or were a director, officer,
employee or agent of the Company, against expenses, judgments, fines and
amounts
paid in settlement actually and reasonably incurred by them in connection
with
any such action, suit or proceeding if they acted in good faith and in
a manner
which they reasonably believed to be in, or not opposed to, our best interest
and, in any criminal action or proceeding, they had no reasonable cause
to
believe their conduct was unlawful. Termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo
contendere
or its
equivalent, does not, of itself, create a presumption that the person did
not
act in good faith and in a manner which they reasonably believed to be
in or not
opposed to our best interests, and, in any criminal action or proceeding,
they
had no reasonable cause to believe their conduct was unlawful.
The
Company must indemnify a director, officer, employee or agent who is successful,
on the merits or otherwise, in the defense of any action, suit or proceeding,
or
in defense of any claim, issue, or matter in the proceeding, to which they
are a
party because they are or were a director, officer, employee or agent,
against
expenses actually and reasonably incurred by them in connection with the
defense.
The
Company may provide to pay the expenses of officers and directors incurred
in
defending a civil or criminal action, suit or proceeding as the expenses
are
incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director
or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that they are not entitled to be indemnified by
the
Company.
The
NRS
also permits a corporation to purchase and maintain liability insurance
or make
other financial arrangements 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
enterprises.
|
Such
coverage may be for any liability asserted against them and liability and
expenses incurred by them in their capacity as a director, officer, employee
or
agent, or arising out of their status as such, whether or not the corporation
has the authority to indemnify them against such liability and
expenses.
Insofar
as indemnification for liabilities arising under the Securities Act, as
amended,
may be permitted to officers, directors or persons controlling our company
pursuant to the foregoing provisions, the Company has been informed that
in the
opinion of the SEC such indemnification is against public policy as expressed
in
such Act and is therefore unenforceable.
Executive
Compensation
The
following executives of the Company received compensation in the amounts
set
forth in the chart below for the years ended January 31, 2006, 2005 and
2004.
All compensation listed is in US dollars. No other item of compensation
was paid
to any officer or director of the Company other than reimbursement of
expenses
SUMMARY
COMPENSATION TABLE
| |
|
|
Annual
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Compensation
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
|
Payouts
|
|
|
|
|
|
ame
And Principal Position
|
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Other
Annual Compensation
($)
|
|
|
Restricted
Stock Award(s)
($)
|
|
|
Securities
Under-lying Options /SARs
($)
|
|
|
LTIP
Payouts
($)
|
|
|
All
Other Compensation
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aleksandr
Shvarts, Chief Executive Officer
|
|
|
2006
|
|
$
|
42,500
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
2005
|
|
$
|
7,800
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
2004
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Eric
Schwartz,
Executive
Vice President
|
|
|
2006
|
|
$
|
60,705
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
2005
|
|
$
|
36,450
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
2004
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
David
Kokakis, Esq.,
Chief
Operating Officer, Acting President
|
|
|
2006
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
2005
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
2004
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Gennady
Pomeranets, CPA, Chief Financial Officer
|
|
|
2006
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
2005
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
2004
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Certain
Relationships and Related Transactions
Aleksandr
Shvarts and Eric Schwartz are brothers.
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth information regarding the number of shares of
Common
Stock beneficially owned on August 11, 2006, the Closing Date, by each
person
who is known by the Company to beneficially own 5% or more of the Company’s
Common Stock, each of the Company’s directors and executive officers, and all of
the Company’s directors and executive officers, as a group:
|
Name
and Address
|
|
Number
of Common Shares Beneficially Owned(2)
|
|
Percent
of Class
|
|
|
Aleksandr
Shvarts(1)
(5)
100
Oceana Drive
|
|
|
754,689,404
|
(4)
|
|
50.31
|
%
|
|
David
Kokakis(1)
53
Horratio St., 2nd
Fl
|
|
|
0
|
|
|
0
|
%
|
|
Dr.
Lev Paukman(1)
1965
Broadway, Apt. 2A
|
|
|
0
|
|
|
0
|
%
|
|
Eric
Schwartz(1)
(5)
100
Oceana Drive, Apt. 6B
|
|
|
0
|
|
|
0
|
%
|
|
Gennady
Pomeranets(1)
c/o
Universal Accounting
328
Neptune Avenue
|
|
|
0
|
|
|
0
|
%
|
|
Ian
Rescigno (3)
605
Warwick Avenue #4
|
|
|
328,530,941
|
(4)
|
|
21.90
|
%
|
|
Michael
Rosenfeld
|
|
|
104,698,659
|
(4)
|
|
5.19
|
%
|
|
35
Summer Street
|
|
|
9,000,000
|
(4)
|
|
0.45
|
%
|
|
Ronald
Rescigno
4063
Bridgewood Lane
|
|
|
89,118,902
|
(4)
|
|
4.42
|
%
|
|
Robert
Rescigno
|
|
|
7,500,000
|
(4)
|
|
0.37
|
%
|
|
Joe
Pikulski
32009
Foxmoor Court
|
|
|
141,000,000
|
(4)
|
|
6.99
|
%
|
|
Stanley
Merdinger(6)
30
West 63rd Street, Apt. 24P
|
|
|
10,000,000
|
(4)
|
|
0.50
|
%
|
|
Natalie
Merdinger(6)
30
West 63rd Street, Apt. 24P
|
|
|
25,000,000
|
(4)
|
|
1.24
|
%
|
|
Jerry
Hanley
|
|
|
17,152,951
|
(4)
|
|
0.85
|
%
|
|
Rip
Gerber
|
|
|
17,152,951
|
(4)
|
|
0.85
|
%
|
|
Paula
Cruz Takash
|
|
|
3,000,000
|
(4)
|
|
0.15
|
%
|
|
Louis
Capannelli
|
|
|
2,535,000
|
(4)
|
|
0.13
|
%
|
|
All
directors and executive officers as a group (5 in
number)
|
|
|
754,689,404
|
(4)
|
|
50.31
|
%
|
(1)
The
person listed is an officer and/or director of the Company.
(2)
Based on
1,500,000,000 shares of common stock issued and outstanding as of August
11,
2006.
(3)
Ian
Rescigno is the beneficial owner of 844,592,577 shares of our common stock,
of
which 735,000,000 shares were awarded to him pursuant to a judgment against
the
company, of which 516,061,636 of those shares are unissued as they would
exceed
our authorized capital stock of 1,500,000,000 shares.
(4)
In the
Merger, MMG and its shareholders, received irrevocable proxies from a majority
of the EduLink shareholders to vote 754,689,404 shares of common stock,
representing 50.31% of the issued and outstanding shares of us, for a period
of
120 days or until such time as the Company issues to the MMG Shareholders
90% of
its outstanding shares. MMG and its shareholders designated Aleksandr Shvarts,
our new Chief Executive Officer, as the authorized agent to receive such
proxies. As a result of the proxies, Aleksandr Shvarts is the beneficial
owner
of all 754,689,404 shares of common stock for voting purposes.
(5)
Aleksandr
Shvarts and Eric Schwartz are brothers.
(6)
Stanley
Merdinger and Natalie Merdinger are husband and wife.
Description
of Securities
Upon
the
closing of the acquisition of MMG, we are authorized to issue 1,500,000,000
shares of common stock, par value $0.001 per share, and no shares of preferred
stock. We have the full 1,500,000,000 shares of common stock issued and
outstanding. Since we have issued all of our authorized shares, we intend
to
take whatever steps are necessary to effectuate a reverse split and/or
to
increase our authorized shares of common stock to a number sufficient to
issue
to MMG Sharetockholders 90% of our issued and outstanding shares pursuant
to the
Agreement.
All
shares of common stock have equal rights and privileges with respect to
voting,
liquidation and dividend rights. Each share of common stock entitled the
hold
thereof (a) to one non-cumulative vote for each share held of record on
all
matters submitted to a vote of the stockholders; (b) to participate equally
and
to receive any and all such dividends as may be declared by the board of
directors; and (c) to participate pro rata in any distribution of assets
available for distribution upon liquidation. Holders of our common stock
have no
preemptive rights to acquire additional shares of common stock or any other
securities. Our common stock is not subject to redemption and carries no
subscription or conversion rights.
In
addition, such authorized but unissued common shares could be used by the
board
of directors for defensive purposes against a hostile takeover attempt,
including (by way of example) the private placement of shares or the granting
of
options to purchase shares to persons or entities sympathetic to, or
contractually bound to support, management. We have no such present arrangement
or understanding with any person. Further, the common shares may be reserved
for
issuance upon exercise of stock purchase rights designed to deter hostile
takeovers, commonly known as a “poison pill.”
Market
Price of and Dividends on Our Common Equity and Related Stockholder
Matters
The
Company’s common stock is quoted on the Pink Sheets Electronic Quotation Service
under the symbol MYIQ.
The
information set forth in Item 1.01 is incorporated herein by
reference.
|
Section
5
|
-
|
Corporate
Governance and Management
|
|
Item
5.01
|
Changes
in Control of Registrant.
|
On
August
11, 2006, in exchange for all of the MMG common shares tendered, upon the
increase in the authorized capital stock, we will issue to MMG Shareholders
a
total number of shares of Edulink common stock, which will represent, and
equate
to, 90% of EduLink’s issued and outstanding common stock after the transaction
is closed. Such shares will be restricted in accordance with Rule 144 of
the
1933 Securities Act. As further consideration for the acquisition, on the
Closing Date, a majority of our shareholders duly executed irrevocable
proxies
to vote their shares for a period of 120 days or until such time as 90%
of
EduLink’s shares are issued to the MMG Shareholders, and delivered them to MMG
and its shareholders, along with the aforementioned EduLink shareholders’ share
certificates to be held in escrow.
Accounting
Treatment; Change of Control.
The
Merger is being accounted for as a “reverse merger,” since the former
stockholders of Mega Media will own a majority of the outstanding shares
of the
Company’s Common Stock upon the increase in the authorized stock following the
Merger, and since a majority of EduLink shareholders executed and delivered
to
MMG and its shareholders, along with the aforementioned EduLink shareholders’
share certificates to be held in escrow, irrevocable proxies to vote their
shares for a period of 120 days or until such time as 90% of EduLink’s shares
are issued to the MMG Shareholders. No arrangements or understandings exist
among present or former controlling stockholders with respect to the election
of
members of the Company’s board of directors and, to the Company’s knowledge, no
other arrangements exist that might result in a change of control in the
future.
As
a
result of the issuance of shares representing, and equating to, 90% of
EduLink’s
issued and outstanding common stock after the Merger upon the increase
in the
authorized capital stock, the execution and delivery by a majority of EduLink
shareholders to MMG and its shareholders, along with the aforementioned
EduLink
shareholders’ share certificates to be held in escrow, duly executed irrevocable
proxies to vote their shares for a period of 120 days or until such time
as 90%
of EduLink’s shares are issued to the MMG Shareholders, and the change in the
majority of the Company’s officers and directors, a change in control occurred
on the date of the consummation of the Merger.
As
of the
time immediately following the closing, the Company continued to be a “small
business issuer,” as defined under the Securities Exchange Act of 1934, as
amended.
The
information set forth in Item 1.01 is incorporated herein by
reference.
|
Item
5.02
|
Departure
of Directors or Principal Officers; Election of Directors; Appointment
of
Principal Officers.
|
Upon
closing of the Merger on August 11, 2006, the Company appointed the following
people as directors and executive officers of Edulink:
|
Name
|
Position
|
|
Aleksandr
Shvarts
|
Chief
Executive Officer, Director
|
|
David
Kokakis, Esq.
|
Chief
Operating Officer, Acting President, Director
|
|
Gennady
Pomeranets, CPA
|
Chief
Financial Officer
|
|
Eric
Schwartz
|
Executive
Vice President
|
|
Dr.
Lev Paukman
|
Director
|
As
a
result of the Merger, we are changing our fiscal year end to January
31.
|
Item
5.06
|
Change
in Shell Company Status.
|
|
Section
9
|
-
|
Financial
Statements and Exhibits.
|
Item
9.01 Financial
Statements and Exhibits.
|
(a)
|
Financial
statements of businesses acquired.
|
Financial
Statements of Mega Media, Inc. and its wholly-owned operating
subsidiaries.
|
(b)
|
Pro
forma financial information.
|
Pro
Forma
Financial Statements of Mega Media, Inc. and its wholly-owned operating
subsidiaries.
|
Exhibit
No.
|
|
Exhibits
|
|
|
|
|
|
10.1
|
|
Stock
Purchase Agreement and Share Exchange dated August 10, 2006
by and among
EduLink, Inc., Mega Media Group, Inc. and Mega Media
Shareholders
|
|
|
|
|
|
99.1
|
|
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| |
|
|
| |
EDULINK,
INC.
|
|
|
|
| Date: November
29, 2006 |
By: |
/s/ Aleksandr
Shvarts |
| |
ALEKSANDR
SHVARTS |
| |
Title:
Chief
Executive Officer |
30
