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<SEC-DOCUMENT>0001169232-04-005307.txt : 20041025
<SEC-HEADER>0001169232-04-005307.hdr.sgml : 20041025
<ACCEPTANCE-DATETIME>20041025163346
ACCESSION NUMBER:		0001169232-04-005307
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20040930
FILED AS OF DATE:		20041025
DATE AS OF CHANGE:		20041025

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DAG MEDIA INC
		CENTRAL INDEX KEY:			0001080340
		STANDARD INDUSTRIAL CLASSIFICATION:	MISCELLANEOUS PUBLISHING [2741]
		IRS NUMBER:				113474831
		STATE OF INCORPORATION:			NY
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-25991
		FILM NUMBER:		041094279

	BUSINESS ADDRESS:	
		STREET 1:		125 QUEENS BLVD STE 14
		CITY:			KEW GARDENS
		STATE:			NY
		ZIP:			11415

	MAIL ADDRESS:	
		STREET 1:		125 QUEENS BLVD STE 14
		CITY:			KEW GARDENS
		STATE:			NY
		ZIP:			11415
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>d60995_10qsb.txt
<DESCRIPTION>QUARTERLY REPORT
<TEXT>

                                                                  SECURITIES AND
                                                                        EXCHANGE
                                                                      COMMISSION
                                                                     WASHINGTON,
                                                                      D.C. 20549

FORM 10-QSB

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the Quarterly Period Ended September 30, 2004

                        Commission File Number 000-25991

                                 DAG MEDIA, INC.

        (Exact name of small business issuer as specified in its charter)

                New York                                        13-3474831
     (State or other jurisdiction of                         (I.R.S. Employer
     incorporation or organization)                       Identification Number)

         125-10 Queens Boulevard
             Kew Gardens, NY                                      11415
(Address of principal executive offices)                        (Zip Code)

                                 (718) 520-1000
                (Issuer's telephone number, including area code)

      Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
                                                                Yes |X| No |_|

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of October 25, 2004, there were
outstanding 3,152,190 shares of the issuer's common shares, $.001 par value.

      Transitional Small Business Disclosure Format             Yes |_| No |X|

<PAGE>

                                 DAG MEDIA, INC.
                         QUARTERLY REPORT ON FORM 10-QSB
                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004
                                TABLE OF CONTENTS

          Part I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
                                                                                     Page Number
<S>                                                                                  <C>
Item 1.   Financial Statements (unaudited)

          Balance Sheet at September 30, 2004                                        3

          Statements of Operations for the Three and Nine Months Periods Ended       4
          September 30, 2004 and 2003

          Statements of Cash Flows for the Nine Months Periods Ended September
          30, 2004 and 2003                                                          5

          Notes to Financial Statements                                              6

Item 2.   Management's Discussion and Analysis or Plan of Operation                  8

Item 3.   Controls and Procedures                                                    13

          Part II - OTHER INFORMATION

Item 6.   Exhibits                                                                   13

          SIGNATURES                                                                 14

          EXHIBITS                                                                   15
</TABLE>


                                       2
<PAGE>

Item 1. FINANCIAL STATEMENTS

                                 DAG MEDIA, INC.
                                  BALANCE SHEET
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                             September 30, 2004
                                                                                             ------------------
<S>                                                                                              <C>
Assets

Current assets:

   Cash and cash equivalents                                                                     $  4,347,203
   Marketable securities                                                                            4,590,734
   Short term investment - insurance annuity contract - at fair value                               1,044,202
                                                                                                 ------------
            Total cash and cash equivalents, marketable securities and short terms investments      9,982,139

   Trade accounts receivable, net of allowance for doubtful accounts of $ 450,000                   1,620,193

   Directories in progress                                                                          1,328,918

   Other current assets                                                                               257,304
                                                                                                 ------------
         Total current assets                                                                      13,188,554

Property and equipment, net                                                                           217,226

Trademarks and other intangibles, net                                                                 275,518

Other assets                                                                                          118,863
                                                                                                 ------------
         Total assets                                                                            $ 13,800,161
                                                                                                 ============

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses                                                            $    265,928
Accrued commissions and commissions payable                                                           605,000
Advanced billing for unpublished directories                                                        2,793,983
Income tax payable                                                                                    670,248
                                                                                                 ------------
         Total current liabilities                                                                  4,355,159

Commitments and contingencies                                                                              --

Shareholders' equity:
         Preferred shares - $ .01 par value; 5,000,000 shares authorized; no shares
         issued                                                                                            --
         Common shares - $ .001 par value; 25,000,000 authorized; 3,152,190
         issued and 3,083,460 outstanding                                                               3,152
           Additional paid-in capital                                                               8,374,913
         Treasury stock, at cost- 68,730 shares                                                      (231,113)
         Deferred compensation                                                                        (31,478)
         Accumulated other comprehensive income                                                        35,284
           Retained earnings                                                                        1,314,244
                                                                                                 ------------
                Total shareholders' equity                                                          9,465,002
                                                                                                 ------------
                Total liabilities and shareholders' equity                                       $ 13,800,161
                                                                                                 ============
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       3
<PAGE>

                                 DAG MEDIA, INC.
                            STATEMENTS OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
                                               Three Months Ended September 30,    Nine Months Ended September 30,
                                               --------------------------------    -------------------------------
- ------------------------------------------------------------------------------------------------------------------
                                                     2004             2003              2004              2003
                                                  ----------      -----------       -----------       -----------
- -----------------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>               <C>               <C>
Advertising revenues                              $1,986,744      $ 2,043,232       $ 5,027,356       $ 5,580,216
- -----------------------------------------------------------------------------------------------------------------
Publishing costs                                     225,496          225,892           772,837           928,910
                                                  ----------      -----------       -----------       -----------
- -----------------------------------------------------------------------------------------------------------------
Gross Profit                                       1,761,248        1,817,340         4,254,519         4,651,306
- -----------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------
Operating costs and expenses:
- -----------------------------------------------------------------------------------------------------------------
Selling expenses                                     963,068          922,110         2,280,664         2,372,402
- -----------------------------------------------------------------------------------------------------------------
Administrative and general costs                     745,178          730,794         2,015,866         1,899,490
                                                  ----------      -----------       -----------       -----------
- -----------------------------------------------------------------------------------------------------------------
Total operating costs and expenses                 1,708,246        1,652,904         4,296,530         4,271,892
                                                  ----------      -----------       -----------       -----------
- -----------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------
Gain (loss) from operations                           53,002          164,436           (42,011)          379,414
                                                  ----------      -----------       -----------       -----------
- -----------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------
Other income                                          84,735           95,546           328,520           200,747
- -----------------------------------------------------------------------------------------------------------------
Gain from sale of the New Yellow Directory                --        1,207,997                --         1,207,997
                                                  ----------      -----------       -----------       -----------
- -----------------------------------------------------------------------------------------------------------------
Total other income                                    84,735        1,303,543           328,520         1,408,744
                                                  ----------      -----------       -----------       -----------
- -----------------------------------------------------------------------------------------------------------------
Income from continuing operations before             137,737        1,467,979           286,509         1,788,158
provision for income taxes                        ----------      -----------       -----------       -----------
- -----------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------
Provision for income taxes                           134,340          189,764           134,340           205,601
                                                  ----------      -----------       -----------       -----------
- -----------------------------------------------------------------------------------------------------------------
Income from continuing operations                 $    3,397      $ 1,278,215       $   152,169       $ 1,582,557
                                                  ----------      -----------       -----------       -----------
- -----------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------
Discontinued operations:
- -----------------------------------------------------------------------------------------------------------------
Gain on the sale of Blackbook, net of tax          1,169,213               --         1,169,213                --
effect of $770,000
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations            16,480         (139,786)         (183,352)         (431,561)
net of tax benefit of $120,000                    ----------      -----------       -----------       -----------
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations         1,185,693         (139,786)          985,861          (431,561)
- -----------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------
Net income                                        $1,189,090      $ 1,138,429       $ 1,138,030       $ 1,150,996
                                                  ==========      ===========       ===========       ===========
- -----------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------
Net income (loss) per common share - Basic
- -----------------------------------------------------------------------------------------------------------------
Continuing operations                                   0.00             0.44              0.05              0.54
- -----------------------------------------------------------------------------------------------------------------
Discontinuing operations                                0.38            (0.05)             0.31             (0.15)
                                                  ----------      -----------       -----------       -----------
- -----------------------------------------------------------------------------------------------------------------
Total net income per common share - Basic         $     0.38      $      0.39       $      0.36       $      0.39
                                                  ==========      ===========       ===========       ===========
- -----------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------
Net income (loss) per common share - Diluted
- -----------------------------------------------------------------------------------------------------------------
Continuing operations                                   0.00             0.43              0.04              0.51
- -----------------------------------------------------------------------------------------------------------------
Discontinuing operations                                0.37            (0.05)             0.31             (0.14)
                                                  ----------      -----------       -----------       -----------
- -----------------------------------------------------------------------------------------------------------------
Total net income per common share -               $     0.37      $      0.38       $      0.35       $      0.37
Diluted                                           ==========      ===========       ===========       ===========
- -----------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------
Weighted average number of common
shares outstanding
- -----------------------------------------------------------------------------------------------------------------
- --Basic                                            3,152,190        2,929,895         3,125,455         2,928,281
                                                  ==========      ===========       ===========       ===========
- -----------------------------------------------------------------------------------------------------------------
- --Diluted                                          3,237,608        3,011,636         3,230,197         3,102,791
                                                  ==========      ===========       ===========       ===========
- -----------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       4
<PAGE>

                                 DAG MEDIA, INC.
                            STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                         Nine Months ended

                                                                              September 30, 2004    September 30, 2003
                                                                              ------------------    ------------------
<S>                                                                                <C>                  <C>
Cash flows from operating activities:
  Net income                                                                       $ 1,138,030          $ 1,150,996
  Adjustment to reconcile net income to net cash (used in) provided by
  operating activities:
  Depreciation and amortization                                                        102,403               85,464
  Gain on sale of New Yellow Directory                                                      --           (1,207,997)
  Gain on sale of Blackbook Photography Inc.                                        (1,939,213)                  --
  Amortization of deferred compensation                                                 49,522               11,198
  Bad debt expense                                                                     524,926              667,261
  Realized gain on sale of marketable securities                                      (191,989)                  --
  Non cash option expense                                                               16,092                   --
  Tax benefit of stock options exercised                                               137,680                   --

  Deferred taxes                                                                       (63,571)            (192,635)
  Changes in operating assets and liabilities net of disposition of Blackbook
Photography, Inc.
       Accounts receivable                                                            (486,514)            (604,892)
       Directories in progress                                                         322,070              396,023
       Other current assets                                                             85,814              (29,938)
        Other assets                                                                    (4,412)                  --
       Accounts payable and accrued expenses                                          (342,968)              31,947
       Accrued commissions and commissions payable                                     (61,817)             (19,000)
       Advance billing for unpublished directories                                      11,006             (673,305)
       Income taxes payable                                                            581,248              201,213
       Assets and liabilities from discontinued operation                                   --              416,139
                                                                                   -----------          -----------
              Net cash (used in) provided by operating activities                     (121,693)             232,474
                                                                                   -----------          -----------

Cash flows from investing activities:
   Proceeds from sale of marketable securities                                       7,328,008            4,460,453
   Purchase of fixed assets                                                            (24,969)            (126,933)
   Investment in marketable securities move                                         (5,258,515)          (5,727,209)
   Proceeds from sale of fixed assets                                                       --               46,200
   Cash received on sale of New Yellow Directory, net of expenses                           --            1,207,997
   Cash received on sale of Blackbook Photography Inc., net of expenses
    and amounts in escrow and cash surrendered on sale                               1,800,245                   --
   Investment in Dune Medical Devises Ltd.                                                  --             (100,000)
                                                                                   -----------          -----------
             Net cash provided by (used in) investing activities                     3,844,769             (239,492)
                                                                                   -----------          -----------

Cash flows from financing activities:
    Dividend paid                                                                     (744,113)                  --
    Proceeds from forfeit of gain on sale of restricted stocks                          10,279                   --
    Proceeds from exercise of stock options                                            156,142               10,640
                                                                                   -----------          -----------
              Net cash (used in) provided by financing activities                     (577,692)              10,640
                                                                                   -----------          -----------

Net increase in cash                                                               $ 3,145,384          $     3,622
Cash and cash equivalents, beginning of period                                       1,201,819              131,611
                                                                                   -----------          -----------
Cash and cash equivalents, end of period                                           $ 4,347,203          $   135,233
                                                                                   ===========          ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       5
<PAGE>

                                 DAG MEDIA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004

1.    THE COMPANY

The accompanying unaudited financial statements of DAG Media, Inc. ("DAG" or the
"Company") included herein have been prepared by the Company in accordance with
generally accepted accounting principles for interim financial information and
with instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. However, in the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The accompanying unaudited financial
statements should be read in conjunction with the Company's audited financial
statements for the year ended December 31, 2003 and the notes thereto included
in the Company's 10-KSB. Results of operations for the interim period are not
necessarily indicative of the operating results to be attained in the entire
fiscal year.

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual amounts could differ from those estimates.

2.    RECENT TECHNICAL ACCOUNTING PRONOUNCEMENTS

      Management does not believe that any recently issued, but not yet
effected, accounting standards if currently adopted would have a material effect
on the Company's financial statements.

3.    EARNINGS PER SHARE OF COMMON STOCK

      The Company has applied SFAS No. 128, "Earnings Per Share" in its
calculation and presentation of earnings per share - "basic" and "diluted".
Basic earnings per share are computed by dividing income available to common
shareholders (the numerator) by the weighted average number of common shares
(the denominator) for the period. The computation of diluted earnings per share
is similar to basic earnings per share, except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if the potentially dilutive common shares had been issued.


                                       6
<PAGE>

The numerator in calculating both basic and diluted earnings per common share
for each period is the reported net income. The denominator is based on the
following weighted average number of common shares:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
                                                Three Months Ended                  Nine Months Ended
                                                   September 30,                      September 30,
- -------------------------------------------------------------------------------------------------------------
                                               2004              2003            2004               2003
                                               ----              ----            ----               ----
- -------------------------------------------------------------------------------------------------------------
<S>                                         <C>               <C>             <C>                 <C>
Basic                                       3,152,190         2,929,895       3,125,455          2,928,281
- -------------------------------------------------------------------------------------------------------------
Incremental shares for assumed                 85,418            81,741         104,742            174,510
conversion of options
- -------------------------------------------------------------------------------------------------------------
Diluted                                     3,237,608         3,011,636       3,230,197          3,102,791
- -------------------------------------------------------------------------------------------------------------
</TABLE>

      There were 267,440 and 162,440 stock options and warrants not included in
the diluted earnings per share calculation for the three and nine months period
ended September 30, 2004, respectively. For the respective three months and nine
months period ended September 30, 2003 there were 106,440 and 21,440,
respectively, stock options and warrants not included in the diluted earning per
share calculation.

4.    STOCK - BASED COMPENSATION

      As permitted by the SFAS No. 123, "Accounting for Stock Based
Compensation", the Company accounts for stock-based compensation arrangements
with employees in accordance with provisions of Accounting Principles Board
("APB") Opinion No. 25 "Accounting for Stock Issued to Employees". Compensation
expense for stock options issued to employees is based on the difference on the
date of grant, between the fair value of the Company's stock and the exercise
price of the option. No stock based employee compensation cost is reflected in
net income, as all options granted under those plans had an exercise price equal
to the market value of the underlying common stock at the date of grant. The
Company accounts for equity instruments issued to non employees in accordance
with the provisions of SFAS No. 123 and Emerging Issues Task Force ("EITF")
Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction With Selling, or in Conjunction
With Selling Goods or Services". All transactions with non employees, in which
goods or services are the consideration received for the issuance of equity
instruments are accounted for based on the fair value of the consideration
received or the fair value of the equity instrument issued, whichever is more
reliably measurable.

The following table illustrates the effect on net loss and loss per share if the
Company had applied the fair value recognition provisions of SFAS No. 123 to
stock based compensation to employees:


                                       7
<PAGE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
                                        Three Months       Three Months         Nine Months        Nine Months
                                        ------------       ------------         -----------        -----------
                                           Ended               Ended               Ended               Ended
                                           -----               -----               -----               -----
                                        September 30,      September 30,       September 30,       September 30,
                                        -------------      -------------       -------------       -------------
                                            2004                2003                2004                2003
                                            ----                ----                ----                ----
- ----------------------------------------------------------------------------------------------------------------
<S>                                    <C>                 <C>                 <C>                 <C>
Net income, as reported                $   1,189,090       $   1,138,429       $   1,138,030       $   1,150,996
- ----------------------------------------------------------------------------------------------------------------
Less: Total stock based                      (32,738)            (28,240)            (66,322)            (39,098)
employee compensation expenses
determined under fair value based
method for all awards
- ----------------------------------------------------------------------------------------------------------------
Net income, pro forma                  $   1,156,352       $   1,110,189       $   1,071,708       $   1,111,898
- ----------------------------------------------------------------------------------------------------------------
Basic earnings per share,              $        0.38       $        0.39       $        0.36       $        0.39
as reported
- ----------------------------------------------------------------------------------------------------------------
Pro forma                              $        0.37       $        0.38       $        0.34       $        0.38
- ----------------------------------------------------------------------------------------------------------------
Diluted earnings per                   $        0.37       $        0.38       $        0.35       $        0.37
share, as reported
- ----------------------------------------------------------------------------------------------------------------
Pro forma diluted                      $        0.36       $        0.38       $        0.33       $        0.36
earnings per share
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

5.    SIGNIFICANT EVENTS

On August 24, 2004, the company sold its wholly owned subsidiary, Blackbook
Photography Inc. to Modern Holdings Incorporated, for $2.25 million. Under the
stock purchase agreement, - $2.125 million was paid in cash at the closing and
the additional $125,000 will be held in escrow for the next twelve months
pending the resolution of certain open matters. The Company recorded a gain on
the sale of the Blackbook amounting to $1,289,213 which is net of $650,000 for
income taxes and $316,311 for finder's fee, compensation to sales franchisees,
bonuses to employees and legal expenses.

Accordingly, the company has reflected the sale of the Blackbook as a
discontinued operation in the accompanying financial statements. As a result,
revenues, publishing costs, and related expenses have been reclassified in the
statement of operations and shown separately as a net amount under the caption
loss from discontinued operation for all periods presented. Accordingly the
company recorded a loss from discontinued operation totaling $103,520 and
$139,785 for the three-month periods ended September 30, 2004 and 2003,
respectively, and a loss from discontinued operation totaling $303,352 and
$431,561 for the nine-month periods ended September 30, 2004 and 2003,
respectively. Net revenue from the discontinued operations was $234,740 and
$135,006 for the three month periods ended September 30, 2004 and 2003, and net
revenue from the discontinued operation was $799,619 and $285,644 for the nine
month periods ended September 30, 2004 and 2003.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

      The following discussion and analysis of our result of operations should
be read in conjunction with our unaudited financial statements and notes thereto
contained elsewhere in this report. This discussion contains forward-looking
statements based on current expectations that involve risks and uncertainties.
Actual results and the timing of certain events may differ significantly from
those projected in such forward-looking statements.

      We publish and distribute print and online business directories for
domestic niche markets. Our principal source of revenue comes from the sale of
ads in these directories. As a sales incentive we also provide our advertisers
with added values, such as referral services and consumer discount club. We also
operate Internet portals, JewishYellow.com targeting worldwide Jewish
communities and JewishMasterguide.com, targeting the ultra-orthodox and Hasidic
communities as well as Newyellow.com.


                                       8
<PAGE>

      Our principal directories are: the Jewish Israeli Yellow Pages, a
bilingual, English and Hebrew, yellow page directory distributed free through
local commercial and retail establishments in the New York metropolitan area and
Florida. The Jewish Master Guide also known as The Kosher Yellow Pages, a yellow
page directory designed to meet the special needs of the Hasidic and
ultra-Orthodox Jewish communities in the New York metropolitan area and Florida.

      Blackbook Photography Inc., Dag Media's wholly owned subsidiary was sold
on August 24, 2004 to Modern Holdings Incorporated for $2.25 million.

      Advertising fees, whether collected in cash or evidenced by a receivable,
generated in advance of publication dates, are recorded as "Advanced billings
for unpublished directories" on our balance sheet. Many of our advertisers pay
the ad fee over a period of time. In that case, the entire amount of the
deferred payment is booked as a receivable. Revenues are recognized at the time
the directory in which the ad appears is published. Thus, costs directly related
to the publication of a directory in advance of publication are recorded as
"Directories in progress" on our balance sheet and are recognized when the
directory to which they relate is published. All other costs are expensed as
incurred.

      The principal operating costs incurred in connection with publishing the
directories are commissions payable to sales representatives and costs for paper
and printing. Generally, advertising commissions are paid as advertising revenue
is collected. We do not have any long term agreements with paper suppliers or
printers. Since ads are sold before we purchase paper and print a particular
directory, a substantial increase in the cost of paper or printing costs would
reduce our profitability. Administrative and general expenses include
expenditures for marketing, insurance, rent, sales and local franchise taxes,
licensing fees, office overhead and wages and fees paid to employees and
contract workers (other than sales representatives).

Three Months Ended September 30, 2004 Compared to Three Months Ended September
30, 2003

Advertising revenues

Advertising revenues for the three months ended September 30, 2004 were
$1,987,000 compared to $2,043,000 for the three months ended September 30, 2003,
a decrease of $56,000. The decrease was primarily attributable to the slight
decrease in recognized revenue related to the Jewish Yellow Pages Directory,
recognized in the third quarter.

Publishing costs

Publishing costs for the three months ended September 30, 2004 were $225,000
compared to $226,000, for the corresponding period in 2003, a decrease of
$1,000. As a percentage of advertising revenues, publishing costs were 11.32% in
the three month period ending September 30, 2004 compared to 11.06%, in the
corresponding period in 2003. The publishing costs for the quarter ended
September 30, 2004 and the corresponding period in 2003 primarily reflect the
printing and distribution costs of the Jewish Yellow Pages Directory.


                                       9
<PAGE>

Selling expenses

Selling expenses for the three months ended September 30, 2004 were $ 963,000
compared to $922,000 for the corresponding period in 2003, an increase of
$41,000. This increase in selling expenses was primarily attributable to more
sales made by agencies with higher commission rates versus sales made by
representatives who work directly for the company.

Administrative and general costs

General and administrative expenses for the three months period ended September
30, 2004 were $745,000 compared to $731,000 for the same period in 2003, an
increase of 1.92%. This increase is primarily attributable to increased legal
fees.

Other income

For the three month period ended September 30, 2004, we had other income
consisting of dividends, interest and realized gains of $85,000 compared to
other income of $96,000 and gain from sale of the New Yellow Manhattan Directory
of $1,208,000 for the three month period ended September 30, 2003.

Discontinued Activity

On August 24, 2004, the company sold its wholly owned subsidiary, Blackbook
Photography Inc. to Modern Holdings Incorporated, for $2.25 million. The
Company's net profit from the sale, after direct related costs of finder's fee,
compensation to sales franchisees, bonuses to employees and payments to legal
advisors, before provision for income taxes, totaled $1.169 million in addition
to a gain from operation of $16,000. Net gain from discontinued operations
totaled $1.186 million.

Provision for income taxes

The provision for income taxes for the three months ended September 30, 2004 was
$134,000 compared to a provision of $190,000 for the three months ended
September 30, 2003. The Company used its deferred tax asset incurred during the
second quarter of 2004 to decrease its income tax liabilities.

Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30,
2003

Advertising revenues

Advertising revenues for nine months ended September 30, 2004 were $5,027,000
compared to $5,580,000 for the nine months ended September 30, 2003, a decrease
of $553,000. The decrease was primarily attributable to the deduction of
recognized revenues related to the New Yellow Manhattan Directory ninth edition
(sold) partly offset by the increase in recognized revenues of the tenth edition
of the Jewish Master Guide Directory.


                                       10
<PAGE>

Publishing costs

Publishing costs for the nine months ended September 30, 2004 were $773,000
compared to $929,000, for the corresponding period in 2003, a decrease of
$156,000. As a percentage of advertising revenues, publishing costs were 15.37%
in the nine month period ending September 30, 2004, compared to 16.65% in the
corresponding period in 2003. The decrease in publishing costs primarily
reflects the decrease in the printing and distribution costs of the ninth
edition of the New Yellow Manhattan Directory.

Selling expenses

Selling expenses for the nine months ended September 30, 2004 were $2,281,000
compared to $2,372,000 for the corresponding period in 2003, a decrease of
$91,000. This decrease in selling expenses was primarily the result of the
general decreased in sales offset by higher commission rates paid for revenue
generated by the Jewish Master Guide Directory compared to commission rates paid
for revenues generated by the New Yellow Manhattan Directory, previously
published.

Administrative and general costs

General and administrative expenses for the nine month period ended September
30, 2004 were $2,016,000 compared to $1,899,000 for the same period in 2003, an
increase of 6.16%. This increase is primarily attributable to increased
salaries, advertising costs and legal fees

Other income

For the nine month period ended September 30, 2004, we had other income
consisting of dividend, interest and realized gains of $329,000 compared to
other income of $201,000 and gain from sale of the New Yellow Manhattan
Directory of $1,208,000 for the nine month period ended September 30, 2003.

Discontinued Activity

On August 24, 2004, the company sold its wholly owned subsidiary, Blackbook
Photography Inc. to Modern Holdings Incorporated, for $2.25 million. The
Company's net profit from the sale, after direct related costs of finder's fee,
compensation to sales franchisees, bonuses to employees and payments to legal
advisors, before provision for income taxes, totaled $1.169 million in addition
to a loss from operation of $183,000. Net gain from discontinued operation
totaled $986,000.

Provision for income taxes

The provision for income taxes for the nine months ended September 30, 2004 was
$134,000 compared to $206,000 for the nine months ended September 30, 2003. The
Company used its deferred tax asset incurred during the second quarter of 2004
to decrease its income tax liabilities for the period.


                                       11
<PAGE>

Liquidity and Capital Resources

At September 30, 2004, we had cash and cash equivalents, marketable securities
and short term investments of $9,982,000 and working capital of $8,853,000 as
compared to cash and cash equivalents, marketable securities and short term
investments of $8,320,000 and working capital of $6,901,000 at September 30,
2003. The increase in cash and cash equivalents and marketable securities also
reflects the $2.125 million cash provided by the sale of Blackbook Photography
Inc. received in August of 2004. The increase in working capital primarily
reflects the increase in cash offset by decrease in accounts receivable and
$744,000 dividend payments to shareholders made on January 5, 2004.

Net cash used in operating activities was $122,000 for the nine months ended
September 30, 2004. For the comparable period in 2003, net cash provided by
operating activities was $232,000. The decrease in net cash provided by
operating activities reflects the cost of converting the New Yellow sales force
to a sale force for Jewish Master Guide and increased legal fees.

Net cash provided by investing activities was $3,845,000 for the nine months
ended September 30, 2004 compared to net cash used in investing activities of
$239,000 for the comparable period in 2003. Net cash provided by investing
activities was primarily the result of our sales of marketable securities and a
change in our investment strategy as well as the net cash received from the sale
of the Blackbook Photography Inc.

Net cash used in financing activities for the nine months ended September 30,
2004 was $599,000 compared to net cash provided by financing activity in the
corresponding period in 2003 of $11,000. The net cash used in financing
activities for the nine months ended September 30, 2004 was accounted for by the
dividend paid to the Company's shareholders on January 5, 2004, offset by the
proceeds received from the exercise of stock options and the issuance of common
shares, respectively.

We anticipate that our current cash balances together with our cash flows from
operations will be sufficient to fund the production of our directories and the
maintenance of our Web sites as well as increases in our marketing and
promotional activities for the next 12 months. However, we expect our working
capital requirements to increase over the next 12 months as we continue to
market our directories and expand our on-line services.

Forward Looking Statements

This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking
statements are typically identified by the words "believe", "expect", "intend",
"estimate" and similar expressions. Those statements appear in a number of
places in this report and include statements regarding our intent, belief or
current expectations or those of our directors or officers with respect to,
among other things, trends affecting our financial


                                       12
<PAGE>

conditions and results of operations and our business and growth strategies.
These forward-looking statements are not guarantees of future performance and
involve risks and uncertainties. Actual results may differ materially from those
projected, expressed or implied in the forward-looking statements as a result of
various factors (such factors are referred to herein as "Cautionary
Statements"), including but not limited to the following: (i) our limited
operating history, (ii) potential fluctuations in our quarterly operating
results, (iii) challenges facing us relating to our rapid growth and (iv) our
dependence on a limited number of suppliers. The accompanying information
contained in this report, including the information set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", identifies important factors that could cause such differences.
These forward-looking statements speak only as of the date of this report, and
we caution potential investors not to place undue reliance on such statements.
We undertake no obligation to update or revise any forward-looking statements.
All subsequent written or oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
Cautionary Statements.

Item 3. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. The Company's management,
with the participation of the chief executive officer and the chief financial
officer, carried out an evaluation of the effectiveness of the Company's
"disclosure controls and procedures" (as defined in the Securities Exchange Act
of 1934 (the "Exchange Act") Rules 13a-15(e) and 15-d-15(e)) as of the end of
the period covered by this quarterly report (the "Evaluation Date"). Based upon
that evaluation, the chief executive officer and the chief financial officer
concluded that, as of the Evaluation Date, the Company's disclosure controls and
procedures are effective, providing them with material information relating to
the Company as required to be disclosed in the reports the Company files or
submits under the Exchange Act on a timely basis.

(b) Changes in Internal Control Over Financial Reporting. There was no change in
the Company's internal controls over financial reporting, known to the chief
executive officer or the chief financial officer, that occurred during the
period covered by this report that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.

                            PART II-OTHER INFORMATION

Item 6. EXHIBITS

      (a) Exhibits:

      Exhibit No.       Description
      -----------       -----------

      31.1              Chief Executive Officer Certification pursuant to
                        section 302 of the Sarbanes-Oxley Act of 2002.

      31.2              Chief Financial Officer Certification pursuant to
                        section 302 of the Sarbanes-Oxley Act of 2002.

      32.1              Chief Executive Officer Certification as required under
                        section 302 of the Sarbanes-Oxley Act of 2002.

      32.2              Chief Financial Officer Certification as required under
                        section 302 of the Sarbanes-Oxley Act of 2002.


                                       13
<PAGE>

                                   SIGNATURES

      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 thereunto duly authorized.

                                   DAG Media, Inc. (Registrant)


Date: October 25, 2004                         By: /s/ Assaf Ran
                                        -----------------------------
                                   Assaf Ran, President and Chief Executive


Date: October 25, 2004                     By: /s/ Yael Shimor-Golan
                                        ---------------------------------
                                   Yael Shimor-Golan, Chief Financial Officer


                                       14

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>d60995_ex31-1.txt
<DESCRIPTION>CERTIFICATION
<TEXT>

                                  EXHIBIT 31.1

                                  CERTIFICATION

I, Assaf Ran, certify that:

      1. I have reviewed this quarterly report on Form 10-QSB of DAG Media,
      Inc.;

      2. Based on my knowledge, this report does not contain any untrue
      statement of material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this report;

      3. Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

      4. The registrant's other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
      and have:

            a)    Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, is made known to us by others within those
                  entities, particularly during the period in which this report
                  is being prepared;

            b)    Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

            c)    Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

      5. The registrant's other certifying officer(s) and I have disclosed,
      based on our most recent evaluation of internal control over financial
      reporting, to the registrant's auditors and the audit committee of the
      registrant's board of directors (or persons performing the equivalent
      functions):

            a)    All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

            b)    Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: October 25, 2004


                                         /s/ Assaf Ran
                                         -------------
                                         Assaf Ran
                                         President and Chief Executive Officer


                                       15

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>d60995_ex31-2.txt
<DESCRIPTION>CERTIFICATION
<TEXT>

                                  EXHIBIT 31.2

                                  CERTIFICATION

I, Yael Shimor-Golan, certify that:

      1. I have reviewed this quarterly report on Form 10-QSB of DAG Media,
      Inc.;

      2. Based on my knowledge, this report does not contain any untrue
      statement of material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this report;

      3. Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

      4. The registrant's other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
      and have:

            a)    Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, is made known to us by others within those
                  entities, particularly during the period in which this report
                  is being prepared;

            b)    Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

            c)    Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

      5. The registrant's other certifying officer(s) and I have disclosed,
      based on our most recent evaluation of internal control over financial
      reporting, to the registrant's auditors and the audit committee of the
      registrant's board of directors (or persons performing the equivalent
      functions):

            a)    All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

            b)    Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: October 25, 2004


                                                   /s/ Yael Shimor-Golan
                                                   ---------------------
                                                   Yael Shimor-Golan
                                                   Chief Financial Officer


                                       16

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>4
<FILENAME>d60995_ex32-1.txt
<DESCRIPTION>CERTIFICATION
<TEXT>

                                  Exhibit 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Quarterly Report of DAG Media, Inc. (the "Company")
on Form 10-QSB for the period ending September30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Assaf
Ran, President and Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:

      (1) The Report fully complies with the requirements of section 13(a) or
      15(d) of the Securities Exchange Act of 1934; and

      2) The information contained in the Report fairly presents, in all
      material respects, the financial condition and results of operations of
      the Company.


/s/ Assaf Ran
- -------------
Assaf Ran
President and Chief Executive Officer

October 25, 2004


                                       17

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>5
<FILENAME>d60995_ex32-2.txt
<DESCRIPTION>CERTIFICATION
<TEXT>

                                  Exhibit 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Quarterly Report of DAG Media, Inc. (the "Company")
on Form 10-QSB for the period ending September 30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Yael
Shimor-Golan, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:

      (1) The Report fully complies with the requirements of section 13(a) or
      15(d) of the Securities Exchange Act of 1934; and

      2) The information contained in the Report fairly presents, in all
      material respects, the financial condition and results of operations of
      the Company.


/s/ Yael Shimor-Golan
- ---------------------
Yael Shimor-Golan
Chief Financial Officer

October 25, 2004


                                       18

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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