<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B)
OR 12(G) OF THE SECURITIES ACT OF 1934
LA GROUP, INC.
--------------
(Name of Small Business Issuer in Its Charter)
DELAWARE 16-1499611
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification Number
30 Corporate Woods, Suite 280, Rochester, New York 14623
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
716-426-5394
------------
(Issuer's Telephone Number)
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001
---------------------------------------------------------
(Title of Class)
---------------------------------------------------------
(Title of Class)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Forward Looking Statements..........................................................................Page 3
Description of Business.............................................................................Page 4
Risk Factors.......................................................................................Page 14
Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................................................Page 17
Description of Property............................................................................Page 20
Security Ownership of Certain Beneficial Owners
and Management...............................................................................Page 20
Directors and Executive Officers...................................................................Page 21
Executive Compensation.............................................................................Page 22
Certain Relationships and Related Transactions.....................................................Page 22
Description of Securities..........................................................................Page 24
Market Price of Common Stock.......................................................................Page 25
Legal Matters......................................................................................Page 25
Financial Statements...............................................................................Page 26
Index to Exhibits..................................................................................Page 45
</TABLE>
<PAGE> 3
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This Report contains "forward-looking" statements regarding potential
future events and developments affecting the business of the Company. These
forward looking statements involve risks and uncertainties and are usually
accompanied by words such as "believes," "anticipates," "plans," "expects," and
similar expressions. Our actual results could differ materially from those
expressed or implied by such forward-looking statements as a result of certain
factors, including the risk factors described above and elsewhere in this
Report. Such statements relate to, among other things, (i) competition for
customers for its products and services; (ii) the uncertainty of developing or
obtaining rights to new products that will be accepted by the market and the
timing of the introduction of new products into the market; (iii) the limited
market life of the Company's products; and (iv) other statements about the
Company or the direct response industry.
The Company's ability to predict results or the effects of any pending
events on the Company's operating results is inherently subject to various risks
and uncertainties, including competition for products, customers and media
access, the uncertainty of developing or obtaining rights to new products that
will be accepted by the market, the limited market life of the Company's
products; and the effects of government regulations. See MANAGEMENT'S DISCUSSION
AND ANALYSIS.
3
<PAGE> 4
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
Form and year of organization:
- ------------------------------
LA Group, Inc. (the Company) was formed in the state of Delaware on
2/29/96, in order to create an entity with which to form a reverse merger with a
public company, Kent Toys, Inc.
Kent Toys, Inc. (Kent), a non-reporting company, was incorporated in Utah
in 1977, had been inactive for several years. Through a series of transactions,
Kent merged with the Company on 3/15/96. As part of the merger, the Company
assumed Kent's assets and liabilities, and issued one share of the Company's
stock for each share of Kent stock. Upon the completion of this transaction, the
Company became public and all Kent stock was then canceled.
On January 6, 1999, the Company formed a wholly owned subsidiary, Seen On
TV, Inc., a New York corporation, for the purpose of selling household, health,
and beauty products over the Internet. This subsidiary currently is responsible
for the electronic retailing segment of the Company's business.
From inception to date, the Company has not been involved in any
bankruptcy, receivership, or similar proceeding.
Mergers:
- --------
As part of the merger with Kent, the Company, on 3/15/96, effected a 1
for 300 share reverse split of the Company common stock. On 4/8/96, the Company
merged with LA Distribution, Inc. (Distribution), a now inactive New York
corporation, formed 8/30/95. The Company issued a total of 10,000,000 shares of
Company stock on a 1 for 1 exchange of shares with Distribution
On 6/1/98, the Company merged with What A Product, Inc., an Arizona
corporation formed 2/27/93, which was a company involved in the design,
manufacturing, sales and marketing of products through direct response mediums,
primarily quality value channel. As consideration for the merger, the Company
issued 790,000 shares of the Company's common stock to acquire 100% of the
outstanding shares of What A Product, Inc.
OUR BUSINESS
Principal products or services and their markets.
- -------------------------------------------------
4
<PAGE> 5
The Company's original operating business is somewhat different from
its present business. From the time of inception through December 1997, the
Company, through it's subsidiary, LA Distribution, Inc., was involved in retail
sales of products that were viewed by customers on television infomercials. Due
to the difficulties of selling this type of product in the traditionally high
rent retail environment, the Company ceased its conventional retail operations
to begin to develop the sale of those same type of products though its own
designed sites on the World Wide Web.
The Company presently has two main areas of business. The Company
designs and markets web sites for other businesses and derives income from
revenue sharing agreements. As described elsewhere in this statement, the
purchase of the domain name, "AsSeenOnTV.com" will also be operated by the
parent company and management expects to derive revenue from the marketing of
this portal. The second main area of business relates to Seen On TV, Inc. This
wholly owned subsidiary markets and sells products, on the Internet, to the
general public.
Through the Seen On TV, Inc. subsidiary, the Company operates the
website "SeenOnTV.com". "SeenOnTV.com" is a premiere destination website
offering the most sought after "as seen on tv" products direct to the consumer
via the Internet. The "SeenOnTV.com" web site currently derives income from
buying at distributor prices and selling its products through its wholesale and
retail customers. The Company's management has over twelve years of experience
in the Direct Response Television Industry and maintains a wide range of
relationships with many direct response television marketing companies and major
manufacturers who provide products to the direct response industry.
Specific consumer products, through Seen On TV, Inc., which the Company
markets include a wide variety of categories, i.e.: health, beauty, weight loss,
kitchen, sporting goods, and household appliances, etc. Products sold by Seen On
TV, Inc. include, but are not limited to: Ronco Showtime Rotisserie & BBQ,
Popeil Pastamaker, Ronco Food Dehydrator, Tae-Bo video tapes, IGIA Wonder Forms,
Popeil Pocket Fisherman, IGIA IonAir, Tap Light, Egg-a-Part, IGIA Platinum nail,
Metabolize, Oxiclean, Orangeglow, Shelf Master, Sortmans Dream Knifes, True
Motion Lures, Vibatouch Fingertip Massager, QRB, Duzzit Handy Hanger, Eagle Eye
Sun Glasses, Hygionic Tooth, Steamin Iron, IGIA CelluLift, Instagone, Iron
Wonder, IGIA Epielle, Proactiv Solution, PVA Mop, Quick-n-Brite, Safety Can,
Silver lighting, Sweet simplicity and many more.
Due to its experience in the direct response television marketing
industry, the Company has developed a method for gaining market share by
promoting its clients and its own web sites to the top of search engines. In
addition, the Company has the ability to channel customers through a specific
buying sequence, which gives the ability to increase sales so that the unique
5
<PAGE> 6
hit to order ratio is substantially larger then what is normally experienced in
the industry.
The Company has recognized the enormous value in the phrase "as seen on
tv" causing the direct response industries products to be branded as "as seen on
tv" by the retail customer. As a response to the exponential growth of Internet
marketing and sales, the Company has secured (as described elsewhere in this
statement), and is developing, the portal "AsSeenOnTV.com" to become the
Internet gateway to the direct response television consumer. The domain
"AsSeenOnTV.com" will link business to business, and business to consumers, to
direct response television marketing companies, major manufactures and "as seen
on tv" retailers.
"AsSeenOnTV.com" anticipates that it will derive the majority of its
revenues from transaction fees for linking, banner advertising, feature product
advertising, new product test marketing and streaming Infomercial videos.
Because they may be under short-term contracts, they are difficult to forecast
accurately. The expense levels are based in part on expectations of future
revenue and, to a large extent, are fixed.
The Company expects that it will experience seasonality in its
business, reflecting a combination of seasonal fluctuations in Internet usage
and traditional retail seasonality patterns. Internet usage and the rate of
Internet growth may be expected to decline during the summer. Further, sales in
many of the traditional retail industries are significantly higher in the fourth
calendar quarter of each year than in the preceding three-quarters. Management
believes the Company's sales may follow a similar pattern.
The Company purchases a substantial majority of its products from a
multitude of vendors, and, therefore, the Company carries minimal inventory and
relies, to a large extent, on rapid fulfillment from these and other vendors.
The Company has no long-term contracts or arrangements with any of its vendors
that guarantee the availability of merchandise, the continuation of particular
payment terms or the extension of credit limits. There can be no assurance that
the Company's current vendors will continue to sell merchandise to the Company
on current terms or that the Company will be able to establish new, or extend
current, vendor relationships to ensure acquisition of merchandise in a timely
and efficient manner and on acceptable commercial terms. If the Company were
unable to develop and maintain relationships with vendors that would allow it to
obtain sufficient quantities of merchandise on acceptable commercial terms, its
business, prospects, financial condition and results of operations would be
materially adversely affected.
The Company's success, in particular its ability to successfully
process transactions, receive and fulfill orders and provide high-quality
customer service, largely depends on the efficient and uninterrupted operation
6
<PAGE> 7
of its computer and communications hardware systems. Substantially all of the
Company's computer and communications hardware is located at a single leased
facility in Rochester, New York. The Company's systems and operations are
vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, break-ins, earthquake and similar events. The
Company does not presently have redundant systems or a formal disaster recovery
plan and does not carry sufficient business interruption insurance to
compensate it for losses that may occur. Despite the implementation of network
security measures by the Company, its servers are vulnerable to computer
viruses, physical or electronic break-ins and similar disruptions, which could
lead to interruptions, delays, loss of data or the inability to accept and
fulfill customer orders. The occurrence of any of the foregoing risks could
have a material adverse effect on the Company's business, prospects, financial
condition and results of operations.
In addition to the sale of products over the Internet, the Company is
engaged in website marketing and development. Presently, this entity has only
one customer, to whom it provides services under an exclusive contract that
expires in March 2002. Through its own websites, it markets general household,
cosmetic, exercise, health and beauty, automotive and other consumer products
that are generally initially advertised on television. The Company's emphasis is
on products that have been introduced to the marketplace through television
infomercials. Infomercials are paid television advertisements of varying lengths
aired on television stations in virtually every market in the United States. In
addition, as part of its Website hosting and design activity, the Company
provides advisory service to firms interested in marketing products through the
World Wide Web. The Company can be described as an e-commerce Business to
Business (B2B) and Business to Consumer (B2C) entity.
The Internet is becoming an increasingly significant global medium for
communications, advertising, and commerce. International Data Corporation (IDC)
estimates that more than 56 million individuals in the United States used the
Internet in 1998, and projects that this figure will reach 136 million by the
year 2002. As reported in Time Magazine's recent Person of the Year article, IDC
feels that a new kind of consumer is about to emerge as the Internet revolution
spills over the edges of the computer revolution's territory. The next wave is
people who never wanted to buy a PC. Even as early as 2003, analysts expect, a
third of online households will be spending around $50 billion through non-PC
devices, referring to the shopping which will be done via TV with cable-modem
hookup, via game machine, via Palm Pilot, via intelligent refrigerator, via any
means other than a good old-fashioned desktop and keyboard. IDC also stated that
by 2003, on line advertising expenditures will grow from an estimated $1.9
billion in 1998 to $7.7 billion in 2002.
The electronic retailing industry, which includes infomercials and
short-form commercials, television shopping channels and multimedia marketing,
7
<PAGE> 8
estimated annual sales of $8.6 billion in 1998. Many electronic retailers are
now approaching cyberspace and the world of e-commerce as their next frontier. A
U.S. Commerce Department study shows that 100 million consumers are now online.
Internet traffic is doubling every 100 days. The "digital economy" is growing
twice as fast as the economy overall. Ten million Internet users made online
purchases by the end of 1997, up from 4.7 million six months earlier. America On
Line, Inc. (AOL) stated that for the recent holiday sales period, alone, sales
on the Internet was approximately $10 billion dollars. The average AOL shopper
spent $300 on line this year, up over 50% from a year ago. Ninety-five percent
of those shoppers said they would buy on line, again, and rated their overall
experience as excellent or good.
Ernst & Young has predicted that total Internet sales, for the period
Mid-October through the end of December 1999 to be $10-$13 billion. Total
Internet sales are projected, by Ernst and Young, to be $25-$30 billion for the
year 1999.
The Internet is becoming an increasingly significant global medium for
communications, advertising, and commerce. International Data Corporation
estimates that more than 56 million individuals in the United States used the
Internet in 1998, and projects that this figure will reach 136 million by the
year 2002. IDC also projects that consumer-targeted dial-up Internet access
revenues in the U.S. will grow from $4.6 billion in 1998 to $7.7 billion in
2002.
Amazon.com recently announced that it experienced higher sales in the
1999 holiday season than it had for the entire prior year.
The Company's goal is to be recognized as a worldwide leader in the
electronic retailing industry. As this industry continues to rapidly expand, the
Company realizes the exciting stage that has developed. As the Company moves
through the maturation process, it will be positioned to survive the falling out
process that will occur with lessor developed competitors. Though strategic
alliances with direct response marketers and infomercial companies, the Company
is pursuing a business strategy focusing on increasing the utilization of its
domestic relationships, securing and marketing innovative consumer products to
increase existing product lines, and engineering an efficient business model for
the conduit of a worldwide direct response business. The company also intends to
aggressively utilize its assets such as its customer lists in order to realize
the true value thereon.
The Company intends to pursue expansion of its Internet operations in
order to capitalize on the consumer brand-awareness created by the Company's
"AsSeenonTV.com" web site. The Company believes that the product exposure
enables the Company to utilize distribution channels without incurring any of
the additional advertisement costs that other consumer product companies may
incur.
8
<PAGE> 9
The Company has developed considerable expertise in the area of web
design and development of the associated shopping carts for use in e-commerce.
The Company's most dramatic success has come from the redesign and marketing of
a new website for one of the foremost informercial marketing companies. Prior to
the Company taking on this website, its customer generated approximately $25,000
in revenue for the calendar year 1998. After the Company took over the website,
the customer was able to generate nearly $2,000,000 in sales for calendar year
1999. While this result is extraordinary, management believes similar successes
may be available or possible with other customers.
The company intends to pursue expansion of its electronic retail
operations in order to capitalize on the consumer brand-awareness created by the
publics' awareness of the "As Seen On TV" logo.
At this stage of development, management feels the Company may be
properly described as in its infancy. The Company launched it new business plan,
and has generated increasing revenues. After consecutive periods of operating
losses, the Company, during the June 30, 1999 fiscal year, began to generate
profits. It is expected that increasing revenues will fund continuing operations
in substantial part, supplemented by normal commercial borrowing, such that
capital formation or augmentation would be secondary considerations in relation
to the Company's ability to sustain itself as a going concern. See further
discussion in Management's Discussion and Analysis.
DISTRIBUTION METHODS OF THE PRODUCTS OR SERVICES
The Company distributes its products through generally recognized
channels and utilizes various delivery services. Product is primarily shipped by
United Postal Service (UPS), and utilizes both Federal Express and the US Postal
Service on an as needed basis. Some product is shipped directly from the
manufacturer or developer to the end customer. Some products are shipped
directly by the company. In the case of website development and advisory
services, no distribution is required other than through electronic means.
RECENT ACQUISITION OF DOMAIN NAME
On 1/14/00, the Company entered into an agreement with the shareholders
of Conrad Promotions, LLC, a Tennessee Limited Liability Company. The agreement
calls for the Company to acquire the domain name "AsSeenOnTV.com", for a
purchase price of Five Million dollars ($5,000,000). The consideration paid by
the Company includes cash and a promissory note, with payments due at various
times from closing until fifteen months after closing. The note will be
collateralized by 2.1 million shares of Company stock and by the domain name.
9
<PAGE> 10
The registered domain name "AsSeenOnTv.com" name has never been
activated or tied to a website. A domain name is a singularly unique "address"
used as part of the World Wide Web to identify locations on the web. The Company
believes that its purchase of, and thus its ownership of, the domain name is a
significant, material asset. The company intends to develop the yet undeveloped
domain name into a major website for e-commerce, and develop the site as an
entry point or portal for consumers seeking to purchase products that they have
seen offered on television. By utilizing management's knowledge of the
infomercial and seen on TV products, management anticipates being able to offer
a variety of products and company access through the portal site
(AsSeenOnTV.com). In addition, direct sales will occur for products on this new
site. Management intends to develop other revenue streams from this acquisition.
The acquisition of the AsSeenOnTV.com name will mean that the Company
will benefit from its own advertisements, traditional trade use of the name and
random site access from those web surfers who utilize the name. In addition,
given the unique name, search engines are expected to rank the site very high.
The portal and e-commerce concept is currently utilized by such companies as
E-Bay, Yahoo, Amazon.com and E-Toys. Management believes proper development of
the AsSeenOnTV.com site will result in substantial growth to the company. It
intends to sell banner advertisements, as seen on TV products, close out items
and other items. In addition, management is designing a unique search pattern
for the new site that will include products, product spokespersons, and
companies.
As part of its strategy, management anticipates an aggressive
television and radio advertising campaign to "drive traffic" to the
www.AsSeenOnTv.com site.
COMPETITIVE BUSINESS CONDITIONS
Competition in the Electronic Retailing Industry is intense and may be
expected to remain so for some time to come. There are other larger and
well-established electronic retailers, with whom the Company must compete. The
Company competes with a large number of consumer product companies and retailers
who have substantially greater financial, marketing and other resources than the
Company, some of which have commenced, or indicated their intent to conduct,
direct response marketing. Products similar to the Company's products may be
sold in department stores, pharmacies, general merchandise stores, and through
magazines, newspapers, direct mail advertising, and catalogs. It is management's
opinion that some, if not all, of its major competitors may be better and longer
established, better financed, and with enhanced borrowing credit based on
historical operations, and enjoy substantially higher revenues than does the
Company, currently. As a relatively new entrant into this marketing industry,
the Company relies on the skill, experience and innovative discernment of
10
<PAGE> 11
management in the hope that its superior judgment will provide it a competitive
advantage. The Company's major competitors are, among others: Guthy Renker
Corp. and Media Group Incorporated. These two companies are two of our many
suppliers. Anyone that is a reseller of product similar to the product the
Company handles may be deemed a competitor to the Company. Cyberbrands.com,
Connecticutsbest.com, Smdistributers.com, Tvgadgets.com, Imall.com, and
Planetcybermall2.com. are examples of this type of reseller. See further
discussion in the Risk Factors section of this statement.
SOURCES OF PRODUCTS
The company purchases no raw materials. However, through its Seen On
TV, Inc. subsidiary, it purchases product for resale. These products, as
previously described, are purchased from industry wide distributors, such as
Tactica, On-Tel, Media Group, Guthy Renker, QRB, and Dental Systems, among
others.
DEPENDENCE ON MAJOR CUSTOMERS
Prior to the previously described contractual agreement with the
infomercial customer, all company revenue was derived from retail sales, and did
not have dependence on any one customer. As a result of hosting one customer's
web site, beginning in January 1999, 30.3% of the revenue recorded by the
Company for fiscal year ending June 30, 1999 was derived from this one customer.
In addition, for quarters ending September 30, 1999, and December 31, 1999,
revenue from this same one customer was 66.6% and 71.7%, respectively. The
Company presently has no other major customers.
PATENTS AND TRADEMARKS
By virtue of its acquisition, in 1998, of What a Product, Inc., LA
Group, Inc. acquired ownership to the following trademarks: What-a Razor(TM),
What-a Spoon(TM), What-a Tray(TM), What-a-Carver(TM), What-a Loveseat(TM)and
What-a-Couch(TM). Patent interests include the United States and Canadian Patent
pertaining to the What-a-Saw(TM).
The Company generates a revenue stream as it receives a royalty, or commission,
from Coordinated Strategic Alliances, Inc. (CSA) of Chester, New York on any
sales by CSA as follows:
<TABLE>
<CAPTION>
-------------------------------------- ----------------------------------------
PRODUCT ROYALTY/COMMISSION
-------------------------------------- ----------------------------------------
<S> <C>
What-a-Saw(TM) $1.00
-------------------------------------- ----------------------------------------
What-a-Saw Deluxe(TM) $1.00
-------------------------------------- ----------------------------------------
Slide Lock What-a-Saw(TM) $0.20
-------------------------------------- ----------------------------------------
What-a-Razor(TM) $0.10
-------------------------------------- ----------------------------------------
</TABLE>
11
<PAGE> 12
<TABLE>
-------------------------------------- ----------------------------------------
<S> <C>
What-a-Chair(TM) $0.10
-------------------------------------- ----------------------------------------
What-a-Chair Deluxe(TM) $0.05
-------------------------------------- ----------------------------------------
Twogether What-a-Chair(TM) $0.10
-------------------------------------- ----------------------------------------
What-a-Tray(TM) $1.00
-------------------------------------- ----------------------------------------
What-a-Carver(TM) $0.50
-------------------------------------- ----------------------------------------
What-a-Loveseat(TM) $0.50
-------------------------------------- ----------------------------------------
What-a-Couch(TM) $0.50
-------------------------------------- ----------------------------------------
</TABLE>
The Company also owns the broader registered trademark What-A(TM)
serial number 75/410219.
The Company currently owns or controls the following Internet domains:
What-A.com, What-A-Product.com, Whataproduct.com, AsSeenOnTV.com,
iAsSeenOnTV.com, i-AsSeenOnTV.com, eAsSeenOnTV.com, e-AsSeenOnTV.com,
ASeenOnTV.com, SeenOnTV.com, iSeenOnTV.com, i-SeenOnTV.com, eSeenOnTV.com,
e-SeenOnTV.com, WeEscrow.com and LAGroupInc.com.
The previously described revenue sharing agreement with the infomercial
company expires on 3/14/02. Management believes that the customer is very
satisfied with the current working relationship with the customer, and believes
that the contract will be renewed for another term.
The company owns no licenses, franchises, concessions, and has not
entered into any labor or bargaining contracts.
GOVERNMENTAL APPROVAL
The Company needs no government approval for its principal products or
services.
GOVERNMENTAL REGULATIONS
Aspects of the Company's business that are subject to governmental
regulation include federal and state taxing authorities. In addition to the
federal and franchise taxing authorities, the Company collects and remits sales
tax in the one state in which it has a physical presence. The Company is
prepared to collect sales taxes for other states, if laws are passed requiring
such collection. The Company does not believe that a change in the tax laws
requiring the collecting of sales tax will have a material adverse effect on the
Company's financial condition or results of operations.
12
<PAGE> 13
RESEARCH AND DEVELOPMENT
The Company has incurred no research and development costs in the past,
however, management does not rule out such unforeseen costs occurring in the
future.
ENVIRONMENTAL LAWS
Through the present time, the Company has incurred no costs as a result
of complying with environmental laws. However, with any changes in current laws,
there is always a potential for some such costs in the future.
EMPLOYEES
The Company, as of January 1, 2000, had one full time employee and
three contract employees who provide accounting, financial, and technical
services to the Company on an as needed basis. None of the employees are covered
by collective bargaining agreements and management considers relations with its
employees to be good. In addition, the Company utilizes paid consultants and
advisors.
DEPENDENCE ON KEY EMPLOYEES
The Company believes that its success will depend to a significant
extent upon the efforts and abilities of a small group of executive officers,
and in particular on Daniel M. Fasano, the Company's Chief Executive Officer.
The loss of the services of one or more of these key personnel could have a
material adverse effect on the Company's future business, financial condition
and results of operations. In addition, the Company's future success will depend
upon its ability to continue to attract and retain qualified technical and
management personnel. There can be no assurance that the Company will be
successful in attracting and retaining such personnel.
REPORTS TO SECURITY HOLDERS
The purpose of the registration statement is to become a fully
reporting company. As such, the Company intends to provide an annual report to
security holders, which will include audited financial statements.
Upon satisfactory completion of the registration process, the Company
intends to file all required reports with the Securities and Exchange
Commission.
The public may read and copy any materials that the Company files with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, DC 20549. The public may obtain information on the Company from the
Public Reference Room by calling the SEC at 1-800-SEC-0330. As the
13
<PAGE> 14
Company intends to be an electronic filer, the SEC maintains an Internet site
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The SEC site address
is: http://www.sec.gov. In addition, the public may contact the Company's own
Internet site at http://www.lagroupinc.com.
RISKS RELATED TO THE INTERNET INDUSTRY
LA Group, Inc.'s business is very difficult to evaluate because its
operating history is limited.
In January 1999, the Company began operations in electronic retailing,
through its wholly owned subsidiary, Seen On TV, Inc. In addition, the Company,
through its parent, LA Group, Inc., began web site hosting and development
during the same period. Accordingly, there is very limited information about the
Company with which to evaluate its business, strategies, and performance. In
assessing the risks associated with the Company, one should consider the risks,
expenses and uncertainties that an early stage company like LA Group, Inc.
faces, particularly in the new and rapidly evolving Internet market.
LA Group, Inc. may not be able to compete effectively against its
current and potential competitors.
LA Group, Inc. competes with a number of other companies that provide
electronic retailing, web site design and hosting over the Internet. Some of
these competitors may have greater financial, technical, and marketing resources
than the Company has. This may allow them to devote greater resources to the
development and promotion of their products and services. In addition, some of
these competitors may offer a broader base of products and services that may
attract consumers to their websites. This could result in reduced market
penetration for the Company's products and services. In addition, because the
barriers to entry are low, new competitors may emerge and rapidly acquire market
share.
LA Group, Inc. faces potential electronic commerce related liabilities
and expenses that may be costly.
Arrangements with electronic commerce merchants may expose the Company
to legal risks and uncertainties, including potential liabilities to consumers
of third party products and services. Although LA Group carries general
liability insurance, its insurance may not cover potential claims of this type
or may not be adequate to indemnify LA Group, Inc. for all liability that may be
imposed.
Some of the risks that may result from these arrangements with businesses
engaged in electronic commerce include:
14
<PAGE> 15
- - Potential liabilities for illegal activities that may be conducted by
participating merchants;
- - Product liability or other tort claims relating to goods or services
sold through third-party commerce sites;
- - Consumer fraud and false or deceptive advertising or sales practices;
- - Breach of contract claims relating to merchant transactions;
- - Claims that materials included in merchant sites or sold by merchants
through these sites infringe third-party patents, copyrights,
trademarks or other intellectual property rights, or are libelous,
defamatory or in breach of third-party confidentiality or privacy
rights; and
- - Claims relating to failure of merchants to appropriately collect and
remit sales or other taxes arising from electronic commerce
transactions.
Even if any asserted claims do not result in material liability,
investigating and defending claims could be costly and may have a material
adverse effect of the Company's business, operating results or financial
condition.
The growth of LA Group, Inc. will depend on its ability to develop its
brand name.
The Company believes that broader brand recognition and a favorable
consumer perception of the "As Seen On TV" brand is essential to its future
success. Accordingly, the Company intends to pursue an aggressive
brand-enhancement strategy, which will include mass market and multimedia
advertising, promotional programming, infomercials, and public relations
activities. LA Group, Inc. intends to incur significant expenditures on these
activities. These expenditures may not result in a sufficient increase in
revenue to cover the advertising and promotional expenses. In addition, even if
brand recognition increases, the number of consumers, advertisers or customers
may not increase. If LA Group, Inc.'s brand enhancement strategy is
unsuccessful, these expenses may never be recovered and the Company may be
unable to increase future revenues.
If LA Group, Inc. is unable to expand its products and services,
profits may not continue.
To increase its revenues, the Company will need to expand its
operations by promoting new or complementary products and by expanding the
breadth and depth of its services. In particular, the Company's future success
will depend largely on its ability to increase revenues through the facilitation
of electronic commerce transactions and attracting and maintaining visitors to
15
<PAGE> 16
the "AsSeenOnTV.com" website. The market for electronic commerce services is
extremely competitive. The expansion of the Company's business to include
providing other products and services via the Internet will require additional
development resources. This expansion may strain the Company's managerial,
financial, and operational resources. The Company's expansion into new product
and service offerings may not be timely or may not generate sufficient revenues
to offset their cost. If this occurs, the Company's business, operating results
and financial condition will be materially adversely affected.
LA Group, Inc.'s success depends in part on the growth of electronic
commerce and consumer acceptance of the Company's products and services.
The future success of LA Group, Inc. is dependent on the continued
growth of electronic commerce generally, and the increased market share of the
Company, offered via the Internet. The continued growth of these areas depends
on various factors, many of which are outside the Company's control. These
factors include:
- - The continued acceptance and effectiveness of the Internet as a medium
for transactions in business and consumer related products and
services;
- - The performance and reliability of the Internet to facilitate
electronic commerce transactions;
- - Security and authentication concerns with respect to the transmission
over the Internet of confidential information, such as credit card
numbers, and attempts by unauthorized computer users, so-called
hackers, to penetrate online security systems; and
- - Privacy concerns, including those related to the ability of websites to
gather user information without the user's knowledge or consent.
Government regulation and legal uncertainties pertaining to the
Internet could hurt the business of LA Group, Inc.
Any new law or regulation pertaining to the Internet, or the
application or interpretation of existing laws, could decrease the demand for
the Company's services, increase its cost of doing business or otherwise have a
material adverse effect on its business. There is, and will likely continue to
be, an increasing number of laws and regulations pertaining to the Internet.
These laws or regulations may relate to liability for information retrieved from
or transmitted over the Internet, online content regulation, user privacy,
taxation and the quality of products and services. Furthermore, the growth and
development of electronic commerce may prompt calls for more stringent consumer
16
<PAGE> 17
protection laws that may impose additional burdens on electronic
commerce companies, as well as companies like LA Group, Inc. that provide
electronic commerce services.
Recently adopted legislation provides that, prior to October 2001, a
state cannot impose sales taxes on products sold on the Internet unless those
taxes could be charged on non-Internet transactions involving the same products.
During this moratorium, it is possible that taxing mechanisms may be developed
that would, following the moratorium, impose increasing sales and similar tax
burdens on the Company. If these burdens are placed on LA Group, Inc., it may
have a negative effect on its financial condition. In addition, foreign
jurisdictions may claim that LA Group, Inc. is subject to taxation if it
conducts transactions with their citizens.
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of the financial condition and results of
operations of LA Group, Inc. should be read in conjunction with the consolidated
financial statements and the notes to those statements included elsewhere in
this statement. This discussion contains forward-looking statements that involve
risks and uncertainties. The actual results of the Company may differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, such as those set forth elsewhere in this Report.
RESULTS OF OPERATIONS
Fiscal Period Ended December 31, 1999 vs. Fiscal Period Ended December
31, 1998
Revenue for the fiscal quarter ended December 31, 1999 was $125,551, an
increase of approximately 1050% over revenue of $10,915 for the comparable
period in 1998. Revenue for the six months ended December 31, 1999 was $209,754,
an increase of approximately 1173% over the comparable six-month period in the
prior year. Such increases were primarily attributable to the Company's hosting
of a customer's web site, and the sale of product over the Internet by its Seen
On TV, Inc. subsidiary. The sales by Seen On TV, Inc., as well as the hosting of
the web site by LA Group, Inc., for the quarter ending December 31, 1999 is
inclusive of the seasonal holiday business, and management feels that the volume
due to this season related business will not continue throughout the final two
quarters of this fiscal year ending June 30, 2000. Comparatives between the two
separate business segments for the comparable periods are not possible, as
neither business segment was active in the prior fiscal year.
Cost of revenue, as a percentage of revenue, was 14% for the fiscal
quarter ended December 31, 1999 as compared with 9% for the comparable period in
17
<PAGE> 18
the prior year, and approximately 15% and 17% for the six month fiscal periods
ended December 31, 1999, and 1998. Such increases are primarily due to the
commencement of the sales of product over the Internet, which involved the sale
of merchandise acquired at less than normal cost during the prior fiscal year.
Thus, it is the opinion of management that the low cost of revenue percentages
seen in the prior fiscal year are not reflective of expectations in the future.
Gross profit, as a percentage of revenue, was 86% for the fiscal
quarter ended December 31, 1999 as compared with 81% for the comparable period
in the prior year, and approximately 85% and 83% for the six month fiscal
periods ended December 31, 1999, and 1998.
Operating expenses, as a percentage of sales, were approximately 44%
for the fiscal quarter ended December 31, 1999, as compared with approximately
56% for the comparable quarter ended December 31, 1998, and approximately 41%
for the six month period ended December 31, 1999, contrasted with 78% for the
comparable period ended December 31, 1998. The fiscal 1999 improvements are
attributable to the increase of revenues with the expenses generally remaining
more stable. It is management's belief that these expenses, as a percentage of
sales will increase during the remainder of the fiscal year, due to the costs of
acquiring the new management team, along with the necessary costs associated
with the acquisition of the domain name, AsSeenOnTV.com.
The net income for the six months ended December 31, 1999 was $87,372,
or $.0057 per share, compared with net income of $1,223, or $.000 per share, for
the six months ended December 31, 1998.
Fiscal Year Ended June 30, 1999 vs. Fiscal Years Ended June 30, 1998
and June 30, 1997
Revenue for the fiscal year ended June 30, 1999 was $129,050, an
increase of approximately 167% over fiscal 1998 revenue of $48,311, and
approximately 77% over 1997 fiscal year revenue of $72,812. Such increases were
in each instance attributable to the Company's development of new businesses,
specifically Internet sales and web site hosting. The retail sales business,
conducted by LA Distribution, Inc., was phased out at the end of December 1997.
Comparison between the two separate business segments are not possible, as
neither of these current specific revenue generators activities were active
during the prior fiscal year.
Cost of revenue, as a percentage of revenue, was 20% for fiscal 1999,
as compared with approximately 27% and 53% for the fiscal years ended June 30,
1998 and June 30, 1997, respectively.
18
<PAGE> 19
Gross profit, as a percentage of revenue, was 80% for the fiscal year
ended June 30, 1999, as compared with 73% and 47% for the fiscal years ended
June 30, 1998 and June 30, 1997, respectively.
Operating expenses, as a percentage of revenue, approximated 63% for
the fiscal year ended July 31, 1999, as compared with 109% and 157% for the
fiscal years ended June 30, 1998 and 1997, respectively. The decreases are
attributable to both the increase in revenue volume and decrease in costs
primarily related to the elimination of the retail business.
Net income, for the fiscal year ending June 30, 1999, was $20,807, or
$.001 per share, as compared to ($18,574) and ($81,307), or ($.0034) and
($.0172) per share, for fiscal years ended June 30, 1998 and 1997, respectively.
IMPACT OF INFLATION
The Company believes that it will be able to offset the effects of
inflation. Although the Company does not purchase, by contract, any product for
resale, the Company sells all products on an individual basis. Any increase in
costs to the Company can be immediately passed on to the customer. Although
inflation could have an impact on the volume of sales, the Company could combat
this by adjusting product mix, or by the change of product offered for sale.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has been able to finance operations
primarily through funds generated by operations, and by non-interest bearing
loans both from wholly owned subsidiaries and from an executive officer.
The Company has not needed financing from traditional sources such as
banking institutions, and as such, other than the note as described elsewhere
within this statement, the company has no long term debt.
In April 1999, the Company issued 75,000 shares of restricted common
stock to two individuals for $30,000. These funds were utilized by the Company
to invest in Tirk Internet Systems, Inc., as described in Item 7 of this
registration statement. Additionally, the Company, at various times, has issued
stock in exchange for services, as well as for exchanges of other companies
stock during merger transactions. These exchanges were specifically for the
merger with Kent Toys, Inc., LA Distribution, Inc., LA Acquisition, Inc., all
of which occurred in 1996, and What A Product, Inc. in January 1998.
Management believes that the Company's working capital and the profits
generated from normal operations will be sufficient to finance both the web
hosting and Internet sales areas of the business. If cash flow from operations
19
<PAGE> 20
is inadequate to capitalize from the AsSeenOnTV.com acquisition, the Company
will seek to secure working capital to fully develop and market the new portal.
In addition, the Company must seek to pay or refinance the debt instrument
incurred from the AsSeenOnTv.com acquisition. The Company intends to seek the
required financing through infusions from major customers, the sale of
additional equity or debt securities, or to obtain traditional lending
facilities. The sale of additional equity or convertible debt securities would
result in additional dilution to our stockholders. The incurrence of
indebtedness would result in increased fixed obligations and could result in
covenants that would restrict our operations. We have not made arrangements to
obtain additional financing and there can be no assurance that financing will be
available in amounts or on terms acceptable to us, if at all.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company's official office is located at 30 Corporate Woods, Suite
280, Rochester, New York 14623. The Company currently leases the office on a
month to month basis. In addition, the Company leases space from an executive
officer of the company. This facility is used for the warehousing and
fulfillment functions of shipping the Seen On TV, Inc. products to customers.
Nominal rents are paid for each site. The Company owns no real estate.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.
TABLE A
COMMON STOCK
OFFICERS AND DIRECTORS AND OWNERS OF 5% OR MORE OF THE COMMON SHARES
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner - Title Actual Ownership % Ownership
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ACTUAL
Daniel J. Fasano None 3,000,000 19.6%
Daniel M. Fasano Chairman and CEO 2,900,000 19.0%
Director
Frank T. Costanzo President 560,000 3.7%
Curt B. Westrom Treasurer -0- -0-
Ronald J. Axelrod Secretary 360,000 2.4%
All Officers and Directors as a Group 6820,000 44.6%
Total Shares Issued and Outstanding 15,277,938 100.0%
</TABLE>
20
<PAGE> 21
There are presently no options issued to any member of management, nor
any options issued by the Company.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS.
Daniel M. Fasano is presently the sole director of the Company, serving
as director since its inception. It is intended that he will serve until, and
that additional Directors will be nominated at, the next meeting of
shareholders, tentatively scheduled to be held February 21, 2000.
The Officers of the corporation are:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Daniel M. Fasano 38 Chairman, Chief Executive Officer
and Director
Frank T. Costanzo 51 President
Curt B. Westrom 56 Treasurer and Chief Financial Officer
Ronald J. Axelrod 54 Secretary
</TABLE>
Daniel M. Fasano, of Rochester, New York, has served as CEO of the
Company since September 1995. Mr. Fasano has over twelve years experience in the
Direct Response Industry, and is a recognized authority on retailing. A notable
accomplishment was to be the first to successfully market, in a retail setting,
products traditionally sold exclusively on television. It was during Mr.
Fasano's involvement in the Direct Response Industry when he conceived the
concept of retailing "As Seen On TV" products. His involvement in the Industry
encompassed the development of a skin care line, production of Infomercials, and
other short form direct response pieces.
Mr. Fasano was the founder and President of a private company,
Everything Seen On TV, Inc., a company involved in retail sales. As a result of
an action by one landlord, this company instituted Chapter 7 insolvency
proceedings in 1995. As a result of having personally guaranteed this company's
lease obligation, Mr. Fasano was forced to file for personal bankruptcy
protection in 1996. Both cases have been discharged.
Frank T. Costanzo, of Chandler, Arizona, was appointed President in
January 2000. Mr. Costanzo has been a founder, officer and/or director in
several public and private companies, including Ronco Holding, LLC. He is
currently President of FTC & Associates, Inc., of Chandler, Arizona, an interim
business management-consulting firm. Mr. Costanzo is associated with his
21
<PAGE> 22
family's publishing company, Featherfew. He has been active in product
development and general operations with several companies in the direct response
and television sales industry. Mr. Costanzo has taught at the University of
Phoenix and remains an adjunct faculty member. He received a MA Degree from Kane
College of New Jersey, and holds a BA Degree from St. Bonaventure University.
Curt B. Westrom, of Bemus Point, New York, was appointed Treasurer in
January 2000. Since 1997, Mr. Westrom has been the sole principal of Curt B.
Westrom, P.A., a public accounting firm in Jamestown, NY. During the period 1993
through 1997, Mr. Westrom was the President and sole shareholder of Standard
Portable Products, Inc. a manufacturing company in Mayville, NY. Prior to 1993,
Mr. Westrom was a co-founder and Chief Financial Officer for an electronics
manufacturer, Electronic Technology Group, Inc., a Buffalo, NY based public
company. He holds a Bachelor' Degree in Accounting from St. Bonaventure
University.
Ronald J. Axelrod, of Pittsford, New York, was appointed Secretary of
the Company in January 2000. Mr. Axelrod has been a full time practicing
attorney, in Rochester, NY, for the past 30 years. He was co-founder of The
Maxim Group, Inc., now known as Floor Covering America, and traded on the New
York Stock Exchange. Mr. Axelrod has a B.S. Degree in Finance from SUNY at
Buffalo and a J.D Degree from its Law School.
There are no other directors, executive officers, promoters, or control
persons other than those listed under item 4. Daniel J. Fasano is Daniel M.
Fasano's father. Daniel J. Fasano has no involvemnt in the day to day
operations of the Company.
ITEM 6. EXECUTIVE COMPENSATION.
The Company has not entered into formal Employment Agreements with
members of management, however it intends to do so in the future.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company, as an investor in a privately held company in Rochester,
NY, has a 20% interest in Tirk Internet Systems, Inc. (Tirk). Tirk is the
developer of a Java Application Server, the Tirk Application Server. The Tirk
Application Server will allow developers to rapidly develop database driven web
sites and Internet based applications. The Tirk Application Server is comprised
of a powerful multithreaded http web server and an object database. The Tirk
Application Server is an open system in that it can be extended with Java and
other interpreted languages. Currently the interpreted programming language
JPython has been bundled with the Tirk Application Server allowing for rapid
prototyping and application development. Other interpreted or scripting
languages in which a Java interpreter exists may be bundled with the system such
as TCL, Rhino, and Beanshell (a Java interpreted scripted language).
22
<PAGE> 23
The platform incorporates a tag based template system to implement
business logic and also to provide html developers a powerful time saving
environment. The application server is web based, in that it is maintained and
administered via a web browser. Tirk has leveraged XML technology throughout the
Platform with the aid of a Sax based XML parser. XML is used in the following
areas, System Configuration, Object Definitions, Data Modeling, User Interfaces,
Defining Access Privileges, and Cluster Management.
Dean Fragnito, a principal in Tirk, is a relative of Daniel M. Fasano,
the Company's Chief Executive Officer.
There have been no transactions with promoters since inception of the
company.
The following information discloses that the Company and its Officers,
Directors, and 5% Controlling persons, interests may have interests, which, from
time to time, may be inconsistent in some respect with the interest of the
Company. The nature of these conflicts of interest, if any, may vary. There may
be circumstances in which they may take advantage of an opportunity that might
be suitable for the Company. Although there can be no assurance that a conflict
of interest will not arise, or that resolutions of any such conflicts will be
made in a manner most favorable to the Company and its shareholders, the
Officers and Directors have a fiduciary responsibility to the Company and its
shareholders and, therefore, must adhere to a standard of good faith and
integrity in their dealings with and for the Company and its shareholders.
Certain specific conflicts of interest may include the following:
Conflicts Arising From Related Party Transactions.
- --------------------------------------------------
From time to time, transactions may be proposed between the Company and
related persons or entities. It is expected that any such transactions will be
consummated on terms and conditions no less favorable to the Company than could
be obtained in arm's-length negotiations with unaffiliated third parties. The
Company's shareholders may not be notified prior to any related party
transaction, but any significant related party transactions are expected to be
disclosed in the Company's annual report. There can be no assurance, in such a
circumstance, that some consideration, benefit or value would not be lost to or
relinquished by the Company and accrue to such related persons. The Company
expects, however, that following any business combination involving the Company,
present management will be replaced with candidates of the acquired company, and
that, thereafter, any transactions with presently related persons may be deemed
arm's-length transactions.
23
<PAGE> 24
Lack of Separate Representation.
- --------------------------------
Related persons and the company have not been represented by separate
counsel and it is not expected that they will be represented by separate counsel
prior to the consummation of any proposed business combination. The Officers and
Directors are accountable to the Company and its shareholders as fiduciaries
and, therefore, must adhere to a standard of good faith and integrity in their
dealings with and for the Company. The area of fiduciary responsibility is a
rapidly developing area of law, and persons who have questions concerning the
duties of the officers and directors should consult with their legal counsel.
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capital stock of LA Group, Inc. consists of 20,000,000
shares of common stock, par value $.001 per share. In addition, pursuant to the
Articles of Incorporation, the Company is authorized to issue 2,000,000 shares
of preferred stock.
As of June 30, 1999 there was a total of 15,277,938 shares of commons
stock outstanding, which included 6,393,766 restricted shares. As of January 27,
2000, there was no change in these figures.
Since the incorporation of the Company, no shares of preferred stock
have been issued.
The authorized but unissued shares of common stock and preferred stock
are available for future issuance without stockholder approval, subject to
certain limitations imposed, if any, by the Nasdaq National Market. These
additional shares may be utilized for a variety of corporate purposes, including
future public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The company intends to seek, at the next scheduled
shareholders' meeting, shareholder approval to apply for an increase in the
authorized level of common stock. The existence of authorized but unissued and
unreserved common stock and preferred stock could render more difficult or
discourage an attempt to obtain control of the Company by means of a proxy
contest, tender offer, merger or otherwise.
The transfer agent and registrant for the common stock is United Stock
Transfer, Inc., 3615 South Huron Street, Suite 104, Englewood, Colorado 80110.
24
<PAGE> 25
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT'S COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.
Market Information.
- -------------------
The Common Stock of this Registrant is quoted Over the Counter on the
Bulletin Board ("OTC BB"). Based upon standard reporting sources, the
following information is provided:
<TABLE>
<CAPTION>
Period Low Bid High Bid Period Low Bid High Bid
- ------ ------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
1st 1998 n/a n/a 2nd 1999 .02 .05
- --------------------------------------------------------------------------------------
2nd 1998 n/a n/a 3rd 1999 .035 2.18
- --------------------------------------------------------------------------------------
3rd 1998 .125 .215 4th 1999 .56 .77
- --------------------------------------------------------------------------------------
4th 1998 .09 .145 1st 2000 .20 .56
- --------------------------------------------------------------------------------------
1st 1999 .05 .125 2nd 2000 .16 .32
- --------------------------------------------------------------------------------------
</TABLE>
The foregoing price information is based upon inter-dealer prices,
without retail mark-up, mark down or commission, and may not represent actual
transactions.
Holders of record.
- ------------------
The exact number of holders of record, as of January 27, 2000 is 1126.
Dividends.
- ---------
The Company has not declared or paid any cash dividends on our capital
stock since inception. We intend to retain any future earnings to finance the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS.
The Company is involved in a lawsuit pending in the Supreme Court of
the State of New York entitled Charles Schwab & Co., vs. Quintin A. Prospero, LA
Group, Inc. and CDR Transfer, Inc. The total claim is $33,850 plus interest from
August 1997. The Company has valid cross-claims against the other Defendants;
however, they are both judgment proof. While the Company may prevail on its
defenses against Charles Schwab, there is the possibility that the
25
<PAGE> 26
company could be liable for the entire amount for which it is being sued. It is
likely that this case will be settled prior to trial.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
There have been no disagreements of any sort or kind with Auditors or
Accountants respecting any matter or item reflected in the financial statements
of the Company.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On April 24, 1997, the Company issued 200,000 shares of common stock
to Ronald J. Axelrod, Esq. in lieu of payment for legal services rendered to
the Company. The trading value of the shares was $.05 on the date of issuance.
The shares were issued without registration in reliance on the exemption
provided by 4(2) of the Securities Act.
Also on April 24, 1997, the Company issued 100,000 shares of common
stock to Trobriand Properties, Ltd., a former shareholder of Kent Toys, Inc.,
as additional payment for the merger which occurred on March 15, 1996. The
trading value of the shares was $.05 per share on the date of issuance. The
shares were issued without registration reliance on the exemption form
registration provided by 4(2) of the Securities Act.
On September 8, 1997, the Company issued 150,000 shares of common
stock to N & G International Holdings, Inc. for payment of professional
services. The trading value of the shares was $.05 per share on the date of
issuance. The shares were issued without registration in reliance on the
exemption from registration provided by 4(2) of the Securities Act.
On December 15, 1997, the Company issued 100,000 shares of common
stock to each of FTC & Associates, Inc., Eric Levine, Edward Tesher, and Kevin
Day. Each of those parties were shareholders of What A product, Inc., and were
issued the shares in exchange for their interest in What A Product, Inc. In
addition, the Company issued 345,000 shares of common stock to F.D. and Mary K.
Haberkorn Trust U/A, and 45,000 shares of common stock to Charles Haberkorn.
Each of those two parties received the shares in consideration for the
assignment of a Collateral Security Agreement issued by What A Product, Inc.
The trading value of the shares was $.05 at the time of issuance. The shares
were issued without registration in reliance on the exemption form registration
provided by 4(2) of the Securities Act.
On June 1, 1998, the Company issued 300,000 shares of common stock to
Trobiand Properties, Ltd., a former shareholder of Kent Toys, Inc., as
additional payment for the merger which occurred on March 15, 1996. The
trading value of the shares was $.05 per share on the date of issuance. The
shares were issued without registration in reliance on the exemption from
registration provided by 4(2) of the Securities Act.
On April 6, 1999, the Company issued 25,000 shares of common stock to
Frank T. Costanzo in a private placement transaction. The trading value was
$.40 per share on the date of issuance, and Mr. Costanzo paid the Company a
total of $10,000 for the shares. The shares were issued without registration in
reliance on the exemption from registration provided by 4(2) of the Securities
Act.
Also, on April 6, 1999, the Company issued 50,000 shares of common
stock to Ehad Ramon in a private placement transaction. The trading value was
$.40 per share on the date of issuance, and Mr. Ramon paid the Company a total
of $20,000 for the shares. The shares were issued without registration in
reliance on the exemption from registration provided by 4(2) of the Securities
Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The following indemnification provision will be contained in any future
Employment Agreements of executive officers.
"Indemnification. Employer shall indemnify Employee and hold Employee
harmless from liability for acts or decisions made by Employee while performing
services for Employer to the greatest extent permitted by applicable law.
Employer shall use its best efforts to obtain coverage for Employee under any
insurance policy now in force or hereafter obtained during the term of this
Agreement insuring Officers and Directors of Employer against such Liability."
26
<PAGE> 27
PART F/S
FINANCIAL STATEMENTS
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Independent Auditors' Report F-2
Independent Accountant's Report on Interim Unaudited
Financial Information F-3
Consolidated Balance Sheets at June 30, 1999 and 1998 and
December 31, 1999 and 1998 (Unaudited) F-4
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
June 30, 1999, 1998 and 1997 and for the Six Months Ended
December 31, 1999 (Unaudited) F-5
Consolidated Statements of Operations for the Years Ended June 30, 1999, 1998
and 1997 and for the Quarters Ended December 31, 1999 and 1998 (Unaudited) and
for the Six Months Ended December 31, 1999 and 1998
(Unaudited) F-6
Consolidated Statements of Cash Flows for the Years Ended June 30, 1999, 1998
and 1997 and for the Six Months Ended December 31, 1999 and 1998
(Unaudited) F-7
Notes to Consolidated Financial Statements F-8-F-11
</TABLE>
F-1
<PAGE> 28
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders
LA Group, Inc. & Subsidiaries
Rochester, New York
We have audited the accompanying consolidated balance sheets of LA
Group, Inc. & Subsidiaries (A Delaware Corporation) as of June 30, 1999 and
1998, and the related consolidated statements of operations, changes in
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended June 30, 1999. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 presentation of the financial
statements. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of LA Group,
Inc. & Subsidiaries as of June 30, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
June 30, 1999, in conformity with generally accepted accounting principles.
Rotenberg & Company, LLP
Rochester, New York
January 24, 2000
F-2
<PAGE> 29
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors
and Stockholders
LA Group, Inc. & Subsidiaries
Rochester, New York
We have reviewed the accompanying consolidated balance sheets of LA
Group, Inc. & Subsidiaries (A Delaware Corporation) as of December 31, 1999 and
1998 and the related statements of operations, changes in stockholders' equity,
and cash flows for the six months ended December 31, 1999 and 1998 in accordance
with standards established by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of LA Group, Inc. & Subsidiaries.
A review consists principally of inquiries of company personnel and
analytical procedures applied to the financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements in order for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the balance sheets as of June 30, 1999 and 1998, and the
related statements of operations, changes in stockholders' equity and cash flows
for each of the three years in the period ended June 30, 1999, and in our report
dated January 24, 2000, we expressed an unqualified opinion on those financial
statements.
Rotenberg & Company, LLP
Rochester, New York
January 26, 2000
F-3
<PAGE> 30
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
=============================================================================================================================
(AUDITED) (UNAUDITED)
JUNE 30, DECEMBER 31,
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 16,549 $ 85 $ 20,773 $
Accounts Receivable 10,308 38,283 $ 7,967
Marketable Securities 35,000 50,000
Inventory 4,001 895 11,388 1,409
Due from Officer 10,334 40,971 10,052
Prepaid Expenses 600
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 76,792 980 161,415 19,428
PROPERTY AND EQUIPMENT - Net of Accumulated Depreciation 3,870 163 6,233
INTANGIBLE ASSETS - Net of Accumulated Amortization 95,411 103,405 106,673 99,305
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 176,073 $ 104,548 $ 274,321 $ 118,733
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts Payable $ 66,417 $ 54,401 $ 59,205 $ 57,207
Accrued Expenses 20,393 4,041 22,678 3,134
Accrued Taxes 17,781 11,019 22,497 11,498
Due to Officer 14,412 9,446 24,263
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 104,591 83,873 113,826 96,102
- -----------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock: $.001 Par; 20,000,000 Shares Authorized,
15,277,938 Shares Issued and Outstanding 15,278 15,203 15,278 15,203
Additional Paid In Capital 165,630 135,705 165,630 135,705
Accumulated Deficit (109,426) (130,233) (20,413) (128,277)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 71,482 20,675 160,495 22,631
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 176,073 $ 104,548 $ 274,321 $ 118,733
=============================================================================================================================
</TABLE>
F-4
<PAGE> 31
<PAGE> 32
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
=================================================================================================================================
Additional
Number Par Common Paid In Accumulated Stockholders'
of Shares Value Stock Capital Deficit Equity
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - JULY 1, 1996 13,662,938 -- 13,663 73,466 (30,352) 56,777
Common Stock Issued 300,000 0.001 300 14,700 -- 15,000
Net Loss -- -- -- -- (81,307) (81,307)
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE -
JUNE 30, 1997 13,962,938 $ 13,963 88,166 (111,659) (9,530)
Common Stock Issued 300,000 0.001 300 14,700 -- 15,000
Common Stock Issued 150,000 0.001 150 7,350 -- 7,500
Common Stock Issued 790,000 0.001 790 25,489 -- 26,279
Net Loss -- -- -- -- (18,574) (18,574)
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE -
JUNE 30, 1998 15,202,938 -- 15,203 135,705 (130,233) 20,675
Common Stock Issued 75,000 0.001 75 29,925 -- 30,000
Net Income -- -- -- -- 20,807 20,807
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE -
JUNE 30, 1999 15,277,938 -- 15,278 165,630 (109,426) 71,482
Net Income -- -- -- -- 2,900 2,900
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE -
DECEMBER 31, 1999 15,277,938 $ -- $ 15,278 $165,630 $(106,526) $ 74,382
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-5
<PAGE> 33
<TABLE>
<CAPTION>
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
CONSOLIDATED STATEMENTS OF OPERATIONS
---------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
(AUDITED) SIX MONTHS Six Months
YEARS ENDED QTR ENDED QTR Ended ENDED Ended
1999 1998 1997 DEC. 31, 1999 Dec. 31, 1998 DEC. 31, 1999 Dec. 31, 1998
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 129,050 $ 48,311 $ 72,812 $ 125,551 $ 10,915 $ 209,754 $ 16,476
- ------------------------------------------------------------------------------------------------------------------------------------
COST OF GOODS SOLD 25,970 13,239 38,658 17,086 978 32,423 1,110
- ------------------------------------------------------------------------------------------------------------------------------------
Gross Profit 103,080 35,072 34,154 108,465 9,937 177,331 15,366
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Amortization 8,453 5,040 638 2,269 2,130 4,288 4,260
Depreciation 143 75 -- 443 -- 586 --
Interest 1,119 1,110 213 136 314 314 624
Legal and Accounting 9,701 10,810 10,280 11,340 -- 22,608 --
Litigation Contingency 16,500 -- -- -- -- -- --
Other Expenses 45,214 35,636 103,254 41,617 3,618 59,877 8,041
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 81,130 52,671 114,385 55,805 6,062 87,673 12,925
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Taxes 21,950 (17,599) (80,231) 52,660 3,875 89,658 2,441
Provision for Income Taxes 1,143 975 1,076 645 975 645 975
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 20,807 $ (18,574) $ (81,307) $ 52,015 $ 2,900 $ 89,013 $ 1,466
====================================================================================================================================
EARNINGS PER SHARE
====================================================================================================================================
Income (Loss) Per
Common Share $ 0.0014 $ (0.0013) $ (0.0059) $ 0.0034 $ 0.0002 $ 0.0058 $ 0.0001
Weighted Average Number of
Common Shares Outstanding 15,220,404 14,679,760 13,811,705 15,220,404 14,679,760 15,220,404 14,679,760
====================================================================================================================================
</TABLE>
F-6
<PAGE> 34
<PAGE> 35
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
<TABLE>
<CAPTION>
================================================================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================================================================
Unaudited
YEARS ENDED Six Months Ended
JUNE 30, December 31,
1999 1998 1997 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 20,807 $(18,574) $(81,307) $ 2,900 $ 1,466
Adjustments to Reconcile Net Income (Loss)
To Net Cash Flows from Operating Activities:
Amortization 8,453 5,040 638 2,130 4,260
Depreciation 143 75 -- -- --
Changes in Assets and Liabilities:
Accounts Receivable (10,308) -- -- (27,975) (7,967)
Inventory (3,106) 5,723 (1,598) (7,387) (514)
Prepaid Expenses (600) -- -- 600 --
Accounts Payable 12,016 (2,629) 32,018 (7,212) 2,806
Accrued Expenses 16,352 1,804 2,075 2,285 (417)
Accrued Taxes 6,762 5,960 3,011 4,716 479
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 50,519 (2,601) (45,163) (29,943) 113
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Marketable Securities (35,000) -- -- (15,000) --
Acquisition of Property and Equipment (3,850) (238) -- (2,363) 163
Acquisition of Intangible Assets (459) (40,482) (2,561) (13,392) (160)
Due To/From Officer (24,746) (5,587) 32,870 (21,191) (201)
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES (64,055) (46,307) 30,309 (51,946) (198)
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Common Stock 30,000 48,779 15,000 -- --
- --------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS 16,464 (129) 146 (81,889) (85)
Cash and Cash Equivalents - Beginning of Year 85 214 68 16,549 85
- --------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 16,549 $ 85 $ 214 $(65,340) $ --
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
Interest Paid $ -- $ -- $ -- $ -- $ --
Income Taxes Paid $ -- $ -- $ -- $ -- $ --
- --------------------------------------------------------------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of Common Stock in Exchange
for Intangible Assets $ -- $23,720 $ -- $ -- $ --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-7
<PAGE> 36
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE A - SUMMARY OF TRANSACTION SEGMENT DATA, GEOGRAPHIC INFORMATION
AND SIGNIFICANT CUSTOMERS
The corporation operates in two industry segments and
generates revenue from customers throughout the United States.
LA Group, Inc. was formed on February 29, 1996 under the laws
of the State of Delaware. The company has since merged with
other companies as well as acquired the stock of other
companies. The company is authorized to issue 20,000,000
shares of common stock $.001 par value. The company is also
authorized to issue 2,000,000 shares of preferred stock.
There were no preferred shares issued or outstanding at
December 31, 1999. The company is primarily engaged in
retail sales of general merchandise and consumer goods.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The corporation maintains its books and prepares its financial
statements on the accrual basis of accounting.
The accompanying unaudited interim financial statements
reflect all adjustments of a normal and recurring nature which
are, in the opinion of management, necessary to present fairly
the financial position, results of operations and cash flows
of the Company for the interim periods presented. The results
of operations for these periods are not necessarily comparable
to, or indicative of, results of any other interim period or
for the fiscal year as a whole.
USE OF 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 expense during the
reporting period. Actual results can differ from those
estimates.
CONCENTRATIONS OF CREDIT RISK\
Financial instruments which potentially expose the Corporation
to significant concentrations of credit risk consist
principally of bank deposits. Cash is placed primarily in high
quality short term interest bearing financial instruments.
Beginning in January 1999, 30.3% of the revenue recorded by
the Company for fiscal year ending June 30, 1999 was derived
from one customer. In addition, for the six months ended
December 31, 1999, 71.7% of revenue was derived from this same
customer. The Company had no other major customers.
F-8
<PAGE> 37
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the LA Group and its wholly or majority owned subsidiaries.
All significant inter-company balances and transactions have
been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include time deposits, certificates
of deposit, and all highly liquid debt instruments with
original maturities of three months or less. The company
maintains cash and cash equivalents at financial institutions
that periodically may exceed federally insured amounts.
- continued -
F-9
<PAGE> 38
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
MARKETABLE SECURITIES
The Company accounts for marketable securities in accordance
with the provisions of Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investments in Debt
and Equity Securities" (SFAS 115).
Under SFAS 115, debt securities and equity securities that
have readily determinable fair values are to be classified in
three categories:
HELD TO MATURITY - the positive intent and ability to
hold to maturity. Amounts are reported at amortized
cost, adjusted for amortization of premiums and
accretion of discounts.
TRADING SECURITIES - bought principally for purpose
of selling them in the near term. Amounts are
reported at fair value, with unrealized gains and
losses included in earnings.
AVAILABLE FOR SALE - not classified in one of the
above categories. Amounts are reported at fair value,
with unrealized gains and losses excluded from
earnings and reported separately as a component of
shareholders' equity.
Marketable securities consist of common stock warrants with an
aggregate cost, based on specific identification, of $35,000
which approximates fair value as of June 30, 1999. All of the
Company's securities are classified as available for sale
securities.
INVENTORY
Inventory is stated at the lower of cost or market using the
first-in, first-out method.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost, less accumulated
depreciation computed using the straight line method over the
estimated useful lives as follows:
Computer Equipment 5 - 7 Years
Maintenance and repairs are charged to expense. The cost of
the assets retired or otherwise disposed of and the related
accumulated depreciation are removed from the accounts.
F-10
<PAGE> 39
TRADEMARKS
Trademarks are carried at cost and are amortized using the
straight-line method over the estimated useful lives, not to
exceed 10 years from the date of issuance of the trademark.
GOODWILL
Goodwill results from the excess of the fair market value of
assets acquired over the purchase price. Goodwill is carried
at cost and is amortized using the straight line method over
15 years.
- continued -
F-11
<PAGE> 40
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
NET INCOME PER COMMON SHARE
Net income (loss) per common share is computed in accordance
with SFAS No. 128, "Earnings Per Share," by dividing income
available to common stockholders by the weighted average
number of common shares outstanding for each period.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS
No. which requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of
such assets and liabilities. This method utilizes enacted
statutory tax rates in effect for the year in which the
temporary differences are expected to reverse and gives
immediate effect to changes in income tax rates upon
enactment. Deferred tax assets are recognized, net of any
valuation allowance, for temporary differences and net
operating loss and tax credit carry forwards. Deferred income
tax expense represents the change in net deferred assets and
liability balances. The Corporation had no material deferred
tax assets or liabilities for the periods presented.
PROVISION FOR INCOME TAXES
Provision for income taxes consisted of state franchise taxes
due on the corporation and subsidiaries. No federal tax was
provided for due to the availability of net operating losses.
NOTE C - BUSINESS SEGMENTS
The Company operates in two principal business segments.
Through its wholly owned subsidiary Seen on TV, Inc., the
Company delivers products directly to the consumer via its
internet website. (Segment I) The Company is also engaged in
website hosting and development. (Segment II)
Information on the Company's current business segments was as
follows:
<TABLE>
<CAPTION>
=================================================================================================================
Years Ended June 30, Six Months Ended
1999 1998 1997 12/31/99 12/31/98
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEGMENT I
Sales $ 64,025 $ -- $ -- $ 66,315 $ --
Cost of Sales 24,175 -- -- 32,423 --
-----------------------------------------------------------------------------------------------------------------
Gross Profit $ 39,850 $ -- $ -- $ 33,892 $ --
Expenses 36,903 -- -- 42,705 --
-----------------------------------------------------------------------------------------------------------------
</TABLE>
F-12
<PAGE> 41
<TABLE>
<S> <C> <C> <C> <C> <C>
Net Income $ 2,947 $ -- $ -- $ (8,813) $ --
=================================================================================================================
SEGMENT II
Sales $ 58,673 $ -- $ -- $153,643 $ --
Cost of Sales -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------
Gross Profit $ 58,673 $ -- $ -- $153,643 $ --
Expenses 28,612 -- -- 57,650 --
-----------------------------------------------------------------------------------------------------------------
Net Income $ 58,061 $ -- $ -- $ 95,993 $ --
=================================================================================================================
</TABLE>
F-13
<PAGE> 42
LA GROUP, INC. & SUBSIDIARIES
(A DELAWARE CORPORATION)
ROCHESTER, NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and consisted of
the following:
<TABLE>
<CAPTION>
=================================================================================================================
June 30, 1999 1998
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computer Equipment $ 4,013 $ 238
Less: Accumulated Depreciation 143 75
-----------------------------------------------------------------------------------------------------------------
Net Property and Equipment $ 3,870 $ 163
=================================================================================================================
</TABLE>
Depreciation expense for the years ended June 30, 1999 and 1998 was
$143 and $-0-, respectively.
NOTE E - INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
=================================================================================================================
June 30, 1999 1998
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Goodwill $ 95,145 $ 95,145
Trademarks 15,382 15,382
Other 3,275 2,875
-----------------------------------------------------------------------------------------------------------------
$ 113,802 $ 113,402
Less: Accumulated Amortization 18,391 9,997
-----------------------------------------------------------------------------------------------------------------
Net Intangible Assets $ 95,411 $ 103,405
=================================================================================================================
</TABLE>
Amortization expense for the years ended June 30, 1999 and 1998 was
$8,453 and $5,040, respectively.
NOTE F - CONTINGENCIES
The company has been named a defendant in a lawsuit. While the
company may prevail, it is possible that the company may be liable
for the amount of the claim. The company believes that in the event
the outcome is unfavorable, the amount can be settled for
approximately $16,500. Accordingly, this amount has been recorded in
the accompanying financial statements.
NOTE G - SUBSEQUENT EVENTS
In January, 2000, the Company entered into an agreement with an
unrelated
F-14
<PAGE> 43
entity to acquire the domain name "As Seen on TV.Com" for $5 million.
The consideration includes cash of $25,000 and a non-interest bearing
promissory note of $4,975,000 with payments due over the next 15
months. The note is collateralized by 2.1 million shares of company
stock and the domain name.
F-15
<PAGE> 44
PART III
ITEM 1. INDEX TO EXHIBITS.
EXHIBIT NUMBER DESCRIPTION
3 (i) Articles of Incorporation
3 (ii) Bylaws
4 Copy of Stock Certificate
9 Voting Trust Agreement - N/A
10 Material Contracts - N/A
11 Statement re: Computation of Earnings - see financials
16 Letter on Change of Certifying Accountant - N/A
21 Subsidiaries of the Registrant
24 Power of Attorney - N/A
27 Financial Data Schedule
99 Additional Exhibits - N/A
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
LA Group, Inc. (Registrant)
By: Daniel M. Fasano Date: January 31, 2000
- ---------------------------------------------
Daniel M. Fasano: Director, Chairman
and Chief Executive Officer
45
<PAGE> 45
Exhibit Index
-------------
EXHIBIT 3
(i) Articles of Incorporation
(ii) Bylaws
EXHIBIT 4
Copy of stock certificates
EXHIBIT 9
N/A
EXHIBIT 10
N/A
EXHIBIT 11
See Financial Statements
EXHIBIT 16
N/A
EXHIBIT 21
Wholly owned subsidiaries
EXHIBIT 24
N/A
EXHIBIT 27
Financial Data Schedule
EXHIBIT 99
N/A
<PAGE> 1
Exhibit 3(i)
ARTICLES OF INCORPORATION
OF
THE L.A. GROUP, INC.
The undersigned natural, adult person, acting as incorporator of a
corporation (hereinafter usually referred to as the "Corporation") pursuant to
the provisions of the Delaware Corporation Law, hereby adopts the following
Articles of Incorporation for said Corporation:
ARTICLE I
Name
The name of the Corporation shall be The L.A. Group, Inc.
ARTICLE II
Duration
The period of duration of the Corporation shall be perpetual.
ARTICLE III
PURPOSE
-------
The purpose for which the Corporation is organized is to transact any
or all lawful business for which corporations may be incorporated pursuant to
the Delaware Corporation Law.
ARTICLE IV
CAPITAL STOCK
-------------
The authorized capital stock of the Corporation shall consist of
20,000,000 shares of common stock with a par value of $0.OOl per share and
2,000,000 shares of preferred stock with a par value of $0.00l per share.
ARTICLE V
<PAGE> 2
PREFERENCES. LIMITATIONS.
-------------------------
AND RELATIVE RIGHTS OF
----------------------
Capital Stock
No share of the common stock shall have any preference over or
limitation in respect to any other share of such common stock. All shares of
common stock shall have equal rights and privileges, including the following:
1. All shares of common stock shall share equally in dividends.
Subject to the applicable provisions of the laws of Delaware,
the Board of Directors of the Corporation may, from time to
time, declare and the Corporation may pay dividends in cash,
property, or its own shares, except when the Corporation is
insolvent or when the payment thereof would render the
Corporation insolvent or when the declaration or payment
thereof would be contrary to any restrictions contained in
these Articles of Incorporation. When any dividend is paid or
any other distribution is made, in whole or in part, from
sources other than unreserved and unrestricted earned surplus,
such dividend or distribution shall be identified as such and
the source and amount per share paid from each source shall be
disclosed to the stockholder receiving the same concurrently
with the distribution thereof and to all other stockholders
not later than six months after the end of the Corporation's
fiscal year during which such distribution was made.
2. All shares of common stock shall share equally in
distributions in partial liquidation. Subject to the
applicable provisions of the laws of Delaware, the Board of
Directors of the Corporation may distribute, from time to
time, to its stockholders in partial liquidation, out of
stated capital or capital surplus of the Corporation, a
portion of its assets in cash or property, except when the
Corporation is insolvent or when such distribution would
render the Corporation insolvent. Each such distribution, when
made, shall be identified as a distribution in partial
liquidation, out of stated capital or capital surplus, and the
source and amount per share paid from Corporation each source
shall be disclosed to all stockholders of the concurrently
with the distribution thereof. Any such distribution may be
made by the Board of Directors from stated capital without the
affirmative vote of any stockholders of the Corporation.
3. Each outstanding share of common stock shall be entitled to
one vote at stockholders' meetings, either in person or by
proxy.
(b) The designations, powers, rights, preferences,
qualifications, restrictions and limitations of the
preferred stock shall be established from time to
time by the Corporation's Board of Directors, in
accordance with the Delaware Corporation Law.
(c) Cumulative voting shall not be allowed in elections
of directors or for any purpose.
<PAGE> 3
2. No holders of shares of common stock of the Corporation shall
be entitled, as such, to any preemptive or preferential right
to subscribe to any unissued stock or any other securities
which the Corporation may now or hereafter be authorized to
issue. The Board of Directors of the Corporation, however, in
its discretion by resolution, may determine that any unissued
securities of the Corporation shall be offered for
subscription solely to the holders of common stock of the
Corporation, or solely to the holders of any class or classes
of such stock, which the Corporation may now or hereafter be
authorized to issue, in such proportions based on stock
ownership as said board in its discretion may determine.
3. The Board of Directors may restrict the transfer of any of the
Corporation's stock issued by giving the Corporation or any
stockholder "first right of refusal to purchase" the stock, by
making the stock redeemable, or by restricting the transfer of
the stock under such terms and in such manner as the directors
may deem necessary and as are not inconsistent with the laws
of this State. Any stock so restricted must carry a
conspicuous legend noting the restriction and the place where
such restriction may be found in the records of the
Corporation.
4. The judgment of the Board of Directors as to the adequacy of
any consideration received or to be received for any shares,
options, or any other securities which the Corporation at any
time may be authorized to issue or sell or otherwise dispose
of shall be conclusive in the absence of fraud, subject to the
provisions of these Articles of Incorporation and any
applicable law.
ARTICLE VI
PLACE OF BUSINESS
-----------------
The registered office of the Corporation will be:
Three Christina Centre
201 North Walnut Street
Wilmington, Delaware 19801
NEW CASTLE COUNTY
The name of the Corporation's initial registered agent at its office
shall be:
<PAGE> 4
THE COMPANY CORPORATION
ARTICLE VII
DIRECTORS
---------
The affairs of the Corporation shall be governed by a board of not less
than one (1) director, who shall be elected in accordance with the Bylaws of the
Corporation. Subject to such limitation, the number of directors shall be fixed
by or in the manner provided in the Bylaws of the Corporation, as may be amended
from time to time. The organization and conduct of the board shall be in
accordance with the following:
1. The name and address of the initial Director, who shall hold
office until the first annual meeting of the stockholders of the
Corporation or until his successor shall have been elected and
qualified, is:
NAME ADDRESS
------------------------------------------------------------------
Anthony Biondi 15461/2 West Ridge Road
Rochester, NY 14615
2. The directors of the Corporation need not be residents of Delaware
and shall not be required to hold shares of the Corporation's
capital stock.
3. Meetings of the Board of Directors, regular or special, may be
held within or without Delaware upon such notice as may be
prescribed by the Bylaws of the Corporation. Attendance of a
director at a meeting shall constitute a waiver by him of notice
of such meeting unless he attends only for the express purpose of
objecting to the transaction of any business thereat on the ground
that the meeting is not lawfully called or convened.
4. A majority of the number of directors at any time constituting the
Board of Directors shall constitute a quorum for the transaction
of business.
5. By resolution adopted by a majority of the Directors at any time
constituting the Board of Directors, the Board of Directors may
designate two or more directors to constitute an Executive
Committee or one or more other committees each of which shall have
and may exercise, to the extent permitted by law or in such
resolution, all the authority of the Board of Directors in the
management of the Corporation; but the designation of any such
committee and the delegation of
<PAGE> 5
authority thereto shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed on
it or him by law.
6. Any vacancy in the Board of Directors, however caused or created,
may be filled by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the Board of
Directors. A director elected to fill a vacancy shall be elected
for the unexpired term of his predecessor in office and until his
successor is duly elected and qualified.
ARTICLE VIII
Officers
The officers of the Corporation shall be prescribed by the Bylaws of
the Corporation.
ARTICLE IX
MEETINGS OF STOCKHOLDERS
------------------------
Meetings of the stockholders of the Corporation shall be held at such
place within or without Delaware and at such times as may be prescribed in the
Bylaws of the Corporation. Special meetings of the stockholders of the
Corporation may be called by the President of the Corporation, the Board of
Directors, or by the record holder or holders of at least ten percent (107.) of
all shares entitled to vote at the meeting. At any meeting of the stockholders,
except to the extent otherwise provided by law, a quorum shall consist of a
majority of the shares entitled to vote at the meeting; and, if a quorum is
present, the affirmative vote of the majority of shares represented at the
meeting and entitled to vote thereat shall be the act of the stockholders unless
the vote of a greater number is required by law.
ARTICLE X
Voting
When, with respect to any action to be taken by stockholders of this
Corporation, the Delaware Corporation Law requires the affirmative vote of the
holders of more than a majority of the outstanding shares entitled to vote
thereon, or of any class or series, such action may be taken by the affirmative
vote of the holders of a majority of the outstanding shares entitled to vote on
such action.
<PAGE> 6
ARTICLE XI
Bylaws
The initial Bylaws of the Corporation shall be adopted by its Board of
Directors. Subject to repeal or change by action of the stockholders, the power
to alter, amend, or repeal the Bylaws or to adopt new Bylaws shall be vested in
the Board of Directors.
ARTICLE XII
Transactions with Directors and
OTHER INTERESTED PARTIES
------------------------
No contract or other transaction between the Corporation and any other
corporation, whether or not a majority of the shares of the capital stock of
such other corporation is owned by the Corporation, and no act of the
Corporation shall in any way be affected or invalidated by the fact that any of
the directors of the Corporation are pecuniary or otherwise interested in, or
are directors or officers of, such other corporation. Any director of the
corporation, individually, or any firm with which such director is affiliated
may be a party to or may be pecuniary or otherwise interested in any contract or
transaction of the Corporation; provided, however, that the fact that he or such
firm is so interested shall be disclosed or shall have been known to the Board
of Directors of the Corporation, or a majority thereof, at or before the
entering into such contract or transaction; and any director of the Corporation
who is also a director or officer of such other corporation, or who is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation which shall authorize such
contract or transaction, with like force and effect as if he were not such
director or officer of such other corporation or not so interested
ARTICLE XIII
LIMITATION OF DIRECTOR LIABILITY
--------------------------------
AND INDEMNIFICATION
-------------------
No director of the Corporation shall have liability to the Corporation
or to its stockholders or to other security holders for monetary damages for
breach of fiduciary duty as a director; provided, however, that such provisions
shall not eliminate or limit the liability of a director to the Corporation or
to Its shareholders or other security holders for monetary damages for: (i) any
breach of the director's duty of loyalty to the Corporation or to its
shareholders or other security holders; (ii) acts or omissions of the director
not in good faith or which involve intentional misconduct or a knowing violation
of the law by such
<PAGE> 7
director; (iii) acts by such director as specified by the Delaware Corporation
Law; or (iv) any transaction from which such director derived an improper
personal benefit.
No officer or director shall be personally liable for any injury to
person or property arising out of a tort committed by an employee of the
Corporation unless such officer or director was personally involved in the
situation giving rise to the injury or unless such officer or director committed
a criminal offense. The protection afforded in the preceding sentence shall not
restrict other common law protections and rights that an officer or director may
have.
The word "director" shall include at least the following, unless
limited by Delaware law: an individual who is or was a director of the
Corporation and an individual who, while a director of a Corporation is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee or agent of any other foreign or domestic corporation or of any
partnership, joint venture, trust, other enterprise or employee benefit plan. A
director shall be considered to be serving an employee benefit plan at the
Corporation's request if his duties to the Corporation also impose duties on or
otherwise involve services by him to the plan or to participants in or
beneficiaries of the plan. To the extent allowed by Delaware law, the word
"director" shall also include the heirs and personal representatives of all
directors.
This Corporation shall be empowered to indemnify its officers
and directors to the fullest extent provided by law, including but not
limited to the provisions set forth in the Delaware Corporation Law, or
any successor provision.
ARTICLE XIII
INCORPORATOR
------------
The name and address of the incorporator of the Corporation is as
follows:
Name Address
----------------------------------------------------------------------
Anthony Biondi 1546 1/2 West Ridge Road
Rochester, NY 14615
IN WITNESS WHEREOF, the undersigned incorporator has hereunto affixed
his signature on the ______________ day of February, 1996.
------------------------
Anthony Biondi
<PAGE> 1
EXHIBIT 3 (ii)
BYLAWS
OF
THE L.A. GROUP, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. OFFICES:
- --------------------
The principal office of the Corporation shall be at 120 Dean Road,
Spencerport, New York 14559, and the Corporation shall have other offices at
such places as the Board of Directors may from time to time determine.
ARTICLE II
STOCKHOLDER' S MEETINGS
-----------------------
SECTION 1. PLACE:
- ------------------
The place of stockholders' meetings shall be the principal office of
the Corporation unless some other place shall be determined and designated from
time to time by the Board of Directors.
SECTION 2. ANNUAL MEETING:
- ---------------------------
The annual meeting of the stockholders of the Corporation for the
election of directors to succeed those whose terms expire, and for the
transaction of such other business as may properly come before the meeting,
shall be held each year on a date to be determined by the Board of Directors
beginning in the year 1996. If the annual meeting of the stockholders be not
held, or if held and directors shall not have been elected for any reason, then
the election of directors may be held at any meeting of stockholders thereafter
called.
SECTION 3. SPECIAL MEETINGS:
- -----------------------------
Special meetings of the stockholders for any purpose or purposes may be
called by the President, the Board of Directors, or the holders of ten percent
(10%) or more of all the shares entitled to vote at such meeting, by the giving
of notice in writing as hereinafter described.
SECTION 4. VOTING:
- -------------------
<PAGE> 2
At all meetings of stockholders, voting may be viva voce; but any
qualified voter may demand a stock vote, whereupon such vote shall be taken by
ballot and the Secretary shall record the name of the stockholder voting, the
number of shares voted, and, if such vote shall be by proxy, the name of the
proxy holder. Voting may be in person or by proxy appointed in writing, manually
signed by the stockholder or his duly authorized attorney--in--fact. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided therein.
Each stockholder shall have such rights to vote as the Articles of
Incorporation provide for each share of stock registered in his name on the
books of the Corporation, except where the transfer books of the Corporation
shall have been closed or a date shall have been fixed as a record date, not to
exceed, in any case, fifty (50) days preceding the meeting, for the
determination of stockholders entitled to vote. The Secretary of the Corporation
shall make, at least ten (10) days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each, which list, for a period of ten (10) days prior
to such meeting, shall be kept on file at the principal office of the
Corporation and shall be subject to inspection by any stockholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
stockholder during the whole time of the meeting.
SECTION 5. ORDER OF BUSINESS:
- ------------------------------
The order of business at any meeting of stockholders shall be as
follows:
1. Calling the meeting to order.
2. Calling of roll.
3. Proof of notice of meeting.
4. Report of the Secretary of the stock represented at the
meeting and the existence or lack of a quorum.
5. Reading of minutes of last previous meeting and disposal of
any unapproved minutes.
6. Reports of officers.
7. Reports of committees.
8. Election of directors if appropriate.
<PAGE> 3
9. Unfinished business
10. New business.
11. Adjournment.
12. To the extent that these Bylaws do not apply, Roberts' Rules
of Order shall prevail.
SECTION 6. NOTICES:
- --------------------
Written or printed notice stating the place, day, and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) nor more than fifty
(50) days before the date of the meeting, either personally or by mail, by or at
the direction of the President, the Secretary, or the officer or persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail addressed to the shareholder at his address as it
appears on the stock transfer books of the Corporation, with postage thereon
prepaid.
SECTION 7. QUORUM:
- -------------------
A quorum at any annual or special meeting shall consist of the
representation in person or by proxy of a majority in number of shares of the
outstanding capital stock of the Corporation entitled to vote at such meeting.
In the event a quorum be not present, the meeting may be adjourned by those
present for a period not to exceed sixty (60) days at any one adjournment; and
no further notice of the meeting or its adjournment shall be required. The
stockholders entitled to vote, present either in person or by proxy at such
adjourned meeting, shall, if equal to a majority of the shares entitled to vote
at the meeting, constitute a quorum, and the votes of a majority of those
present in numbers of shares entitled to vote shall be deemed the act of the
shareholders at such adjourned meeting.
SECTION 8. ACTION BY SHAREHOLDERS WITHOUT A MEETING:
- ----------------------------------------------------
Any action required to be or which may be taken at a meeting of the
shareholders of the Corporation may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
<PAGE> 4
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. ORGANIZATION AND POWERS:
- ------------------------------------
The Board of Directors shall constitute the policy-making or
legislative authority of the Corporation. Management of the affairs, property,
and business of the Corporation shall be vested in the Board of Directors, which
shall consist of not less than one nor more than three members, who shall be
elected at the annual meeting of stockholders by a plurality vote for a term of
one (1) year, and shall hold office until their successors are elected and
qualify. Directors need not be stockholders. Directors shall have all powers
with respect to the management, control, and determination of policies of the
Corporation that are not limited by these Bylaws, the Articles of Incorporation,
or by law, and the enumeration of any power shall not be considered a limitation
thereof.
SECTION 2. VACANCIES:
- ----------------------
Any vacancy in the Board of Directors, however caused or created, shall
be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board, or at a special meeting of the
stockholders called for that purpose. The directors elected to fill vacancies
shall hold office for the unexpired term and until their successors are elected
and qualify.
SECTION 3. REGULAR MEETINGS:
- -----------------------------
A regular meeting of the Board of Directors shall be held, without
other notice than this Bylaw, immediately after and at the same place as the
annual meeting of stockholders or any special meeting of stockholders at which a
director or directors shall have been elected. The Board of Directors may
provide by resolution the time and place for the holding of additional regular
meetings without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS:
- -----------------------------
Special meetings of the Board of Directors may be held at the principal
office of the Corporation, or such other place as may be fixed by resolution of
the Board of Directors for such purpose, at any time on call of the President or
of any member of the Board, or may be held at any time and place without notice,
by unanimous written consent of all the members, or with the presence and
participation of all members at such meeting. A resolution in writing signed by
all the directors shall be as valid and effectual as if it had been passed at a
meeting of the directors duly called, constituted, and held.
SECTION 5. NOTICES:
- --------------------
<PAGE> 5
Notices of both regular and special meetings save when held by
unanimous consent or participation, shall be mailed by the Secretary to each
member of the Board not less than five (5) days before any such meeting and
notices of special meetings may state the purposes thereof. No failure or
irregularity of notice of any regular meeting shall invalidate such meeting or
any proceeding thereat.
SECTION 6. QUORUM AND MANNER OF ACTING:
- ----------------------------------------
A quorum for any meeting of the Board of Directors shall be a majority
of the Board of Directors as then constituted. Any act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. Any action of such majority, although not at a regularly
called meeting, and the record thereof, if assented to in writing by all of the
other members of the Board, shall always be as valid and effective in all
respects as if otherwise duly taken by the Board of Directors.
SECTION 7. EXECUTIVE COMMITTEE:
- --------------------------------
The Board of Directors may by resolution of a majority of the Board
designate two (2) or more directors to constitute an executive committee, which
committee, to the extent provided in such resolution, shall have and may
exercise all of the authority of the Board of Directors in the management of the
Corporation; but the designation of such committee and the delegation of
authority thereto shall not operate to relieve the Board of Directors, or any
member thereof, of any responsibility imposed on it or him by law.
SECTION 8. ORDER OF BUSINESS:
- ------------------------------
The order of business at any regular or special meeting of the Board of
Directors, unless otherwise prescribed for any meeting by the Board, shall be as
follows
1. Reading and disposal of any unapproved minutes.
2. Reports of officers and committees.
3. Unfinished business.
4. New business.
5. Adjournment.
6. To the extent that these Bylaws do not apply, Roberts' Rules
of Order shall prevail.
SECTION 9. REMUNERATION:
- -------------------------
<PAGE> 6
No stated salary shall be paid to directors for their services as such,
but, by resolution of the Board of Directors, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board. Members of special or standing committees may be allowed
like compensation for attending meetings. Nothing herein contained shall be
construed to preclude any director from receiving compensation for serving the
Corporation in any other capacity, subject to such resolutions of the Board of
Directors as may then govern receipt of such compensation.
ARTICLE IV
OFFICERS
SECTION 1. TITLES:
- -------------------
The officers of the Corporation shall consist of a President, one or
more Vice Presidents, a Secretary, and a Treasurer, the last two of which
offices may be combined and held by one person, who shall be elected for one (1)
year by the directors at their first meeting following the annual meeting of
stockholders. Such officers shall hold office until their successors are elected
and qualify. The Board of Directors may appoint from time to time such other
officers as It deems desirable who shall serve during such terms as may be fixed
by the Board at a duly held meeting. The Board, by resolution, shall specify the
titles, duties and responsibilities of such officers.
SECTION 2. PRESIDENT:
- ----------------------
The President shall preside at all meetings of stockholders and, in the
absence of a, or the, Chairman of the Board of Directors, at all meetings of the
directors. He shall be generally vested with the power of the chief executive
officer of the Corporation and shall countersign all certificates, contracts,
and other instruments of the Corporation as authorized by the Board of Directors
or required by law. He shall make reports to the Board of Directors and
stockholders and shall perform such other duties and services as may be required
of him from time to time by the Board of Directors.
SECTION 3. VICE PRESIDENT:
- ---------------------------
The Vice President shall perform all the duties of the President if the
President is absent or for any other reason is unable to perform his duties and
shall have such other duties as the Board of Directors shall authorize or
direct.
SECTION 4. SECRETARY:
- ----------------------
The Secretary shall issue notices of all meetings of stockholders and
directors, shall keep minutes of all such meetings and shall record all
pro-
<PAGE> 7
ceedings. He shall have custody and control of the corporate records and books,
excluding the books of account, together with the corporate seal. He shall make
such reports and perform such other duties as may be consistent with his office
or as may be required of him from time to time by the Board of Directors.
SECTION 5. TREASURER:
- ----------------------
The Treasurer shall have custody of all moneys and securities of the
Corporation and shall have supervision over the regular books of account. He
shall deposit all moneys, securities, and other valuable effects of the
Corporation in such banks and depositories as the Board of Directors may
designate and shall disburse the funds of the Corporation in payment of just
debts and demands against the Corporation, or as they may be ordered by the
Board of Directors, shall render such account of his transactions as may be
required of him by the President or the Board of Directors from time to time and
shall otherwise perform such duties as may be required of him by the Board of
Directors.
The Board of Directors may require the Treasurer to give a bond
indemnifying the Corporation against larceny, theft, embezzlement, forgery,
misappropriation, or any other act of fraud or dishonesty resulting from his
duties as Treasurer of the Corporation, which bond shall be in such amount as
appropriate resolution or resolutions of the Board of Directors may require.
SECTION 6. VACANCIES OR ABSENCES:
- ----------------------------------
If a vacancy in any office arises in any manner, the directors then in
office may choose, by a majority vote, a successor to hold office for the
unexpired term of the officer. If any officer shall be absent or unable for any
reason to perform his duties, the Board of Directors, to the extent not
otherwise inconsistent with these Bylaws, may direct that the duties of such
officer during such absence or inability shall be performed by such other
officer or subordinate officer as seems advisable to the Board.
SECTION 7. COMPENSATION:
- -------------------------
No officer shall receive any salary or compensation for his services
unless and until the Board of Directors authorizes and fixes the amount and
terms of such salary or compensation.
ARTICLE V
STOCK
-----
<PAGE> 8
SECTION 1. CERTIFICATES OF SHARES.
- -----------------------------------
Each holder of stock of the Corporation shall be entitled to a stock
certificate signed by the President or Vice President and also by the Secretary
or an assistant secretary of the Corporation. The certificates of shares shall
be in such form, not inconsistent with the Certificate of Incorporation or
Articles of Incorporation, as shall be prepared or approved by the Board of
Directors. (All certificates shall be prepared or approved by the Board of
Directors). All certificates shall be consecutively numbered. Each certificate
shall state upon its face that the Corporation is organized under the laws of
this state; the name of the person to whom issued; the number and class of
shares; and the designation of the series, if any, which such certificate
represents; the par value of each share represented by the certificate, or a
statement that the shares are without par value. The name of the person owning
the shares represented thereby, with the number of such shares and the date of
issue, shall be entered on the Corporation's books, and no certificate shall be
valid unless it be signed by the President or Vice President and by the
Secretary or an assistant secretary of the Corporation. The seal of the
Corporation affixed to stock certificates may be a facsimile. The signatures of
officers as above described on any such certificate may be a facsimile if the
certificate is countersigned by a transfer agent, or registered by a registrar,
other than the Corporation itself or an employee of the Corporation.
SECTION 2. NEW CERTIFICATES:
- -----------------------------
All certificates surrendered to the Corporation shall be canceled and
no new certificate shall be issued, except to evidence transfer. of stock from
the unissued stock or treasury of the Corporation, or, in the case of a lost
certificate, except upon posting a bond of indemnity in such form and with such
surety or sureties and for such amount as shall be satisfactory to the directors
and upon producing by affidavit or otherwise such evidence of loss or
destruction as the Board may require, until the former certificates for the same
number of shares have been surrendered and canceled.
SECTION 3. TRANSFER OF SHARES:
- -------------------------------
Shares in the capital stock of the Corporation shall be transferred
only on the books of the Corporation by the holder thereof in person, or by his
attorney, upon surrender and cancellation of certificates for a like number of
shares. The delivery of a certificate of stock of this Corporation to a bona
fide purchaser or pledgee for value, together with a written transfer of the
same or a written power of attorney to sell, assign, and transfer the same,
signed by the owner of the certificate, shall be a sufficient delivery to
transfer the title against all persons except the Corporation. No transfer of
stock shall be valid against the Corporation until it shall have been registered
upon the books of the Corporation.
<PAGE> 9
SECTION 4. CLOSING OF TRANSFER BOOKS OR PROVISIONS FOR RECORD DATE:
- -------------------------------------------------------------------
The stock transfer books may be closed by the Board of Directors for a
period not exceeding fifty (50) days prior to any meeting of the stockholders or
prior to the payment of dividends; or the Board of Directors may fix in advance
a day not more than fifty (50) days prior to the holding of any such meeting of
stockholders or payment of dividends as the day as of which stockholders
entitled to notice of and to vote at such meeting or to payment of dividends, as
the case may be, shall be determined; and only stockholders of record on such
day shall be entitled to notice or to vote at such meeting, or to receive
dividends, as the case may be.
SECTION 5. REGULATIONS:
- ------------------------
The Board of Directors shall have power and authority to take all such
rules and regulations as they deem expedient concerning the issue, transfer, and
registration of certificates for shares of the capital stock of the Corporation.
The Board of Directors may appoint a Transfer Agent and a Registrar and may
require all stock certificates to bear the signature of such Transfer Agent or
such Registrar.
SECTION 6. RESTRICTIONS ON STOCK:
- ----------------------------------
The Board of Directors may restrict any stock issued by giving the
Corporation or any stockholder "first right of refusal to purchase" the stock,
by making the stock redeemable or by restricting the transfer of the stock,
under such terms and in such manner as the directors may deem necessary and as
are not inconsistent with the Articles of Incorporation or by law. Any stock so
restricted must carry a stamped legend setting out the restriction or
conspicuously noting the restriction and stating where it may be found in the
records of the Corporation.
ARTICLE VI
DIVIDENDS AND FINANCES
SECTION 1. DIVIDENDS:
- ----------------------
Dividends may be declared by the directors and paid out of any funds
legally available therefor, as may be deemed advisable from time to time by the
Board of Directors of the Corporation. Before declaring any dividends, the Board
of Directors may set aside out of net profits or earned or other surplus such
sums as the Board may think proper as a reserve fund to meet contingencies or
for other purposes deemed proper and to the best interests of the Corporation.
SECTION 2. MONEYS:
- -------------------
<PAGE> 10
The moneys, securities, and other valuable effects of the Corporation
shall be deposited in the name of the Corporation in such banks or trust
companies as the Board of Directors shall designate and shall be drawn out or
removed only as may be authorized by the Board of Directors from time to time.
SECTION 3. FISCAL YEAR:
- ------------------------
Unless and until the Board of Directors by resolution shall determine
otherwise, the fiscal year shall begin on the 1st day of January and end on the
31st day of December, and the first fiscal period shall end December 31, 1995.
ARTICLE VII
SEAL
----
The Board of Directors shall provide a corporate seal which shall be in
the form of a circle and shall have inscribed thereon the name of the
Corporation, and shall be entrusted in the care of the Secretary or such other
officer of the Corporation as the Board of Directors shall designate
ARTICLE VIII
NOTICES
-------
SECTION 1. REQUIREMENTS:
- -------------------------
Whenever a notice shall be required by the statutes of the State of
Delaware or by these Bylaws, such notice may be given in writing by depositing
the same in the United States mails in a postpaid, sealed envelope addressed to
the person for whom such notice is intended to his or her home or other address,
as the same shall appear on the stock transfer books of the Corporation. The
time of mailing shall be deemed to be the time of giving such notice. A waiver
of any notice in writing, signed by a stockholder, director, or officer, whether
before, at, or after the time stated in such waiver for holding a meeting, shall
be deemed the equivalent of duly giving such notice.
SECTION 2. PRESENCE:
- ---------------------
The presence of any officer at a meeting, or the presence of any
stockholder or director at a meeting, unless such presence is for the sole
purpose of objecting to the holding of such meeting on the ground that it is not
duly held or convened, shall in all events be considered a waiver of notice
thereof; and failure to vote thereat shall not defeat the effectiveness of such
waiver.
<PAGE> 11
SECTION 3. RATIFICATION:
- -------------------------
The ratification or approval in writing of the minutes of any meeting
of officers, stockholders, or directors shall have the same force and effect as
if the ratifying or approving officer, director, or stockholder were present in
person at said meeting.
ARTICLE IX
AMENDMENTS
----------
These Bylaws may be altered, amended, or repealed by the Board of
Directors by resolution of a majority of the Board.
ARTICLE X
INDEMNIFICATION
---------------
The Corporation shall indemnify any and all of its directors or
officers, or former directors or officers, or any person who may have served at
its request as a director or officer of another corporation in which this
Corporation owns shares of capital stock or of which it is a creditor and the
personal representatives of all such persons, against expenses actually and
necessarily incurred in connection with the defense of any action, suit, or
proceeding in which they, or any of them, were made parties, or a party, by
reason of being or having been directors or officers or a director or officer of
the Corporation, or of such other corporation, except' in relation to matters as
to which any such director or officer or person shall have been adjudged in such
action, suit, or proceeding to be liable for negligence or misconduct in the
performance of any duty owed to the Corporation. Such indemnification shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled, independently of this Article X, by law, under any Bylaw agreement,
vote of stockholders, or otherwise.
ARTICLE XI
CONFLICTS OF INTEREST
No contract or other transaction of the Corporation with any other
persons, firms or corporations, or in which the Corporation is interested, shall
be affected or invalidated by the fact that any one or more of the directors or
officers of the Corporation is interested in or is a director or officer of such
other firm or corporation; or by the fact that any director or officer of the
<PAGE> 12
Corporation, individually or jointly with others, may be a party to or may be
interested in any such contract or transaction; and relieves every person who
may become a director or officer of the Corporation from any liability that
might otherwise arise by reason of his contracting with the Corporation for the
benefit of himself or any firm or corporation in which he may in any way be
interested.
CERTIFICATE
I do hereby certify that I was Secretary of the meeting of the Board of
Directors duly called and held on the 22nd day of February, 1996, and I do
hereby certify that the above and foregoing Bylaws were duly adopted as the
Bylaws of said Corporation at such meeting.
- ---------------------------------
Daniel J. Fasano
(SEAL)
21710
<PAGE> 1
EXHIBIT 4
- --------------------------------------------------------------------------------
NUMBER LOGO SHARES
01018 L.A. GROUP, INC.
COMMON STOCK CUSIP 501714 10 9
THIS CERTIFIES THAT
S P E C I M E N
is owner of
FULLY PAID AND NON ASSESSABLE SHARES OF COMMON STOCK OF $.001 PAR VALUE EACH
OF
L.A. GROUP, INC.
transferable on the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of Delaware,
and to the Certificate of Incorporation and Bylaws of the Corporation, as now
or hereafter amended. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
DATED: CORPORATE SEAL COUNTERSIGNED
L.A. GROUP, INC. COMPANY OFFICERS
DELAWARE
1977
/s/ Daniel J. Fasano /s/ Anthony Biondi
Secretary President
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 21
WHOLLY OWNED SUBSIDIARIES
LA Acquisitions, Inc.
LA Distribution, Inc.
What-A-Product, Inc.
Seen On TV. Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 20,773
<SECURITIES> 50,000
<RECEIVABLES> 79,254
<ALLOWANCES> 0
<INVENTORY> 11,388
<CURRENT-ASSETS> 161,415
<PP&E> 6,962
<DEPRECIATION> (729)
<TOTAL-ASSETS> 274,321
<CURRENT-LIABILITIES> 113,826
<BONDS> 0
0
0
<COMMON> 15,278
<OTHER-SE> 145,217
<TOTAL-LIABILITY-AND-EQUITY> 274,321
<SALES> 209,754
<TOTAL-REVENUES> 209,754
<CGS> 32,423
<TOTAL-COSTS> 23,243
<OTHER-EXPENSES> 87,359
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 314
<INCOME-PRETAX> 89,658
<INCOME-TAX> 645
<INCOME-CONTINUING> 89,013
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,013
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
