1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 2001
Registration No. 333-58326
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------
AMENDMENT NO. 2
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------------
BBC GRAPHICS OF PALM BEACH, INC.
-
(Name of Small Business Issuer in Its Charter)
FLORIDA 541800 65-0924471
------- ------ ----------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Number) Identification No.)
4301 Oak Circle
Suite 25
Boca Raton, FL 33431
(561) 417 - 3021
(Address and Telephone Number of Principal Executive Offices)
----------------------
Suzanne Brady, President
4301 Oak Circle
Suite 25
Boca Raton, FL 33431
(561) 417 - 3021
(Name, Address and Telephone Number of Agent For Service)
----------------------
Copies of all communications to:
Roxanne K. Beilly, Esq.
Atlas Pearlman, P.A.
350 East Las Olas Boulevard
Suite 1700
Fort Lauderdale, FL 33301
Telephone: (954) 763-1200
Facsimile No. (954) 766-7800
Approximate Date of Proposed Sale to the Public: As soon as practicable after
the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
2
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SECURITY OFFERING PRICE REGISTRATION FEE
- -------------------- --------------- ----------------- --------------- ----------------
Common Stock, par value
$.001 per share(1) 1,976,000 $.125 $247,000 $61.75
Total Registration Fee $61.75
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
securities act of 1933, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said section
8(a), may determine.
3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion June , 2001
PROSPECTUS
BBC GRAPHICS OF PALM BEACH, INC.
1,976,000 Shares of Common Stock
This prospectus covers the 1,976,000 shares of common stock of BBC
Graphics of Palm Beach, Inc. being offered by certain selling security holders.
We will not receive any proceeds from the sale of the shares by the selling
security holders.
---------------------------
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. THERE IS NO PUBLIC
MARKET FOR OUR SHARES. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A
COMPLETE LOSS OF YOUR INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
---------------------------
The date of this prospectus is ____________, 2001
4
PROSPECTUS SUMMARY
The Company
We are a provider of advertising and graphic design services to our
customer base which are primarily corporate clients. Our target niche is new
companies who are seeking to create an effective corporate identity from which
they can market their business. We offer a wide range of services, from design
and production of corporate identity packages, including logos, letterhead and
business cards, to printed collateral materials and various print media, such as
newspaper and magazine ads, posters, trade show booths and outdoor billboards.
The menu of our services also includes the design and production of promotional
materials, such as T-shirts, coffee mugs, and pens, togther with web site
design, high-quality scanning and extensive photo re-touching. We have recently
begun offering a web site design package which also includes hosting services.
We were organized under the laws of the State of Florida in May 1999.
Our principal executive offices are located at 4301 Oak Circle, Suite 25, Boca
Raton, Florida 33431, and our telephone number is 561-417-3021. Our fiscal year
end is September 30. We maintain a website at www.bbcgraphics.com. The
information contained on that website is not part of this prospectus.
On December 22, 2000 we effected a 50,000 for one forward stock split.
Unless specifically disclosed, all information contained in this prospectus
gives proforma effect to this stock split.
The Offering
Common Stock Offered by
Selling Security holders 1,976,000 shares
Common Stock Outstanding:
Prior to the Offering 26,976,000 shares
After the Offering 26,976,000 shares
Selected Financial Data
The following summary of our financial information has been derived
from our audited financial statements that are included in this prospectus. In
September 2000 we changed our fiscal year end from December 31 to September 30.
2
5
Statement of Operations Data:
SIX MONTHS ENDED
MARCH 31, NINE MONTHS ENDED YEAR ENDED
--------------------- SEPTEMBER 30, DECEMBER 31,
2001 2000 2000 1999
---- ---- ----------------- -------------
(unaudited)
Net sales $ 136,491 $ 114,549 $ 104,892 $ 204,040
Gross profit $ 76,890 $ 61,144 $ 54,464 $ 127,619
Income (loss) from operations $ (21,533) $ 16,360 $ (34,470) $ 10,356
Other income $ 0 $ 0 $ 0 $ 13,675
Net income (loss) $ (22,483) $ 11,030 $ (39,373) $ 15,567
Earnings (loss) per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
Weighted average common
shares outstanding 26,812,044 25,000,000 25,000,000 25,000,000
Balance Sheet Data:
MARCH 31, 2001 SEPTEMBER 30, 2000
-------------- ------------------
(unaudited)
Current assets $109,619 $42,146
Current liabilities $ 29,767 $22,674
Working capital $ 79,852 $19,472
Total assets $130,125 $65,219
Total liabilities $ 37,670 $37,371
Shareholders' equity $ 92,455 $27,848
RISK FACTORS
AN INVESTMENT IN OUR SECURITIES IS SPECULATIVE IN NATURE AND INVOLVES
A HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS, THE FOLLOWING MATERIAL RISK FACTORS SHOULD BE CONSIDERED CAREFULLY
IN EVALUATING BBC GRAPHICS AND OUR BUSINESS BEFORE PURCHASING OUR SECURITIES.
WE HAVE GENERATED LIMITED REVENUES, AND OUR FUTURE RESULTS ARE UNCERTAIN.
For the fiscal year ended December 31, 1999 we reported net sales of
$204,040, for the transition period of the nine months ended September 30, 2000
we reported net sales of $104,892, and for the six months ended March 31, 2001
we reported net sales (unaudited) of $136,491. For the nine months ended
September 30, 2000 and the six months ended March 31, 2001 we reported net
losses of $39,373 and $22,483, respectively. We cannot guarantee you that we
will ever achieve a significant increase in our net sales or that profitability
be achieved, or if achieved, sustained on an ongoing basis. Our prospects must
be considered in light of the risks, and uncertainties, expenses and
difficulties frequently encountered by companies in their early stages of
development.
3
6
BECAUSE THERE IS NO PUBLIC MARKET FOR OUR COMMON STOCK, YOU MAY FIND IT
EXTREMELY DIFFICULT OR IMPOSSIBLE TO RESELL OUR SHARES. EVEN IF A PUBLIC MARKET
IS ESTABLISHED, WE CANNOT GUARANTEE YOU THAT THERE WILL EVER BE ANY LIQUIDITY IN
OUR COMMON STOCK.
There is no public market for our common stock, and there can be no
assurance that a public market will ever be established. Purchasers of our
shares of common stock will face significant obstacles if they wish to resell
the shares. Absent a public market for our common stock, an investment in our
shares should be considered illiquid. In the future we may attempt to establish
a public market for our common stock. We cannot guarantee you that we will be
successful. Even if a public market is established, it is unlikely a liquid
market will develop. Because of our relatively small size and limited revenues,
the investment community may show little or no interest in our securities and
investors may not be readily able to liquidate their investment, if at all.
Investors seeking liquidity in a security should not purchase our shares of
common stock.
OUR SUCCESS DEPENDS ON THE EFFORTS OF OUR PRESIDENT AND CEO. IF WE SHOULD LOSE
HER SERVICES, OUR RELATIONSHIPS WITH OUR CLIENTS COULD BE DAMAGED WHICH WOULD
ADVERSELY AFFECT OUR NET SALES AND RESULTS OF OPERATIONS.
We rely on Suzanne Brady, our president and CEO, for the day-to-day
management of BBC Graphics, as well as nurturing and developing the
relationships we have with our clients. While Ms. Brady is a party to an
employment agreement with us that expires in 2004, if we should lose her
services, the relationships that we have with clients as a result of her efforts
on our behalf could be damaged. Because we are a relatively small company with
limited net sales, the loss of relationships with our clients could adversely
affect our ability to generate net sales and, therefore, our future results of
operations.
WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY, AND WE CANNOT GUARANTEE YOU THAT
WE WILL EVER ACHIEVE ANY LEVEL OF SUCCESS IN COMPETING FOR CLIENTS WITH OTHER
ADVERTISING BUSINESSES.
The advertising business is very competitive. We are at a competitive
disadvantage in attracting clients due to our relatively small size and somewhat
limited scope of our services. In addition, there in not a significant barrier
to entry by competitors. Our competitors are larger and more diversified than
BBC Graphics, and have greater financial resources. We cannot predict the degree
of success, if any, with which we will meet competition in the future.
4
7
WE HAVE HISTORICALLY BEEN DEPENDENT ON TWO MAJOR CLIENTS. IF WE SHOULD LOSE ONE
OR BOTH OF THESE CUSTOMERS, OUR NET SALES AND RESULTS OF OPERATIONS WOULD BE
MATERIALLY ADVERSELY AFFECTED.
Sales to two clients during the year ended December 31, 1999 and the
nine months ended September 30, 2000 represented approximately 80% and 25% of
total sales, respectively. While we are attempting to broaden our client base
and lessen our dependence upon these two clients, we cannot guarantee you that
our efforts will be successful. In that event, the loss of either of these
customers would have a material adverse effect on our business, financial
position and results of operations.
WE MAY NEED ADDITIONAL CAPITAL WHICH WE MAY NOT BE ABLE TO OBTAIN ON ACCEPTABLE
TERMS. ANY INABILITY TO RAISE ADDITIONAL CAPITAL WHEN NEEDED COULD ADVERSELY
AFFECT OUR ABILITY TO GROW OUR COMPANY.
Our future capital requirements depend on a number of factors,
including our ability to grow our net sales and manage our business. If we are
to substantially increase our net sales, it is likely we will seek to raise
additional capital, possibly through the issuance of long-term or short-term
indebtedness or the issuance of equity securities in private or public
transactions. If we raise additional capital through the issuance of debt, this
will result in increased interest expense. If we raise additional funds through
the issuance of equity or convertible debt securities, the percentage ownership
of our existing shareholders will be reduced and those shareholders will
experience dilution. In addition, new securities may contain certain rights,
preferences or privileges that are senior to those of our common stock. We
cannot assure you that acceptable financing can be obtained on suitable terms,
if at all.
IF WE EVER ESTABLISH A PUBLIC MARKET FOR OUR COMMON STOCK, THE TRADEABILITY IN
OUR COMMON STOCK WILL BE LIMITED UNDER THE PENNY STOCK REGULATIONS WHICH WILL
ADVERSELY AFFECT THE LIQUIDITY OF OUR COMMON STOCK.
In the event we seek to establish a public market for our common stock,
and the trading price of our common stock is less than $5.00 per share, our
common stock would be considered a "penny stock," and trading in our common
stock would be subject to the requirements of Rule 15g-9 under the Securities
Exchange Act. Under this rule, broker/dealers who recommend low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements. The broker/dealer must make an
individualized written suitability determination for the purchaser and receive
the purchaser's written consent prior to the transaction.
SEC regulations also require additional disclosure in connection with
any trades involving a "penny stock," including the delivery, prior to any penny
stock transaction, of a disclosure schedule explaining the penny stock market
and its associated risks. These requirements severely limit the liquidity of
securities in the secondary market because few broker or dealers are likely to
undertake these compliance activities. In addition to the applicability of the
penny stock rules, other risks associated with trading
5
8
in penny stocks could also be price fluctuations and the lack of a liquid
market. A market in our common stock may never develop due to these factors.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION.
Some of the information in this prospectus may contain forward-looking
statements. These statements can be identified by the use of forward-looking
words such as "may," "will," "expect," "anticipate," "estimate," "continue" or
other similar words. These statements discuss future expectations, contain
projections of results of operations or financial conditions or state other
"forward-looking" information. When considering such forward-looking statements,
you should keep in mind the risk factors and other cautionary statements in this
prospectus. The risk factors noted in this section could cause our actual
results to differ materially from those contained in any forward-looking
statement.
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2001.
The table should be read in conjunction with the financial statements and
related notes included elsewhere in this prospectus. This table does not give
effect to the issuance of up to 1,428,000 shares of our common stock in the
event currently outstanding warrants are exercised.
MARCH 31, 2001
--------------
Long-term liabilities $ 7,903
Shareholder's equity:
Preferred stock, $.001 par value,
3,000,000 shares authorized,
0 shares issued and outstanding --
Common stock, $.001 par value,
100,000,000 shares authorized,
26,976,000 shares issued and
outstanding 26,976
Additional paid-in capital 80,467
-------
Accumulated deficit (14,988)
-------
Total shareholder's equity 92,455
-------
Total capitalization $100,358
-------
6
9
USE OF PROCEEDS
We will not receive any proceeds upon the sale of shares by the selling
security holders.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
The following discussion should be read together with the information
contained in the financial statements and related notes included elsewhere in
this prospectus.
Results of operations
FISCAL YEAR ENDED DECEMBER 31, 1999 AS COMPARED TO TRANSITION PERIOD ENDED
SEPTEMBER 30, 2000
As previously discussed, in September 2000 we changed our fiscal year
end from December 31 to September 30. The following discussion compares our
results of operations for the 12 months ended December 30, 1999 (fiscal 1999) to
the transition period of the nine months ended September 30, 2000 (transition
period 2000). Readers are cautioned that information for our transition period
2000 reflects our results of operations for a three month shorter period of time
than the information for fiscal 1999.
Our net sales for the transition period 2000 were $99,148 less than our
net sales for fiscal 1999. Our gross profit was approximately 52% of our net
sales for the transition period 2000, as compared to approximately 63% for
fiscal 1999. This reduction in the percentage of our gross profit to net sales
is a result of higher costs related to certain services we outsource, including
printing and reproduction. Based upon information presently known to us, we
believe the trend towards a lower gross profit margin will continue into fiscal
2001, until such time, if ever, as our focus on selling higher margin services
is achieved.
Our general and administrative expenses, which primarily include
occupancy costs, professional fees and depreciation expenses, were approximately
85% of net sales for the transition period 2000 as compared to approximately 57%
of net sales for fiscal 1999. Included in general and administrative expenses is
a non-cash expense of $33,750 for the transition period 2000 and a non-cash
expense of $35,000 for fiscal 1999 which represents the value of services
rendered to us by our president who was not otherwise compensated during these
periods. While we did not pay cash compensation to her, we are required under
generally accepted accounting principles to estimate the fair value of these
services to us, and to include such estimation as an expense to us. This
proportional increase in general and administrative expenses is a result of
reduced sales for the transition period 2000 from the fiscal year 1999.
7
10
We reported a loss from operations of $34,470 for transition period
2000 as compared to income from operations of $10,356 for fiscal 1999. This
change is primarily attributable to the shorter reporting period and the
decrease in our gross profit as a percentage of net sales discussed above.
Interest expense for transition period 2000 was $4,903 as compared to
$8,404 for fiscal 1999. Interest expense includes interest payment under capital
leases.
Other income for fiscal 1999 represents a gain on a marketable security
which we purchased in February 1999 and resold in April 1999. We did not engage
in a similar transaction during transition period 2000. This transaction was a
one-time event, and we do not anticipate that we will enter into similar
transactions in the foreseeable future.
We reported a net loss of $39,373 for the transition period 2000 as
compared to net income of $15,627 for fiscal 1999. We believe our focus on
expanding our client base together with a trend toward increased graphic design
services which are higher margin sales should, although we can make no
guarantee, result in increased sales in fiscal 2001 which should, in turn,
provide additional liquidity to us.
SIX MONTHS ENDED MARCH 31, 2001 (UNAUDITED) AS COMPARED TO THE SIX MONTHS ENDED
MARCH 31, 2001 (UNAUDITED)
Our net sales increased $21,942, or approximately 20%, for the six
months ended March 31, 2001 as compared to the six months ended March 31, 2000.
We attribute this increase in net sales to our efforts to grow our business
which resulted in expanding our client base.
Our gross profit as a percentage of net sales increased to
approximately 56.3% for the six months March 31, 2001 as compared to
approximately 53.3% from the comparable six month period in 2000 as a result of
our efforts to focus on higher margin sales, such as graphic design services.
General and administrative expenses increased $53,639 during the six
months ended March 31, 2001 from the comparable period in 2000 as a result of
the relocation of our office to its present location which resulted in increased
rental expense, as well as certain one-time expenses for leasehold improvements.
Included in general and administrative expenses is a non-cash expense of $20,000
and $25,313 for the six months ended March 31, 2001 and 2000, respectively,
which represents the value of services rendered to us by our president who was
not otherwise compensated during these periods. While we did not pay cash
compensation to her, we are required under generally accepted accounting
principles to estimate the fair value of these services to us, and to include
such estimation as an expense to us. Effective March 1, 2001 our
8
11
president entered into a three year employment agreement with us that provides
we will pay her annual compensation of $56,000.
Interest expense decreased $4,380 during the six months ended March 31,
2001 from the six months ended March 31, 2000 as a result in the reduction of
obligations we have under capital leases.
We reported a net loss of $22,483 for the six months ended March 31,
2001 as compared to net income of $11,030 for the six months ended March 31,
2000. The net loss is primarily attributable to the increases in general and
administrative expenses which were the result of the relocation to our current
facilities. We believe that these additional expenses will be offset by
continued, projected increases in our net sales for the balance of fiscal 2001
and beyond.
Liquidity and capital resources
Our working capital at March 31, 2001 was $79,852, an increase of
approximately 244% from September 30, 2000. The change in working capital was
primarily attributable to proceeds of $20,000 from a private sale of our common
stock. Net cash used in operating activities was $2,960 for the six months ended
March 31, 2001 as compared to net cash provided by operating activities of
$50,569 for the six months ended March 31, 2001. This change reflected our net
loss, increases in depreciation and amortization and accounts receivable, and a
decrease in our accounts payable. Net cash used in investing activities was
$3,140 for the six months ended March 31, 2001 as compared to $0.00 for the six
months ended March 31, 2000, as a result of purchases of property and equipment.
Net cash provided by financing activities for the six months ended March 31,
2001 was $56,706 compared to net cash used by financing activities of $41,230
for the six months ended March 31, 2001. This increase was primarily
attributable to proceeds from a private sale of our securities, a reduction in
capital lease obligations and a reduction in the amount due from an affiliate.
Since inception, we have primarily funded our operations through
proceeds from private sales of our common stock. In October 2000, we raised
proceeds of $20,000 through the private sale of our common stock. In January and
February, 2001, we raised an additional $59,500 of proceeds from additional
private sales of our common stock. We have financed certain equipment
acquisitions with capital leases, and as of March 31, 2001, we had outstanding
lease commitments of $11,664.
Prior to February 1, 2001 we had been treated as an S corporation under
the provisions of the Internal Revenue Code, when a disqualifying event occurred
and we began being taxed as a C corporation. Because we had been treated as an S
corporation for Federal income tax purposes, previously we paid no Federal or
state income taxes. As a result of our historical losses, we do not believe this
change in tax status will have a material effect upon us.
9
12
During the next 12 months we anticipate that we will make certain
capital expenditures for new computer equipment totaling approximately $5,000
related to the expansion of our operations. We will fund these capital
expenditures from our working capital. Other than these anticipated purchases,
we have no material commitments for capital expenditures. Other than our working
capital, we do not presently have any outside sources of capital. We believe
that our working capital is sufficient to meet our anticipated cash needs for
working capital and capital expenditures for at least the next 12 months.
However, during this period, we may seek additional capital in the private
and/or public equity markets if we grow more quickly than expected. After that
period, if cash generated from operations is insufficient to satisfy our
liquidity requirements, we may need to raise additional funds through public or
private financing, including equity, debt or a combination of debt and equity.
If we receive additional funds through the issuance of equity securities, our
existing stockholders may experience significant dilution. Further, we may not
be able to obtain additional financing when needed or on terms favorable to our
stockholders or us.
BUSINESS
We provide a wide range of advertising and graphic design services to
our clients. Most typically, these services will include designing, developing
and producing:
- corporate identity packages, including logos, letterhead and
business cards,
- various print media, such as newspaper and magazine ads,
posters, trade show booths and outdoor billboards,
- printed collateral materials such as brochures and catalogs,
and
- promotional materials, such as T-shirts, coffee mugs, and
pens.
We also provide web site design, high-quality scanning and extensive
photo re-touching as part of our menu of services. We have recently begun
offering a web site design package which also includes hosting services.
While we serve a diversified client roster which is primarily corporate
clients, our target niche is new companies who are seeking to create an
effective corporate identity from which they can market their business. We
believe our business focus defines us within our market. We believe we offer our
clients a more cost-effective alternative to a traditional advertising agency
because, unlike many traditional advertising agencies, we will work for a client
on a per project basis as opposed to only handling entire advertising
engagements. Because we do not require a long term advertising commitment by our
client, our business model allows our clients the freedom to work with several
agencies to capture that unique look while staying within their budget.
We generally obtain new clients through referrals or by soliciting
prospective clients through personal contacts and presentations by our
management. The
10
13
agreements with our clients are generally terminable by either party upon
mutually agreed short-term notice, typically 60 to 90 days, as is the custom in
the industry.
The primary sources of our revenues are fees earned from the production
of advertising materials. The billing and collection procedures established by
us require that billings be collected from our clients in sufficient time for us
to make the corresponding payment to production, usually within 30 days of
invoice. Service fees for creative and typesetting time are established on a
case-by-case basis. We also charge our clients a service fee on our outside
purchases of production materials, including photography and printing, which
generally is 20% over the cost of such purchases. In some cases, fees are
generated in lieu of a percentage of the cost and markup on outside purchases of
production materials.
We consider our relationships with our clients to be good. Due to the
nature of the business, any client could at some time in the future reduce its
advertising budget, or transfer to another agency all or part of its advertising
presently placed through us. Representation of a client does not necessarily
mean that we handle all advertising for such client exclusively. In many cases,
we handle the advertising of only a portion of a client's products or services.
We depend upon a core of clients from which we obtain the bulk of our revenues.
For the fiscal year ended December 31, 1999 two of our clients, Beztak
Corporation and International Industries, represented 80% of our net sales, and
for the nine months ended September 30, 2000 these two clients represented 25%
of our net sales.
We internally produce substantially all of the materials required for
our clients. Services and materials such as website software design, website
hosting, photography, printing and film are generally purchased from outside
vendors. We have identified numerous sources for the products and services we
purchase from outside vendors. We do not maintain any written contracts with our
suppliers. Substantially all of such suppliers are located within Palm Beach
County, Florida.
Government Regulation
Federal, state and local governments and governmental agencies in
recent years have adopted statutes and regulations affecting the advertising
activities of advertising agencies and their clients. For example, statutes and
regulations have prohibited television advertising for certain products and
regulated the form and content of certain types of advertising for many consumer
products. The Federal Trade Commission (FTC) has also required proof of accuracy
of advertising claims with respect to various products and, in its enforcement
policies, is seeking to establish more stringent standards with respect to
advertising practices. The FTC has the authority to investigate and to institute
proceedings against advertisers and their advertising agencies for deceptive
advertising. The effect on the advertising business of future interpretations of
existing statutes or regulations, or the effect of new legislation or regulatory
activity cannot be predicted. No claims or enforcement actions have ever
11
14
been instituted against us to date. We do not currently maintain errors and
omissions insurance.
Competition
The advertising industry is highly competitive. Agencies of all sizes
strive to attract new clients or accounts from existing clients. In addition,
many companies have in-house departments, which handle all, or a portion of
their advertising. Competition in the advertising industry depends to a large
extent on the client's perception of the quality of an agency's "creative
product." As we have grown our operation we have had to compete more frequently
against larger advertising agencies. These larger agencies generally have
substantially greater financial resources, personnel and facilities than us. We
believe we are able to compete on the basis of the quality of our product,
service, and personal relationships with clients and reputation.
Property
We lease approximately 1,000 square feet of commercial space from an
unaffiliated third party under a lease terminating in April 2002 at an annual
rental of $11,988. We believe this existing space is sufficient for our needs in
the foreseeable future.
Employees
We currently employ two people, both of whom are full-time employees.
Our employees are not represented by a collective bargaining unit. We believe
that the relations with our employees are good.
Legal Proceedings
We are not a party to any material legal proceeding, nor are any of our
officers, directors or affiliates a party adverse to us in any legal proceeding.
MANAGEMENT
Directors and Executive Officers
The following table includes the names, positions held and ages of our
executive officers and directors. All directors serve for one year and until
their successors are elected and qualify. Directors do not presently receive
compensation for their services as directors. Officers are elected by the board
of directors and their terms of office at the discretion of the board.
12
15
NAME AGE POSITION
- ---- --- --------
Suzanne Brady 34 President, CEO and director
Julie Mitchell 30 Treasurer, COO and director
Lisa M. Breunig 36 Director
Suzanne Brady has been our president, CEO and a member of our board of
directors since May 1999. From February 1997 until May 1999 she was president
and member of the board of directors of BBC Graphics, Inc., a privately held
company and our predecessor company. From April 1994 to February 1997 she
conducted advertising and design services under the dba BBC Graphics, a sole
proprietorship. From 1990 to March 1994 Mrs. Brady was the art director of Boca
Business Center and Advertising and Design Group. Mrs. Brady received an
associates degree in Graphic Art from George Brown College in Toronto, Canada.
Julie Mitchell has been our COO and treasurer since May 1999, and has
been a member of our board of directors since October 2000. From December 1998
until February 1999 she was a graphic designer with Movie Ad Corporation, and
from January 1998 until December 1998 she was the production manager at Boca
Type and Graphics. From January 1997 until January 1998 Ms. Mitchell was print
manager at Proctors Printing and from January 1996 until January 1997 Ms.
Mitchell was a reservationist at Holiday Inn Sunspree. Ms. Mitchell attended
Carlton University in Ontario, Canada and received her associates degree from
The Art Institute of Fort Lauderdale, Florida.
Lisa M. Breunig has been a member of our board of directors since
October 2000. Since June 1999 she has been project manager with PCL Constructors
Canada, Inc. From September 1997 until June 1999 Ms. Breunig was a contract
administrator with construction contractor O'Brien-Kreitzberg & Associates and
from January 1995 until September 1997 she was a project coordinator with
Giffels Enterprises Inc. Ms. Breunig received a Civil Engineering Technology
Honors Diploma from Sheridan College of Applied Arts and Technology.
Mrs. Brady, Ms. Mitchell, and Ms. Breunig are sisters.
Executive Compensation
Summary Compensation Table
The following table sets forth information relating to all compensation
awarded to, earned by or paid by us during the past three fiscal years to (i)
our president and CEO, and (ii) each of our executive officers who earned more
than $100,000 during the fiscal years ended December 31, 1998 and 1999, and the
transition fiscal year ended September 30, 2000:
13
16
FISCAL OTHER ANNUAL LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/ (#) PAYOUTS COMPENSATION
- --------------------------- -----------------------------------------------------------------------------------------
Suzanne Brady 2000(1) 0 0 0 0 0 0
1999(1)(2) 0 0 0 0 0 0
1998 $15,000 0 0 0 0 0
(1) For the fiscal years ended December 31, 1999 and the transition fiscal year
ended September 30, 2000, we imputed compensation in the amounts of $35,000
and $33,750, respectively, which represented our estimation of the fair
value of her services. In March 2001 Ms. Brady became a party to an
employment agreement providing for annual cash compensation of $56,000, the
terms of which are described elsewhere in this prospectus.
(2) Excludes subschapter S distributions made to Ms. Brady during fiscal 1999
in the amounts of $8,034.
Option Grants in Last Fiscal Year
The following table sets forth information concerning our grant of
options to purchase shares of our common stock during the transition fiscal year
ended September 30, 2000 to (i) our president and CEO, and (ii) each of our
executive officers who earned more than $100,000 during the transition fiscal
year ended September 30, 2000.
PERCENT OF
NUMBER OF TOTAL OPTIONS/
SECURITIES SARS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE OR
OPTIONS/SARS IN FISCAL BASE PRICE
NAME GRANTED (#) YEAR ($/SH) EXPIRATION DATE
-------------------------------------------------------------------------------------------------
Suzanne Brady,
President, CEO
and director -- -- -- --
Option Exercises and Holdings
The following table contains information with respect to the exercise
of options to purchase shares of common stock during the transition fiscal year
ended September 30, 2000 to (i) our President and CEO and (ii) each of our
executive officers who earned more than $100,000 during the transition fiscal
year ended September 30, 2000.
14
17
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS OPTIONS/SARS
ON VALUE AT FY-END (#) AT FY-END ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------
Suzanne Brady,
President, CEO
and Director -- -- -- --
Long-Term Incentive Plans Awards in Last Fiscal Year
NUMBER PERFORMANCE
OF SHARES OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
UNITS OR PERIOD UNTIL NON-STOCK PRICE-BASED PLANS
--------------------------------
OTHER RIGHTS MATURATION THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT ($OR #) ($OR #) ($ OR #)
-------------------------------------------------------------------------------------------------------
Suzanne Brady,
President, CEO
and Director -- -- -- -- --
Employment Agreement
In March 2000 we entered into an employment agreement with Suzanne
Brady to serve as our president and CEO. Under the terms of this three year
agreement, we will pay Ms. Brady an annual salary of $56,000. The agreement also
provides, among other things, for participation in any profit-sharing or
retirement plan and in other employee benefits applicable to our employees, and
certain non-disclosure and non- competition provisions. Under the terms of the
agreement, we may terminate the employment of Ms. Brady with cause. If we should
terminate the agreement for cause, as defined in the agreement, no further
compensation is due Ms. Brady from the date of termination.
Incentive and Non-Qualified Stock Option Plan
On March 1, 2001, the board of directors and a majority of our
shareholders adopted our 2001 stock option plan. We have reserved 1,000,000
shares of common stock for issuance upon exercise of options granted from time
to time under the 2001 stock option plan. The 2001 stock option plan is intended
to assist us in securing and retaining key employees, directors and consultants
by allowing them to participate in our ownership and growth through the grant of
incentive and non-qualified options.
15
18
Under the stock option plan we may grant incentive stock options only
to key employees and employee directors, or we may grant non-qualified options
to our employees, officers, directors and consultants. The 2001 stock option
plan is currently administered by our board of directors.
Subject to the provisions of the stock option plan, the board will
determine who shall receive options, the number of shares of common stock that
may be purchased under the options, the time and manner of exercise of options
and exercise prices. The term of options granted under the stock option plan may
not exceed ten years or five years for an incentive stock option granted to an
optionee owning more than 10% of our voting stock. The exercise price for
incentive stock options will be equal to or greater than 100% of the fair market
value of the shares of the common stock at the time granted. However, the
incentive stock options granted to a 110% holder of our voting stock are
exercisable at a price equal to or greater than 10% of the fair market value of
the common stock on the date of the grant. The exercise price for non-qualified
options will be set by the board in its discretion. The exercise price may be
payable in cash or, with the approval of the board, by delivery of shares or by
a combination of cash and shares. Shares of common stock received upon exercise
of options will be subject to restrictions on sale or transfer. As of the date
of this prospectus, we have not granted any options under the 2001 stock option
plan.
Limitation on Liability and Indemnification Matters
As authorized by the Florida Business Corporation Law, our articles of
incorporation provide that none of our directors shall be personally liable to
us or our shareholders for monetary damages for breach of fiduciary duty as a
director, except liability for:
o any breach of the director's duty of loyalty to our company or
its shareholders;
o acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
o unlawful payments of dividends or unlawful stock redemptions
or repurchases; and
o any transaction from which the director derived an improper
personal benefit.
This provision limits our rights and the rights of our shareholders to
recover monetary damages against a director for breach of the fiduciary duty of
care except in the situations described above. This provision does not limit our
rights or the rights of any shareholder to seek injunctive relief or rescission
if a director breaches his duty of care. These provisions will not alter the
liability of directors under federal securities laws.
16
19
Our articles of incorporation further provide for the indemnification
of any and all persons who serve as our director, officer, employee or agent to
the fullest extent permitted under Florida law.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time we have advanced funds to Suzanne Brady, and at March
31, 2001, she was indebted to us in the amount of $20,360. This non-interest
bearing loan is unsecured and due on demand.
PRINCIPAL SHAREHOLDERS
At April 30, 2001, there were an aggregate of 26,976,000 shares of
common stock issued and outstanding. The following table sets forth, as of April
30, 2001, information known to us relating to the beneficial ownership of shares
of common stock by:
- each person who is the beneficial owner of more than 5% of the
outstanding shares of common stock;
- each director;
- each executive officer; and
- all executive officers and directors as a group.
Unless otherwise indicated, the address of each beneficial owner in the
table set forth below is care of 4301 Oak Circle, Suite 25, Boca Raton, Florida
33431.
We believe that all persons named in the table have sole voting and
investment power with respect to all shares of common stock beneficially owned
by them.
Under securities laws, a person is considered to be the beneficial
owner of securities he owns and that can be acquired by him within 60 days from
the date of this prospectus upon the exercise of options, warrants, convertible
securities or other understandings. We determine a beneficial owner's percentage
ownership by assuming that options, warrants or convertible securities that are
held by him, but not those held by any other person and which are exercisable
within 60 days of the date of this prospectus, have been exercise or converted.
17
20
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------------- -------------------- ------------
Suzanne Brady 24,800,000 91.9%
Julie Mitchell 100,000 *
Lisa M. Breunig 100,000 *
All officers and directors
as a group (three persons) 25,000,000 92.7%
- -----------------
* Less than 1%.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 100,000,000 shares of common
stock, $.001 par value per share, and 3,000,000 shares of preferred stock, par
value $.001 per share. As of the date of this prospectus, there are 26,976,000
shares of common stock issued and outstanding, which are held of record by
approximately 63 holders, and no shares of preferred stock issued and
outstanding.
Common stock
Holders of common stock are entitled to one vote for each share on all
matters submitted to a shareholder vote. Holders of common stock do not have
cumulative voting rights and holders of a majority of the shares of common stock
voting for the election of directors can elect all of the directors. Holders of
common stock are entitled to share in all dividends that the board of directors,
in its discretion, declares from legally available funds. In the event of our
liquidation, dissolution or winding up, each outstanding share entitles its
holder to participate in all assets that remain after payment of liabilities and
after providing for each class of stock, if any, having preference over the
common stock.
Holders of common stock have no conversion, preemptive or other
subscription rights, and there are no redemption provisions for the common
stock. The rights of the holders of common stock are subject to any rights that
may be fixed for holders of preferred stock, when and if any preferred stock is
authorized and issued. All outstanding shares of common stock are duly
authorized, validly issued, fully paid and non-assessable.
Preferred stock
Our board of directors, without further shareholder approval, may issue
preferred stock in one or more series from time to time and fix or alter the
designations, relative rights, priorities, preferences, qualifications,
limitations and restrictions of the shares of each series. The rights,
preferences, limitations and restrictions of different series of preferred stock
may differ with respect to dividend rates, amounts payable on liquidation,
voting rights, conversion rights, redemption provisions, sinking fund provisions
and other matters. Our board of directors may authorize the issuance of
preferred stock which ranks senior to our common stock for the payment of
dividends and the distribution of assets on liquidation. In addition, our board
of directors can fix
18
21
limitations and restrictions, if any, upon the payment of dividends on our
common stock to be effective while any shares of preferred stock are
outstanding.
The rights granted to the holders of any series of preferred stock
could adversely affect the voting power of the holders of common stock and
issuance of preferred stock may delay, defer or prevent a change in our control.
Warrants
We have issued and outstanding warrants to purchase a total of
1,428,000 shares of our common stock, including:
* Series A warrants to purchase up to 476,000 shares of our
common stock at an exercise price of $1.00 per share,
* Series B warrants to purchase up to 476,000 shares of our
common stock at an exercise price of $2.00 per share, and
* Series C warrants to purchase up to 476,000 shares of our
common stock at an exercise price of $3.00 per share.
The warrants expire on October 15, 2005. The warrant exercise price
will be subject to adjustment in the event of stock splits, dividends and
similar events. Other than the exercise price, all series of the warrants are
identical. We may call any warrant series or all of the warrants at any time
upon 15 days prior written notice at a call price of $.001 per share if the
average closing price of our common stock should exceed $5.00 per share for 10
consecutive trading days. Warrant holders will have this 15 day period during
which to exercise the warrants so called. In the event the warrants which have
been called are not exercised during this 15 day period, the warrant holder will
receive the call price and the warrants will expire.
Dividend policy
No dividends have been paid on the shares of our common stock, and we
do not anticipate the payment of cash dividends in the foreseeable future. We
anticipate that, for the foreseeable future any profit we report will be devoted
to our future operations and that cash dividends would not be paid to our
shareholders.
Transfer agent and registrar
The transfer agent and registrar for our common stock is Old Monmouth
Stock Transfer Co., Inc., 77 Memorial Parkway, Suite 101, Atlantic Highlands,
New Jersey 07716, and its telephone number is 732-872-2727.
19
22
SELLING SECURITY HOLDERS
The following table sets forth
o the name of each selling security holder,
o the number of shares owned, and
o the number of shares being registered for resale by each
selling security holder.
We may amend or supplement this prospectus from time to time to update
the disclosure set forth herein. All of the shares owned by the selling security
holders may be offered hereby. Because the selling security holders may sell
some or all of the shares owned by them, and because there are currently no
agreements, arrangements or understandings with respect to the sale of any of
the shares, no estimate can be given as to the number of shares that will be
held by the selling security holders upon termination of any offering made
hereby. If all the shares offered hereby are sold, the selling security holders
will not own any shares after the offering.
NUMBER OF SHARES TO SHARES TO BE OWNED
NAME OF SELLING SECURITY HOLDER SHARES OWNED BE OFFERED AFTER OFFERING
- ------------------------------- ------------ ---------- -----------------------
B.S.J. Consulting, Inc. 8,000 8,000 -0-
Ross Bleustein 4,000 4,000 -0-
Marc D. Brodsky, M.D. 8,000 8,000 -0-
Marla Brodsky 8,000 8,000 -0-
Roberta Brodsky 8,000 8,000 -0-
Stephen Brodsky 8,000 8,000 -0-
Elizabeth Capra 8,000 8,000 -0-
Thomas G. Cerami 8,000 8,000 -0-
Jeffrey Ceren 8,000 8,000 -0-
Richard T. Clark 20,000 20,000 -0-
Arthur Dermer 8,000 8,000 -0-
Lois Dermer 8,000 8,000 -0-
Marissa Dermer 8,000 8,000 -0-
Nancie Doherty 8,000 8,000 -0-
Joseph Doherty 8,000 8,000 -0-
Patricia A. Donlevy-Rosen 4,000 4,000 -0-
Steven Elias 4,000 4,000 -0-
Eurovest, Inc. 8,000 8,000 -0-
Daryn P. Fleming 8,000 8,000 -0-
Tyler T. Fleming 8,000 8,000 -0-
Margie Goldstein 8,000 8,000 -0-
Wayne Goldstein 8,000 8,000 -0-
G. David Gordon 32,000 32,000 -0-
George Gordon 500,000 500,000 -0-
Joel C. Holt 8,000 8,000 -0-
Edith Hutto 8,000 8,000 -0-
20
23
NUMBER OF SHARES TO SHARES TO BE OWNED
NAME OF SELLING SECURITY HOLDER SHARES OWNED BE OFFERED AFTER OFFERING
- ------------------------------- ------------ ---------- -----------------------
Thomas H. Jahnke
Revocable Trust 8,000 8,000 -0-
Brian S. John 8,000 8,000 -0-
Brian S. John Revocable Trust 8,000 8,000 -0-
William John Jr. 8,000 8,000 -0-
Cindy K. Olsen Johnson 8,000 8,000 -0-
John Johnson 8,000 8,000 -0-
Seth A. Joseph 4,000 4,000 -0-
Deana L. Leest 8,000 8,000 -0-
Eric Leest 8,000 8,000 -0-
Charles J. Lidman 8,000 8,000 -0-
Stephen Misyak 8,000 8,000 -0-
Jodi Misyak 8,000 8,000 -0-
Darrell Nether 8,000 8,000 -0-
Sandra Nether 8,000 8,000 -0-
John S. Norton 8,000 8,000 -0-
Barbara Pino 8,000 8,000 -0-
John Powers 8,000 8,000 -0-
Stephen Remer 8,000 8,000 -0-
Anthony J. Reynolds 8,000 8,000 -0-
Howard D. Rosen 4,000 4,000 -0-
Roy Samuel 8,000 8,000 -0-
Gary Schultheis 500,000 500,000 -0-
Barry Seidman 8,000 8,000 -0-
John Signorello 8,000 8,000 -0-
Herbert Tabin 500,000 500,000 -0-
Harriet F. Wadia 8,000 8,000 -0-
Dr. Maneck S. Wadia 8,000 8,000 -0-
Terry Washburn 8,000 8,000 -0-
Joel S. Weissler 4,000 4,000 -0-
D. Mark White 8,000 8,000 -0-
Susan Willis 8,000 8,000 -0-
William Zeidel 8,000 8,000 -0-
Malcolm G. Ziman 16,000 16,000 -0-
Arnold Zousmer 8,000 8,000 -0-
TOTAL 1,976,000 1,976,000 -0-
None of the selling security holders has, or within the past three
years has had, any position, office or other material relationship with us or
any of our predecessors or affiliates.
We have agreed to pay full costs and expenses, incentives to the
issuance, offer, sale and delivery of the shares, including all fees and
expenses in preparing, filing and printing the registration statement and
prospectus and related exhibits,
21
24
amendments and supplements thereto and mailing of those items. We will not pay
selling commissions and expenses associated with any sale by the selling
security holders.
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be distributed from time to
time by the selling security holders including in one or more transactions that
may take place on the over-the-counter market at such time, if ever, as a public
market for our common stock is established. These include ordinary broker's
transactions, privately-negotiated transactions or through sales to one or more
broker-dealers for resale of these shares as principals, at market prices
existing at the time of sale, at prices related to existing market prices,
through Rule 144 transactions or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the selling
security holders in connection with sales of securities.
The selling security holders may sell the securities in one or more of
the following methods:
- a block trade in which a broker or dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principals to facilitate the transaction;
- purchasers by a broker or dealer as principal and resale by
the broker or dealer for its account under this prospectus;
- ordinary brokerage transactions and transactions which the
broker solicits purchases, and
- face-to-face transactions between sellers and purchasers
without a broker-dealer.
In making sales, brokers or dealers used by the selling security
holders may arrange for other brokers or dealers to participate. The selling
security holders and others through whom such securities are sold may be
"underwriters" within the meaning of the Securities Act for the securities
offered, and any profits realized or commission received may be considered
underwriting compensation.
At the time a particular offer of the securities is made by or on
behalf of a selling security holder, to the extent required, a prospectus is to
delivered. The prospectus will include the number of shares of common stock
being offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, the purchase price paid by any underwriter for
the shares of common stock purchased from the selling security holder, and any
discounts, commissions or concessions allowed or reallowed or paid to dealers,
and the proposed selling price to the public.
22
25
We have told the selling security holders that the anti-manipulative
rules under the Securities Exchange Act of 1934, including Regulation M, may
apply to their sales in the market. We have provided each of the selling
security holders with a copy of these rules. We have also told the selling
security holders of the need for delivery of copies of this prospectus in
connection with any sale of securities that are registered by this prospectus.
SHARES ELIGIBLE FOR FUTURE SALE
At the date of this prospectus, we have 26,976,000 shares of common
stock issued and outstanding, all of which are restricted securities. Of these
restricted shares, 1,976,000 shares are eligible for resale by this prospectus.
The remaining restricted shares, which are owned by our officers and directors,
are eligible for sale under Rule 144. In general, Rule 144 permits a shareholder
who has owned restricted shares for at least one year, to sell without
registration, within a three month period, up to one percent of our then
outstanding common stock. In addition, shareholders other than our officers,
directors or 5% or greater shareholders who have owned their shares for at least
two years, may sell them without volume limitation or the need for our reports
to be current.
We cannot predict the effect, if any, that market sales of common stock
or the availability of these shares for sale will have on the market price of
the shares from time to time. Nevertheless, the possibility that substantial
amounts of common stock may be sold in the public market could adversely affect
market prices for the common stock and could damage our ability to raise capital
through the sale of our equity securities.
LEGAL MATTERS
The validity of the securities offered by this prospectus will be
passed upon for us by Atlas Pearlman, P.A., 350 East Las Olas Boulevard, Suite
1700, Fort Lauderdale, FL 33301.
EXPERTS
The consolidated financial statements as of September 30, 2000 and
December 31, 1999, and for the nine months and year then ended, respectively,
appearing in this prospectus and registration statement have been audited by
Daszkal, Bolton, Manela, Devlin & Co., independent auditors, as set forth in
their report thereon appearing elsewhere in this prospectus, and are included in
reliance upon this report given on the authority of such firm as experts in
auditing and accounting.
23
26
ADDITIONAL INFORMATION
We have filed with the SEC the registration statement on Form SB-2
under the Securities Act for the common stock offered by this prospectus. This
prospectus, which is a part of the registration statement, does not contain all
of the information in the registration statement and the exhibits filed with it,
portions of which have been omitted as permitted by SEC rules and regulations.
For further information concerning us and the securities offered by this
prospectus, we refer to the registration statement and to the exhibits filed
with it. Statements contained in this prospectus as to the content of any
contract or other document referred to are not necessarily complete. In each
instance, we refer you to the copy of the contracts and/or other documents filed
as exhibits to the registration statement.
The registration statement, including all exhibits, may be inspected
without charge at the SEC's Public Reference Room at 450 Fifth Street, N.W.
Washington, D.C. 20549, and at the SEC's regional offices located at Seven World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these materials
may also be obtained from the SEC's Public Reference at 450 Fifth Street, N.W.,
Room 1024, Washington D.C. 20549, upon the payment of prescribed fees. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. In addition, registration statements and other filings
made with the SEC through its Electronic Data Gathering, Analysis and Retrieval
Systems are publicly available through the SEC's site on the World Wide Web
located at http//www.sec.gov.
The registration statement, including all exhibits and schedules and
amendments, has been filed with the SEC through the Electronic Data Gathering,
Analysis and Retrieval (EDGAR) system. Following the effective date of the
registration statement relating to this prospectus, we will become subject to
the reporting requirements of the Exchange Act and in accordance with these
requirements, will file annual, quarterly and special reports, and other
information with the SEC. We also intend to furnish our shareholders with annual
reports containing audited financial statements and other periodic reports as we
think appropriate or as may be required by law.
24
27
No dealer, sales representative or any other person has been authorized to give
any information or to make any representations other than those contained in
this prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by the company or any of the
underwriters. This prospectus does not constitute an offer of any securities
other than those to which it relates or an offer to sell, or a solicitation of
any offer to buy, to any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the delivery of this prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
the information set forth herein is correct as of any time subsequent to the
date hereof.
Until _________, 2001 (90 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligations of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.......................... 2
Risk Factors................................ 3
Capitalization.............................. 6
Use of Proceeds............................. 7
Management's Discussion and
Analysis or Plan of Operation............ 7
Business.................................... 10
Management.................................. 12
Certain Relationships and
Related Transactions.................... 17
Principal Shareholders...................... 17
Description of Securities................... 18
Selling Security Holders.................... 20
Plan of Distribution ....................... 22
Shares Eligible for Future Sale............. 23
Legal Matters............................... 23
Experts..................................... 23
Additional Information...................... 24
Financial Statements........................ F-1
1,976,000 SHARES
BBC GRAPHICS OF
PALM BEACH, INC.
PROSPECTUS
________________, 2001
28
BBC GRAPHICS OF PALM BEACH, INC.
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
AND NINE MONTHS ENDED SEPTEMBER 30, 2000
29
TABLE OF CONTENTS
Independent Auditor's Report.........................................................................F - 1
Financial Statements:
Balance Sheets at December 31, 1999 and September 30, 2000 and unaudited
at March 31, 2001 and 2000..................................................................... F - 2
Statements of Operations for the year ended December 31, 1999 and the nine
months ended September 30, 2000 and unaudited for the
six months ended March 31, 2001 and 2000...................................................... F - 3
Statements of Changes in Stockholder's Equity for the year ended December 31, 1999
and the nine months ended September 30, 2000 and unaudited for the
six months ended March 31, 2001 and 2000.......................................................F - 4
Statements of Cash Flows for the year ended December 31, 1999 and the nine
months ended September 30, 2000 and unaudited for the
six months ended March 31, 2001 and 2000.............................................F - 5 and F - 6
Notes to Financial Statements.........................................................F - 7 through F - 10
30
DASZKAL BOLTON MANELA DEVLIN & CO.
CERTIFIED PUBLIC ACCOUNTANTS
A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS
2401 N.W. BOCA RATON BOULEVARD, SUITE 100, BOCA RATON, FLORIDA 33431
TELEPHONE (561) 367-1040 FAX (561) 750-3236
JEFFREY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN INSTITUTE
MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
ROBERT A. MANELA, CPA, P.A.
TIMOTHY R. DEVLIN, CPA, P.A.
MICHAEL S. KRIDEL, CPA, P.A.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
BBC Graphics of Palm Beach, Inc.
We have audited the accompanying balance sheets of BBC Graphics of Palm Beach,
Inc. at December 31, 1999 and September 30, 2000, and the related statements of
operations, changes in stockholder's equity and cash flows for the year ended
December 31, 1999 and the nine months ended September 30, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BBC Graphics of Palm Beach,
Inc. as of December 31, 1999 and September 30, 2000, and the results of its
operations and its cash flows for the year ended December 31, 1999 and the nine
months ended September 30, 2000 in conformity with accounting principles
generally accepted in the United States of America.
/s/ Daszkal Bolton Manela Devlin & Co.
Boca Raton, Florida
November 2, 2000
F - 1
31
BBC GRAPHICS OF PALM BEACH, INC.
BALANCE SHEETS
(Unaudited) (Unaudited)
-------------- --------------
September 30, 2000 December 31, 1999 March 31, 2001 March 31, 2000
------------------ ----------------- -------------- --------------
ASSETS
Current assets:
Cash $ 1,889 $ 770 $ 52,495 $ 9,858
Accounts receivable 21,897 6,116 36,764 --
Due from shareholder 18,360 53,805 20,360 53,805
--------- --------- --------- ---------
Total current assets 42,146 60,691 109,619 63,663
--------- --------- --------- ---------
Property and equipment, net 19,854 27,834 17,287 13,794
--------- --------- --------- ---------
Other assets:
Deposits 3,219 1,153 3,219 1,153
--------- --------- --------- ---------
Total assets $ 65,219 $ 89,678 $ 130,125 $ 78,610
========= ========= ========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 9,420 $ 19,473 $ 18,103 $ 18,406
Obligations under capital leases 13,254 11,923 11,664 10,236
--------- --------- --------- ---------
Total current liabilities 22,674 31,396 29,767 28,642
--------- --------- --------- ---------
Long-term liabilities:
Obligations under capital leases 14,697 24,811 7,903 26,117
--------- --------- --------- ---------
Commitments and contingencies -- -- -- --
Stockholder's equity:
Preferred stock, $0.001 par value; 3,000,000
shares authorized, none outstanding -- -- -- --
Common stock, $0.001 par value; 100,000,000
shares authorized; 25,000,000 shares at
September 30, 2000 and December 31, 1999,
and 26,976,000 shares at March 31, 2001,
issued and outstanding 25,000 25,000 26,976 25,000
Paid in Capital 68,750 35,000 80,467 35,000
Accumulated deficit (65,902) (26,529) (14,988) (36,149)
--------- --------- --------- ---------
Total stockholder's equity 27,848 33,471 92,455 23,851
--------- --------- --------- ---------
Total liabilities and stockholder's equity $ 65,219 $ 89,678 $ 130,125 $ 78,610
========= ========= ========= =========
See accompanying notes to financial statements.
F - 2
32
BBC GRAPHICS OF PALM BEACH, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended March 31,
Nine Months Ended Year Ended -----------------------------
September 30, 2000 December 31, 1999 2001 2000
------------------ ----------------- --------- ---------
Net sales $ 104,892 $ 204,040 $ 136,491 $ 114,549
Costs of goods sold 50,428 76,421 59,601 53,405
--------- --------- --------- ---------
Gross profit 54,464 127,619 76,890 61,144
General and administrative expenses 88,934 117,263 98,423 44,784
--------- --------- --------- ---------
Income (loss) from operations (34,470) 10,356 (21,533) 16,360
--------- --------- --------- ---------
Interest expense 4,903 8,404 950 5,330
--------- --------- --------- ---------
Other income:
Realized gain on sale of marketable securities -- 13,675 -- --
--------- --------- --------- ---------
Income (loss) before income taxes (39,373) 15,627 (22,483) 11,030
Income taxes -- -- -- --
--------- --------- --------- ---------
Net income $ (39,373) $ 15,627 $ (22,483) $ 11,030
========= ========= ========= =========
Earnings (loss) per share - basic and diluted $ 0.00 $ 0.00 $ 0.00 $ 0.00
========= ========= ========= =========
Pro forma amounts assuming the Company was
taxed as a C corporation:
Income (loss) before income taxes (39,373) 15,627 (22,483) 11,030
Income tax expense -- (3,125) -- (2,206)
--------- --------- --------- ---------
Net income $ (39,373) $ 12,502 $ (22,483) $ 8,824
========= ========= ========= =========
Earnings (loss) per share - basic and diluted $ 0.00 $ 0.00 $ 0.00 $ 0.00
========= ========= ========= =========
See accompanying notes to financial statements.
F - 3
33
BBC GRAPHICS OF PALM BEACH, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
Common Stock
-------------------------- Additional Accumulated
Shares Amount Paid-in Capital Deficit Total
---------- ---------- --------------- ----------- ----------
Balance at December 31, 1998 25,000,000 25,000 -- (34,122) (9,122)
Net income -- -- -- 15,627 15,627
Imputed officer's compensation -- -- 35,000 -- 35,000
Distributions -- -- -- (8,034) (8,034)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1999 25,000,000 25,000 35,000 (26,529) 33,471
Net loss -- -- -- (39,373) (39,373)
Imputed officer's compensation -- -- 33,750 -- 33,750
---------- ---------- ---------- ---------- ----------
Balance, September 30, 2000 25,000,000 25,000 68,750 (65,902) 27,848
---------- ---------- ---------- ---------- ----------
UNAUDITED:
- ----------
Net loss for the period -- -- -- (22,483) (22,483)
Reclassification of S-corp. accumulated deficit -- -- (73,397) 73,397 --
Imputed officer's compensation -- -- 20,000 -- 20,000
Distributions -- -- (8,910) -- (8,910)
Issuance of common stock 1,976,000 1,976 87,524 -- 89,500
Costs associated with issuance of common stock -- -- (13,500) -- (13,500)
---------- ---------- ---------- ---------- ----------
Balance, March 31, 2001 26,976,000 $ 26,976 $ 80,467 $ (14,988) $ 92,455
========== ========== ========== ========== ==========
See accompanying notes to financial statements.
F - 4
34
BBC GRAPHICS OF PALM BEACH, INC.
STATEMENTS OF CASH FLOWS, CONTINUED
(Unaudited)
Six Months Ended March 31,
Nine Months Ended Year Ended ---------------------------
September 30, 2000 December 31, 1999 2001 2000
------------------ ----------------- -------- --------
Cash flows from operating activities:
Net income (loss) $(39,373) $ 15,627 $(22,483) $ 11,030
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation and amortization 11,412 15,372 5,706 3,381
Gain on sale of marketable security -- (13,675) -- --
Imputed officer's compensation 33,750 35,000 20,000 25,313
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (15,781) (1,645) (14,866) --
(Increase) decrease in security deposits (2,066) -- -- --
Increase (decrease) in accounts payable (10,053) (1,248) 8,683 10,845
-------- -------- -------- --------
Net cash provided (used) by operating activities (22,111) 49,431 (2,960) 50,569
-------- -------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment (3,432) (1,422) (3,140) --
Purchase of marketable security -- (37,000) -- --
Proceeds from sale of marketable security -- 50,675 -- --
-------- -------- -------- --------
Net cash provided (used) by investing activities (3,432) 12,253 (3,140) --
-------- -------- -------- --------
Cash flows from financing activities:
Repayment of capital lease obligations (8,783) (21,483) (8,384) (2,236)
Proceeds from capital lease obligations -- 1,422 -- --
Due from shareholder 35,445 (36,316) (2,000) (34,391)
Distributions -- (8,034) (8,910) (4,603)
Proceeds from sale of common stock -- -- 89,500 --
Costs associated with issuance of common stock -- -- (13,500) --
-------- -------- -------- --------
Net cash provided (used) by financing activities 26,662 (64,411) 56,706 (41,230)
-------- -------- -------- --------
Net increase (decrease) in cash 1,119 (2,727) 50,606 9,339
Cash at beginning of period 770 3,497 1,889 519
-------- -------- -------- --------
Cash at end of period $ 1,889 $ 770 $ 52,495 $ 9,858
======== ======== ======== ========
Supplemental Cash Flow Information:
Cash paid for:
Interest $ 4,903 $ 8,404 $ 950 $ 5,330
======== ======== ======== ========
Non-cash transactions affecting investing and
financing activities:
Assets acquired under capital lease $ -- $ 6,317 $ -- $ --
======== ======== ======== ========
Reclassification of accumulated deficit $ -- $ -- $ 73,797 $ --
======== ======== ======== ========
See accompanying notes to financial statements.
F - 5
35
BBC GRAPHICS OF PALM BEACH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
BBC Graphics of Palm Beach, Inc. (the "Company") was incorporated in the state
of Florida and operates as a full-service nationwide advertising agency with an
emphasis on graphic design. The Company's primary sources of revenues include
design services such as corporate logo design, all types of printed collateral
and displays.
DEPRECIATION
The Company's property and equipment are depreciated using straight-line and
accelerated methods over the estimated useful lives of the assets, five years.
Depreciation expense includes the amortization of capital lease assets.
REVENUE RECOGNITION
Revenue is recognized on sales of products when the customer receives title to
the goods, generally upon delivery. Revenue is recorded on a gross basis, since
the Company is responsible for fulfillment, including the acceptability of the
products and services ordered by the customer.
ESTIMATES
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 amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INCOME TAXES
The Company with the consent of its stockholder has elected to be taxed under S
corporation provisions of the Internal Revenue Code. Under these provisions, the
taxable income of this entity is reflected by the stockholder on her personal
income tax return.
The Company was taxed as an S corporation until February 1, 2001, when a
disqualifying event occurred and the Company began taxation as a C corporation.
The change in the Company's tax status will not have a material effect on the
financial statements.
CASH AND CASH EQUIVALENTS
The Company considers all highly-liquid debt instruments with original
maturities of three months or less to be cash equivalents.
MARKETABLE SECURITIES
Marketable securities were classified as "available for sale" and were sold
during the period ending September 30, 2000. Realized gains and losses on sales
of securities are determined using the specific identification method for
determining the cost of securities sold.
ADVERTISING COSTS
The Company conducts non-direct response advertising. These costs are expensed
as incurred. Advertising costs for the year ended December 31, 1999 and the nine
months ended September 30, 2000 were $6,037 and $352, respectively.
F - 6
36
BBC GRAPHICS OF PALM BEACH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
RECENT ACCOUNTING PRONOUNCEMENTS
The following pronouncements were recently adopted:
EITF 00-2, "Accounting for Web Site Development Costs." This EITF provides
guidance on accounting for significant costs incurred to develop Internet web
sites.
EITF 00-10, "Accounting for Shipping and Handling Fees and Costs." This EITF
provides guidance on the accounting for the income statement classifications of
amounts charged to customers for shipping and handling.
EITF 99-19, "Reporting Revenue Gross as a Principal Versus Net as an Agent."
This EITF provides guidance on how companies should report revenue. Either the
gross amount received from the customer or the net amount retained after payment
to the supplier.
EITF 99-17, "Accounting for Advertising Barter Transactions." This EITF provides
guidance on the accounting for transactions entered into in which rights are
exchanged to place advertisements on each other's web sites.
The Securities and Exchange Commission issued Staff Accounting Bulletin Number
101, which provides guidance on the recognition of revenue.
The Financial Accounting Standards Board issued interpretation No. 44,
"Accounting for Certain Transactions involving Stock Compensation." This
interpretation provides guidance only for certain issues that arise in applying
APB opinion No. 25 "Accounting for Stock Issued to Employees."
The Company's adoption of these pronouncements did not have a material effect on
the financial statements.
EARNINGS PER SHARE
Earnings per common share are calculated under the provisions of SFAS No. 128,
"Earnings per Share," which established new standards for computing and
presenting earnings per share. SFAS No. 128 requires the Company to report both
basic earnings per share, which is based on the weighted-average number of
common shares outstanding, and diluted earnings per share, which is based on the
weighed-average number of common shares outstanding plus all potential dilutive
common shares outstanding.
LONG-LIVED ASSETS
The Company assesses whether its long-lived assets are impaired as required by
SFAS No. 21, "Accounting for the Impairment of Long-Lived Assets to be Disposed
Of," based on an evaluation of undiscounted projected cash flows through the
remaining amortization period. If an impairment exists, the amount of such
impairment is calculated and based on the estimated fair value of the cost.
UNAUDITED INTERIM INFORMATION
The information presented as of March 31, 2001, and for the six-month periods
ended March 31, 2001 and 2000, has not been audited. In the opinion of
management, the unaudited interim financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
Company's financial position as of March 31, 2001, and the results of its
operations and its cash flows for the six months ended March 31, 2001 and 2000,
and the stockholder's deficit for the six months ended March 31, 2001 and 2000.
F - 7
37
BBC GRAPHICS OF PALM BEACH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
UNAUDITED - CHANGE IN FISCAL YEAR-END
On or about September 30, 2000 the Company decided to change its fiscal year
from December 31 to September 30.
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable consist of normal trade receivables. The Company assesses
the collectibility of its accounts receivable regularly. Based on this
assessment, an allowance for doubtful accounts is recorded. At September 30,
2000 and December 31, 1999, an allowance for doubtful accounts is not considered
necessary.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment, which are reflected at cost, consist of the following at
December 31, 1999 and September 30, 2000:
December 31, 1999 September 30, 2000
----------------- ------------------
Furniture and fixtures $ 500 $ 500
Computer equipment 56,595 56,595
Printing machinery and equipment 49,290 52,722
-------- --------
Total property and equipment 106,385 109,817
Less: accumulated depreciation (78,551) (89,963)
-------- --------
Property and equipment, net $ 27,834 $ 19,854
======== ========
Depreciation and amortization expense for the year ended December 31, 1999 and
the nine months ended September 30, 2000 are $15,372 and $11,412, respectively.
NOTE 4 - LEASE COMMITMENTS
Certain non-cancelable leases are classified as capital leases, and the leased
assets are included as part of "Property and equipment." Other leases are
classified as operating leases and are not capitalized. Details of the
capitalized leased assets are as follows:
December 31, 1999 September 30, 2000
----------------- ------------------
Equipment $ 55,607 $ 55,607
Less: accumulated amortization 28,372 37,029
-------- --------
Total $ 27,235 $ 18,578
======== ========
The Company leases its facility under an operating lease with a term of three
years, payable in monthly installments. Total lease expense for the year ended
December 31, 1999 and the nine-month period ended September 30, 2000 was $-0-
and $4,800, respectively.
F - 8
38
BBC GRAPHICS OF PALM BEACH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - LEASE COMMITMENTS, CONTINUED
At September 30, 2000, the future minimum lease payments under operating and
capital leases are as follows:
Period Ended September 30, 2000 Capital Leases Operating Leases
------------------------------- -------------- ----------------
2000 $ 4,077 $ 2,997
2001 16,307 12,204
2002 11,750 12,520
2003 -- 4,208
-------- -------
Total minimum lease payments 32,134 $31,929
=======
Less: amount representing interest (4,183)
--------
Present value of net minimum lease payments 27,951
Less: current maturities (13,254)
--------
Total long-term obligation $ 14,697
========
NOTE 5 - RELATED PARTY TRANSACTIONS
Due from shareholder consists of a non-interest bearing demand note arising from
monies advanced by the Company on her behalf. As of December 31, 1999 the
Company advanced the shareholder $53,805. In fiscal year 2000 the Company
advanced her an additional $9,459 and the shareholder paid the Company back
$44,904. As of September 30, 2000 the shareholder owes the Company $18,360.
NOTE 6 - MAJOR CUSTOMERS
Sales to two customers during the year ended December 31, 1999 and the nine
months ended September 30, 2000 represented approximately 80% and 25% of total
sales, respectively.
NOTE 7 - REALIZED GAIN ON SALE OF MARKETABLE SECURITY
In February of 1999, the Company purchased a marketable security, classified as
available for sale, for $37,000. In April of 1999, they sold the security for
$50,675 for a realized gain of $13,675.
NOTE 8 - SUBSEQUENT EVENTS
In October of 2000, the Company had a private placement offering. One million
five hundred thousand shares of $0.001 common stock were sold at a purchase
price of $0.02 per share for a total of $30,000. The offering was conducted
pursuant to Section 4(2) of the Securities Act of 1933. Prior to this offering,
the Company amended its articles of incorporation.
As a result of the amendment, the maximum number of shares that the Company
shall be authorized to issue and have outstanding at any one time shall be
103,000,000 shares consisting of 100,000,000 shares of common stock, par value
$0.001 per share, and 3,000,000 shares of preferred stock, par value $0.001 per
share.
Effective the date of the amendment, each one share of common stock, $1.00 par
value per share, outstanding before the effective date of this amendment will be
changed into 50,000 fully paid and non-assessable shares of common stock, $0.001
par value per share. The financial statements have been adjusted to
retroactively show the 50,000-for-1 stock split.
F - 9
39
BBC GRAPHICS OF PALM BEACH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
(Unaudited)
Six Months Ended March 31,
Nine Months Ended Year Ended -------------------------------
September 30, 2000 December 31, 1999 2001 2000
------------------ ----------------- ------------ ------------
Numerator:
Net income (loss) is both the numerator for
basic loss per share (income available to
common shareholders and the numerator for
diluted loss per share (income available to
common shareholders after assumed conversions) $ (39,373) $ 15,627 $ (22,483) $ 11,030
------------ ------------ ------------ ------------
Denominator:
Denominator for basic loss per share
(weighted-average shares) $ 25,000,000 $ 25,000,000 $ 26,812,044 $ 25,000,000
Effect of dilutive securities:
Warrants -- -- -- --
------------ ------------ ------------ ------------
Denominator for dilutive loss per share
(adjusted weighted-average) $ 25,000,000 $ 25,000,000 $ 26,812,044 $ 25,000,000
============ ============ ============ ============
Basic loss per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
============ ============ ============ ============
Diluted loss per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
============ ============ ============ ============
Warrants to purchase 1,428,000 shares of common stock were outstanding during
the period ending March 31, 2001, but were not included in the computation of
diluted loss per share because the effect would be anti-dilutive to the net loss
per share for the period.
NOTE 10 - UNAUDITED - STOCK OPTION PLAN
Under the Company's stock option plan, adopted March 1, 2001, 1,000,000 shares
of common stock were reserved for issuance upon exercise of options granted to
directors, officers and employees of the Company. The Company is authorized to
issue Incentive Stock Options ("ISOs"), which meet the requirements of Section
42 of the Internal Revenue Code of 1986. At its discretion, the Company can also
issue Non Statutory Options ("NSOs"). When an ISO is granted, the price shall be
equal to the fair market value on the date of the grant. The NSO price shall not
be less than fair market value of one share of the stock on the date the option
is granted. The vesting period will be determined on the date of grant. As of
March 31, 2001, no options had been granted.
NOTE 11 - IMPUTED COMPENSATION
The Company recorded officer compensation expense imputed at $35,000 for the
year ended December 31, 1999, $33,750 for the period ended September 30, 2000
and $20,000 for the six months ended March 31, 2001.
F - 10
40
BBC GRAPHICS OF PALM BEACH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 12 - UNAUDITED - COMMON STOCK OFFERING
In February 2001 the Company sold 59.5 units at $1,000 per unit or $59,500 or
$0.125 per share of common stock, which included 476,000 shares of common stock
and warrants to purchase an additional 1,428,000 shares at exercise prices
ranging from $1.00 to $3.00.
NOTE 13 - UNAUDITED - INCOME TAXES
As noted in Note 1 Summary of Significant Accounting Policies, the Company was
taxed as an S corporation until February 1, 2001, when a disqualifying event
occurred and the Company began taxation as a C corporation. The following
presents income tax expense, net income and EPS data on a pro forma basis as if
the Company was always a C corporation.
For the periods ended September 30, 2000 and March 31, 2001 income tax expense
would remain at 0, net income and earnings (loss) per share would also be
unchanged. A deferred tax asset would arise of approximately $7,000 from the net
operating loss carry forward. A 100% valuation allowance would be recorded
against the deferred tax asset; hence there would be no effect on the financial
statements.
For the periods ended December 31,1999 and March 31, 2000 pro forma income tax
expense would be $3,125 and $2,206, respectively. Pro forma net income would be
$12,502 and $8,824. Earnings per share would remain unchanged.
At the time the Company changed its status from an S Corporation to a C
Corporation, the deficit accumulated of $73,397 was reclassified from
accumulated deficit to additional paid-in capital.
F - 11
41
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Florida Business Corporation Act (the "Corporation Act") permits
the indemnification of directors, employees, officers and agents of Florida
corporations. The Company's Articles of Incorporation (the "Articles") and
Bylaws provide that the Company shall indemnify its directors and officers to
the fullest extent permitted by the Corporation Act.
The provisions of the Corporation Act that authorize indemnification do
not eliminate the duty of care of a director, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Florida law. In addition, each director will continue to
be subject to liability for (a) violations of criminal laws, unless the director
had reasonable cause to believe his conduct was lawful or had no reasonable
cause to believe his conduct was unlawful, (b) deriving an improper personal
benefit from a transaction, (c) voting for or assenting to an unlawful
distribution and (d) willful misconduct or conscious disregard for the best
interests of the Company in a proceeding by or in the right of a shareholder.
The statute does not affect a director's responsibilities under any other law,
such as the Federal securities laws.
The effect of the foregoing is to require the Company to indemnify the
officers and directors of the Company for any claim arising against such persons
in their official capacities if such person acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the act and is therefore unenforceable.
II-1
42
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Company in connection with the
distribution of the securities being registered are as follows:
SEC Registration and Filing Fee........................ $ 61.75
Legal Fees and Expenses*............................... 20,000.00
Accounting Fees and Expenses*.......................... 7,500.00
Financial Printing*.................................... 3,000.00
Transfer Agent Fees*................................... 1,250.00
Blue Sky Fees and Expenses*............................ 750.00
Miscellaneous*......................................... 2,000.00
----------
TOTAL........................................ $34,561.75
==========
* Estimated
None of the foregoing expenses are being paid by the selling security holders.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Between October 2000 and November 2000 we sold an aggregate of
1,500,000 shares of our common stock to three individuals in a private
transaction exempt from registration under the Securities Act of 1933 in
reliance on Section 4(2) of the act. We received $30,000 in proceeds from these
sales. We paid no commissions or underwriting discounts in this transaction. No
general solicitation or advertising was used in connection with this
transaction, and the certificates evidencing the shares that were issued
contained a legend restricting their transferability absent registration under
the Securities Act or the availability of an applicable exemption therefrom. The
purchasers had access to business and financial information concerning BBC
Graphics of Palm Beach. We had reasonable grounds to believe that each purchaser
was an accredited investor, as defined by Rule 501 of Regulation D, and the
purchaser represented that he was acquiring the shares for investment purposes
only, and not with a view towards distribution or resale except in compliance
with applicable securities laws.
In February 2001 we sold an aggregate of 59.5 units to 57 accredited
and sophisticated investors in a private placement exempt from registration
under the Securities Act of 1933 in reliance on Rule 506. Each unit consisted of
8,000 shares of our common stock, a Series A warrant to purchase 8,000 shares at
$1.00 per share, a Series B warrant to purchase 8,000 shares at $2.00 per share
and a Series C warrant to purchase 8,000 shares at $3.00 per share, at a
purchase price of $1,000 per unit. We received gross proceeds of $59,500 in this
offering. Granite Financial Group, Inc., a broker-dealer, acted as placement
agent for us in this offering, and we paid Granite Financial Group, Inc. selling
commissions of $5,950. Each of the investors (a) had access to business and
financial information concerning BBC Graphics of Palm Beach, (b) represented
that they were acquiring the shares for investment purposes only and not with a
view towards distribution or resale except in compliance with applicable
securities laws and (c) were either accredited investors or had such knowledge
and experience in business and financial matters that they were able to evaluate
the risks and merits of an investment in BBC Graphics of Palm Beach, and were,
therefore, sophisticated investors at the time of purchase. In addition, we had
reasonable
II-2
43
grounds to believe that 54 of the investors were accredited investors within the
meaning of Rule 501 under Regulation D. No general solicitation or advertising
was used in connection with this offering and the certificates evidencing the
shares that were issued contained a legend restricting their transferability
absent registration under the Securities Act or the availability of an
applicable exemption therefrom.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -----------------------
2 Merger Agreement between BBC Graphics, Inc. and BBC Graphics
of Palm Beach, Inc.*
3.1(a) Certificate of Incorporation of BBC Graphics of Palm Beach,
Inc.*
3.1(b) Articles of Amendment increasing authorized capital*
3.2 By-laws of BBC Graphics of Palm Beach, Inc.*
5 Opinion of Atlas Pearlman, P.A.*
10.1 Stock Option Plan*
10.2 Employment Agreement between the Company and Suzanne Brady*
10.3(a) Office Lease for 4301 Oak Circle, Suite 25*
10.3(b) Demand Promissory Note dated December 31, 2000 from Suzanne
Brady*
23(i) Consent of Atlas Pearlman, P.A. (See Exhibit 5)*
23(ii) Consent of Daszkal Bolton Manela Devlin & Company
- ------------
* previously filed
ITEM 28. UNDERTAKINGS
The undersigned Registrant also undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
II-3
44
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or preceding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
45
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this amendment to
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Boca Raton, Florida on June 29, 2001.
BBC GRAPHICS OF PALM BEACH, INC.
By: /s/ Suzanne Brady
--------------------------------------------
Suzanne Brady, President,
Chief Executive Officer
and Principal Financial and Accounting
Officer
Pursuant to the requirements of the Securities Act of 1933, this
amendment to Form SB-2 registration statement has been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Suzanne Brady Chief Executive Officer, June 29, 2001
- ------------------------------------ President and Director
Suzanne Brady (Principal Executive Officer
and Principal Accounting
Officer)
/s/ Julie Mitchell Chief Operating Officer, June 29, 2001
- ------------------------------------ Treasurer and Director
Julie Mitchell
Director June , 2001
- ------------------------------------
Lisa M. Breunig
The foregoing represents a majority
of the Board of Directors.
II-5