SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________to____________
Commission File Number: 0-21457
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MORGAN COOPER, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2254391
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
214 West 39th Street, Suite 1006, New York, New York 10018
(Address of principal executive offices)
(212) 739-3039
(Issuer's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered under section 12(b)
of the Exchange Act: None
Securities registered under section 12(g)
of the Exchange Act: Common Stock, no par
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Check here if the disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of the
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this 10-KSB
or any amendment to this Form 10-KSB. [ ]
Revenues for the year ending December 31, 1999 were
$671,346.
The aggregate market value of the voting stock held by
non-affiliates of the Company, based upon the closing price of
the common stock on March 31, 2000 was approximately $30,800,000.
As of March 31, 2000, the Company had 13,924,301 shares of common
stock issued and outstanding.
MORGAN COOPER, INC.
FORM 10-KSB
for the fiscal year ended December 31, 1999
TABLE OF CONTENTS
Part I
Item 1. Description of Business
Item 2 Description of Property
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of
Security Holders
Part II
Item 5 Market for the Company's Common Equity and
Related Stockholder Matters
Item 6 Management's Discussion and Analysis and
Plan of Operation
Item 7 Financial Statements
Item 8 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Part III
Item 9 Directors, Executive Officers, Promoters
and Control Persons; Compliance with Section
16(a) of the Exchange Act
Item 10 Executive Compensation
Item 11 Security Ownership of Certain Beneficial
Owners and Management
Item 12 Certain Relationships and Related Transactions
Item 13 Exhibits and Reports on Form 8-K
SIGNATURES
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Background
On November 18, 1999, Goung Hei Investment, Co., Ltd., a
Delaware corporation ("Company"), entered into a Reorganization
and Stock Purchase Agreement, by and among the Company, the
shareholders of Company, who are or will be the owners of
or otherwise represent at least eighty-three (83%) of all the
issued and outstanding common stock and Morgan Cooper, Inc., a
New York corporation. Pursuant to the terms and conditions set
forth in that agreement, 11,637,652 newly-issued shares of the
common stock of the Company, which is a publicly-held corporation
and whose stock traded on the OTC market under "GHIC", were
issued in exchange for all of the issued and outstanding common
stock of Morgan Cooper, Inc. and for the conversion of $500,000
of convertible debt, thereby making Morgan Cooper, Inc. a wholly-
owned subsidiary of the Company. This exchange of shares
represents approximately 83% of the issued and outstanding shares
of common stock of the Company and effectively transfers control
to Morgan Cooper, Inc. At the time of the exchange, the Company
had no assets or liabilities of any kind. Simultaneously, the
sole officer and director of the Company resigned and the
following two directors were elected to replace him: Morgan
Cooper, President, and Zarina Cooper, Vice President, Secretary
and Treasurer.
The Company's Board of Directors approved a resolution to
change the name of the corporation, and on January 27, 2000, the
Company filed with the Secretary of State of Delaware changing
its name from Goung Hei Investment, Co., Ltd., to Morgan Cooper,
Inc.
Current Operations
Morgan and Zarina Cooper are the Company's principal
designers and are involved in all aspects of the design process.
The Morgan Cooper collections are designed to provide the
consumer with fresh and updated looks by combining classic
contemporary styling, in both fabrics and leathers, with special
attention to unique details and fit to appeal to their target
market who desire high quality, designer clothes at competitive
prices. The Company plans to compete with top designers by
offering a comparable line of high fashion and quality products
at prices below its competitors.
The private label business and its substantial contracts
have enabled Mr. Cooper's prior business endeavors to realize
large volume profits with negligible increase in overhead.
Through his existing relationships with the Tsinlien Garments
Co., Ltd. in China, the Company believes it can deliver a broad
range of product lines for men, women and children. This
advantage should afford the Company the ability to compete on the
same level as companies with much greater resources and market
presence.
Design
All of the Company's designing will be done in-house by both
Morgan Cooper and Zarina Cooper, who together have over 25 years'
experience in fashion design. Zarina Cooper will be in charge of
heading up and implementing all aspects of the design process.
She has extensive industry experience in design on every level of
the process and brings the experience in design including but not
limited to European, Asian, and United Stated retail markets.
Her experience, tastes and knowledge of fabrics are reflected in
the Morgan Cooper and private label collections and have greatly
contributed to the success of the Coopers' prior business
venture, Sin by Morgan Cooper, Inc.
Womenswear
The Company expects to use its Morgan Cooper line of
products to target woman's contemporary sportswear and spearhead
the growth of the brand. The Company believes it can find a
successful niche in new classic, exciting, high fashion
sportswear, providing high quality at affordable prices. The
Company also plans to develop this niche market using its private
label. The Company will design, source, market and distribute
womenswear under Morgan Cooper and private label. A collection
consisting of knitwear, dresses, skirts, blouses, jackets, pants,
and accessories will be layered to produce combinations that are
varied in styles and fabrics to produce an affordable, quality,
unique high fashion look.
The Morgan Cooper collections will consist of four seasonal
and one industry presentation. The spring and fall collections
will be presented at industry trade shows. The Company currently
has plans to exhibit and sell its product lines internationally
as well.
Wholesale
The Company intends to distribute its wholesale products
through better department and specialty stores and boutiques.
Private label products will be sold to large established
department chain stores and brand labels. The Company's
customers include J.C. Penney and BMW, who have been customers of
the Coopers' prior business venture. The Company plans to
utilize the private label to develop an immediate presence in
higher end retail locations, which are historically dominated by
more established retail designers.
Internet Retail
The Company also plans to sell its Morgan Cooper products
directly to the consumer via the Internet. The Company has plans
in the near future to expand its Internet presence, which
currently consists of an informational website, to include a full
e-commerce site designed to accept orders and payment from major
credit cards and to have the order flow directly to the
manufacturer for fulfillment. The Company believes that its
optimal customer profile (19-40 middle to upper income) uses and
is comfortable with the Internet and is familiar with E-commerce
marketing of garments and accessories; however, in order to
market and sell products through its website, the Company must
appeal to and acquire consumers who historically have used
traditional means of commerce to purchase goods. The Company
plans to enlist the assistance of an Internet consultant to
assist it in developing and launching its retail website. The
success of the Company's Internet retail sales will depend upon
the acceptance of the Internet as a medium for commerce by
consumers, as well as the Company's ability to develop and
maintain a retail website.
Employees
As of the date of this filing, the Company employs seven
persons in addition to Morgan and Zarina Cooper, and Gary Kotler.
As the Company expands its programs, it intends to hire
additional management personnel, as well additional part time and
full time employees.
(i) The Company's performance is substantially dependent on
the performance of its executive officers. In particular, the
Company's success depends on their ability to design, produce and
market the Company's various clothing lines and products.
(ii) The Company does not carry key person life insurance on
any of its personnel. The loss of the services of any of its
executive officers or other key employees could have a material
adverse effect on the business, results of operations and
financial condition of the Company. The Company's future success
also depends on its ability to retain and attract highly
qualified technical and managerial personnel, if and when the
need for such personnel arises.
(iii) There can be no assurance that the Company will be
able to retain its key managerial and technical personnel or that
it will be able to attract and retain additional highly qualified
technical and managerial personnel in the future. The inability
to attract and retain the managerial personnel necessary to
support the growth of the Company's business, due to, among other
things, a large increase in the wages demanded by such personnel,
could have a material adverse effect upon the Company's business,
results of operations and financial condition.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's current principal executive offices and
showroom are located at 214 West 39th Street, Suite 1006, New
York, New York 10018. The Company has a sub-lease agreement in
place, at a monthly rate of $3,733 per month, expiring December
31, 2003.
On February 15, 2000, the Company entered into a two-year
lease for space for a design studio with monthly rent of $5,000
per month. On April 1, 2000, the Company entered into a sub-
lease agreement for its new principal executive office and
showroom space located at 350 Fifth Avenue, Suite 1222, New York,
New York 10118. The sub-lease agreement calls for a lease rate
of $6,000 per month and expires on October 31, 2001.
After relocating its principal executive offices to the
Fifth Avenue location, the Company intends to us the 39th Street
showroom for the Morgan Cooper women's clothing lines and the
Fifth Avenue showroom for its men's clothing lines.
ITEM 3. LEGAL PROCEEDINGS
As of the date of this filing, and subsequent to the year
ended December 31, 1999, the Company, its wholly owned
subsidiary, Tianjian Garments USA, Inc. and certain of its key
employees have been named as defendants in a lawsuit seeking
compensatory and punitive damages. The suit alleges tortious
interference of contractual relations resulting from the
Company's hiring of two former employees of the plaintiff who
were subject to employment agreements. The Company intends to
vigorously contest the lawsuit, however management is unable at
this time to evaluate the ultimate outcome or whether the
resulting liability, if any, would have a material adverse effect
on the financial condition and results of operations of the
Company. The Company's litigation counsel believes that there is
a likelihood that the case will be dismissed upon the Company's
upcoming motion therefor.
Notwithstanding the foregoing, to the best knowledge of the
officers and directors of the Registrant, neither the Registrant
nor any of its officers or directors are parties to any material
legal proceeding or litigation and such persons know of no other
material legal proceeding or litigation contemplated or
threatened. There are no judgments against the Registrant or its
officers or directors. None of the officers or directors have
been convicted of a felony or misdemeanor relating to securities
or performance in corporate office.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In November of 1999, shareholders of the Company (at that
time known as Goung Hei Investment Co., Ltd.) owning or otherwise
representing not less than seventy-five percent (75%) of the
issued and outstanding shares of common stock of the Company
voted to approve a Reorganization and Stock Purchase Agreement
dated November 18, 1999 (the "Agreement"). Pursuant to the terms
of the Agreement, the Company acquired 100% of the issued and
outstanding stock of Morgan Cooper, Inc. (a New York corporation)
in exchange for 11,637,652 newly-issued shares of the Company's
common stock, resulting in the new shareholders controlling
approximately 83% of the Company. A copy of the Agreement was
filed with the Company's Form 8-K filed on November 24, 1999, and
is available for review.
Notwithstanding the foregoing, for the fourth quarter of the
fiscal year ending December 31, 1999, there were no other matters
submitted to a vote of security holders through the solicitation
of proxies or otherwise.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
The Company's shares of common stock trade on the National
Association of Securities Dealers' OTC Bulletin Board under the
symbol "MCII". The following table sets forth the range of high
and low daily closing prices of the Company's common stock per
quarter as provided by NASDAQ Trading and Marketing Services
(which reflect inter-dealer prices without retail mark-up,
mark-down or commission and may not necessary represent actual
transactions).
Common Stock 2000 1999
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High Low High Low
Quarter ended:
March 31: 8.75 3.00 N/A
June 30: N/A N/A
September 30: N/A N/A
December 31: N/A 5.00 2.25
Shareholders
As of March 31, 2000, there were approximately 4,841
shareholders of record, inclusive of those brokerage firms and/or
clearing houses holding the Company's common shares in "street
name".
Recent Sales of Unregistered Securities
In March, 2000, the Company issued a Private Placement
Memorandum offering up to 1,600,000 shares of the Company's
common stock, with an attached warrant open for three years to
purchase an additional share of common stock, for an offering
price of $3.75 per unit. The offering is being conducted under
Rule 506 of Regulation D of the Securities Act of 1933.
Applicability of Low-Priced Stock Risk Disclosure
Requirements.
The securities of the Company will be considered low-priced
or "designated" securities under rules promulgated under the
Exchange Act. Penny Stock Regulation Broker-dealer practices in
connection with transactions in "Penny Stocks" are regulated by
certain rules adopted by the Securities and Exchange Commission.
Penny stocks generally are equity securities with a price of less
than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the NASDAQ system). The penny
stock rules require a broker-dealer, prior to a transaction in a
penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information
about penny stocks and the risk associated with the penny stock
market. The broker-dealer must also provide the customer with
current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market
value of each penny stock held in the customer's account. In
addition, the penny stock rules generally require that prior to a
transaction in a penny stock, the broker-dealer must make a
written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may
have the effect of reducing the level of trading activity in the
secondary market for a stock that becomes subject to the penny
stock rules. When the Registration Statement becomes effective
and the Company's securities become registered, the stock will
likely have a trading price of less than $5.00 per share and will
not be traded on any national exchanges. Therefore, the
Company's stock will become subject to the penny stock rules and
investors may find it more difficult to sell their securities,
should they desire to do so.
Dividend Matters
The Company has not paid or declared any dividends upon its
common stock since its inception, and does not contemplate or
anticipate paying any dividends in the foreseeable future. Any
future declaration of cash or stock dividends will be at the
discretion of the Board of Directors and will depend upon the
financial condition, capital requirements, earnings, and
liquidity of the Company as well as other factors that the Board
of Directors may deem relevant.
Reports to Shareholders
The Company intends to furnish its shareholders with annual
reports containing audited financial statements and such other
periodic reports as the Company may determine to be appropriate
or as may be required by law. The Company will be required to
comply with periodic reporting, proxy solicitation and certain
other requirements by the Securities Exchange Act of 1934.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF
OPERATION
The following discussion should be read in conjunction with
the Company's financial statements and notes thereto included in
Item 7 of this Form 10-KSB report.
During the next twelve months, the Company plans to design,
manufacturer and distribute "better" women's sportswear under the
Morgan Cooper brand to be distributed through specialty and
"better" department stores, and also to produce private label
goods for retailers such as J.C. Penny, Walmart, K-Mart, Sears
and Target.
In March of 2000, the Company commenced the solicitation of
funds through a Regulation D, Rule 506 private placement
memorandum ("PPM"). The Company intends to raise $6,000,000
through the sale of 1,600,000 shares of the Company's common
stock with an attached three-year warrant to purchase an
additional share of common stock at a price of $3.75. The net
proceeds from the offering will be used as working capital, to
repay current outstanding indebtedness and for general corporate
purposes, and should cover the Company's expenses for the next
twelve months.
Operating Subsidiary
The Company has established a wholly-owned subsidiary called
Tianjin Garment USA, Inc. ("Tianjin"). Tianjin commenced
operations in January 2000. Tianjin will specialize in private
label sales to five major accounts: Walmart, K-Mart, J.C. Penney,
Target and Sears. Tianjin has hired a very strong management
team of George Powell, Michael Russo, James Toth and Michael
Gevertz. In 1999, this management team designed and sold over
$69,000,000 to the five accounts listed above. These individuals
have consistently achieved similar sales figures for the past
eleven years while working for other companies.
George Powell is the chief executive officer and will assume
responsibility for strategic planning of all domestic and
international operations and all sales to J.C. Penney. Michael
Russo is the vice president of sales and will assume
responsibility for sales plans and specific direction of all
Walmart programs. Jimmy Toth is the chief operating officer and
will assume responsibility for all domestic and international
operations and merchandising operations. Michael Gevertz is the
vice president of marketing and will assume responsibility for
sales plans and specific direction of all Sears and Target stores
programs.
Advertising, Sales and Marketing
The Company plans to capitalize on the existing Morgan
Cooper trademark and to develop, promote and maintain a
consistent image through coordination of advertising,
merchandising and promotion, both in retail stores and on the
Internet. The Company plans to advertise in magazines such as
Elle, Vogue and Harper's Bazaar, as well as on television, to
promote its high quality, contemporary, sophisticated image to
women aged 19-40, a slightly younger demographic group than that
targeted by the Company's most prominent competitors.
Growth Strategies
The Company's strategy will employ six major elements which
it believes will result in successful market penetration:
1. Rapid expansion of the private label division through
expanded product sales within existing private label and brand
label customers.
2. Support for Tinanjin USA Inc.
3. Creation of five unique annual collections to be exhibited
at trade shows and to existing buyers and clientele.
4. Exploitation of its strategic alliance with Tsinlien
Garments Co., Ltd.
5. Creation of a successful awareness campaign, including
print, television and electronic media, for the designer and
private label lines of Morgan Cooper.
6. Implementation of a full e-commerce Internet site to market
the Morgan Cooper trademark labels over the Internet.
Sourcing
The Company's sourcing strategy will be to contract for the
manufacture of its product lines and collections. Outsourcing
will allow the Company to maximize production flexibility while
avoiding significant capital expenditures, work-in-process
inventory buildups and the costs of managing a large production
work force. The Company will inspect products manufactured by
contractors to insure that they meet the Company's quality
standards.
The Company will import most of its finished goods because
it believes it can import higher quality at lower costs than can
be achieved domestically in the United States. Senior management
has extensive long-term relationships with the manufacturers of
the Morgan Cooper trademark products and has established a
relationship with Tsinlien Garments Co., Ltd. group in China for
the manufacture of the private label products. The Company's
production and sourcing staff will oversee all aspects of apparel
manufacturing and production, the negotiation for raw materials
and the research and development of new products and sources.
The Company's agreement with Tsinlien Garments Co., Ltd., and its
agreements with several other manufacturers in China that are
being assigned by the Company's predecessor, will allow the
Company effectively to compete and maintain high profit margins
by allowing the Company to purchase raw goods at cost and the
contract manufacturer to manufacture and distribute the products
to the retail clients and clientele of the Company. Although the
Company's relationship with Tsienlien is relatively new,
management believes that Tsienlien has the capacity and quality
control systems to enable it to satisfy the Company's needs.
Tsinlien Garments Co., which has 40 garment factories within
mainland China, has been successfully manufacturing garments for
European and Asian designers for 35 years. It is a subsidiary of
Tianjin Development Corp., a major Chinese conglomerate, and one
of only eight mainland Chinese companies currently trading on the
Hong Kong Stock Exchange (Hang Seng Index).
The Company expects to have its products manufactured
according to plans prepared each year, which reflect prior year's
experience, current fashion trends, economic conditions and
management estimates of the performance of its various fashion
lines. In certain cases, the Company expects to negotiate
separately with suppliers for sale of raw materials, which will
then be purchased by its contractors in accordance with the
Company's specifications. The Company intends to limit its
exposure to holding excess inventory by committing to purchase a
portion of total projected demand. The Company believes it will
be able to satisfy the excess demand through reorders. The
Company believes that its policy of limiting its commitments for
purchases early in the season will reduce its exposure to excess
inventory and obsolescence.
The Company's reliance on third party manufacturing could
result in the Company being unable to deliver on a timely basis,
which could result in the cancellation of orders, refusal to
accept orders or a reduction in purchase price, any of which
could have a material adverse effect on the Company's financial
condition and results of operations. Although the Company
believes that in the event and if needed, the Company can replace
such suppliers in a timely manner, there can be no assurance that
such suppliers could be replaced in a timely manner, and the loss
of such suppliers could have a significant effect on the
Company's short-term operation results.
Seasonality of Business
The Company's business varies with general seasonal trends
that are characteristic of the apparel industry, and it generally
experiences lower net revenues and net income (or higher net
losses) in the first half of each fiscal year, as compared to the
second half of its fiscal year. On a quarterly basis, the
Company's operations may vary with production and shipping
schedules, the introduction of new products, and variation in the
timing of certain holidays from year to year.
FORWARD-LOOKING STATEMENTS AND BUSINESS CONSIDERATIONS
Certain statements contained herein are forward-looking
statements that have been made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. The words and phrases "will likely result," "are expected
to," "will continue," "is anticipated," "estimates," "projects,"
"believes," "plans" or similar expressions, are intended to
identify "forward-looking statements include, without limitation,
the Company's expectations regarding sales, earnings, or other
future financial performance and liquidity, and general
statements about future operations and operating results.
Although the Company believes that its expectations are based on
reasonable assumptions within the bounds of its knowledge of its
business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Factors
that could cause actual results to differ from expectations
include, without limitation: (i) the failure of certain key
members of the Company's design teams or management, including
Morgan and Zarina Cooper, to continue to be active in the
business of the Company; (ii) the timing and expense associated
with, and effects of, the strategic initiatives being implemented
by the Company; (iii) risks associated with the receipt, pricing,
and timing of customer orders; (iv) general competitive factors
and the overall financial condition of the apparel industry, the
retail industry, and the general economy; (v) a change in
retailer or consumer acceptance of the Company's products; (vi)
the variability of the Company's results in any period due to the
seasonal nature of the business, the timing and level of the
Company's sales, the timing of launch of new products and
collections and opening of new doors, fashion trends, and the
timing, terms, consummation, or success of any joint ventures,
licenses, or other dispositions of product lines; (vii) social,
political and economic risks to the Company's foreign operations
and customers, including changes in foreign investment and trade
policies and regulations of the host countries and of the United
States; (viii) changes in laws, regulations, and policies,
including changes in accounting standards, that affect, or will
affect, the Company in the United States and abroad; (ix) foreign
currency fluctuations affecting the Company's results of
operations and value of its foreign assets, the relative price at
which the Company and foreign competitors sell their products in
the same markets, and the Company's operating and manufacturing
costs outside of the United States; (x) shipment delays,
depletion of inventory, and increased production costs resulting
from disruption at any of the Company's facilities or other
causes; (xi) changes in product mix to ones which are less
profitable; (xii) infringements of the Company's trademarks and
other proprietary rights, imitations or diversions of the
Company's products, or inability to obtain trademark protection
outside the United States for one or more of the Company's marks;
(xiii) political or economic instability resulting in the
disruption of trade from the countries in which the Company's
contractors, suppliers, licensees, or customers are located, the
imposition of additional regulations relating to imports, the
imposition of additional duties, taxes, and other charges on
imports, significant fluctuations of the value of the dollar
against foreign currencies, or restriction on transfer of funds;
(xiv) the inability of a contractor to deliver the Company's
products in a timely manner thereby causing the Company to miss
the delivery date requirements of its customers, which in turn
could result in the cancellation of orders, refusal to accept
deliveries, or a reduction in the selling price; or (xv) the
violation of labor or other laws by any independent manufacturer
or any licensee. The Company undertakes no obligation to publicly
update or revise any forward-looking statements made herein or
elsewhere whether as a result of new information, future events
or otherwise.
ITEM 7. FINANCIAL STATEMENTS
MORGAN COOPER, INC.
(f/k/a Goung Hei Investment Co., Ltd.)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
MORGAN COOPER, INC.
(f/k/a Goung Hei Investment Co., Ltd.)
DECEMBER 31, 1999
CONTENTS
Page
Independent Auditors' Report 1
Consolidated Financial Statements:
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Deficiency 4
Statement of Cash Flows 5
Notes to Financial Statements 6-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Morgan Cooper, Inc. and Subsidiaries
(f/k/a Goung Hei Investment Co., Ltd.)
New York, New York
We have audited the accompanying consolidated balance sheet of
Morgan Cooper, Inc. (f/k/a Goung Hei Investment Co., Ltd.) as of
December 31, 1999, and the related consolidated statements of
income, stockholders' deficiency, and cash flows for the years
then ended. 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 audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides 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 Morgan Cooper, Inc. (f/k/a Goung Hei Investment Co.,
Ltd.) as of December 31, 1999, and the results of its operations
and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 4 to the financial statements, the Company has negative
working capital and a stockholder's deficiency. In addition, the
company experienced significant losses from operations and has
limited revenues during the first quarter of 2000. These factors
raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans regarding those matters
are also described in Note 4. These financial statements do not
include any adjustment that might result from the outcome of this
uncertainty.
/s/ Sobel & Co., LLC
Certified Public
Accountants
Livingston, New Jersey
April 15, 2000
<PAGE>
MORGAN COOPER, INC.
(f/k/a Goung Hei Investment Co., Ltd.)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
CURRENT ASSETS:
Cash $ 25,184
Accounts receivable -
Notes receivable 125,000
Merchandise inventory 48,330
----------
Total Current Assets 198,514
OTHER ASSETS:
Security deposit 11,500
Deferred tax asset -
----------
Total Other Assets 11,500
----------
$ 210,014
==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable $ 198,407
Bridge loans payable 70,000
Deferred tax liability -
Income taxes payable 380
----------
Total Current Liabilities 268,787
STOCKHOLDERS' DEFICIENCY:
Capital stock, par value $.00001;
50,000,000 shares authorized,
13,924,301 shares outstanding 139
Additional paid-in capital 565,020
Accumulated deficit (623,932)
----------
Total Stockholders' Deficiency (58,773)
----------
$ 210,014
==========
The accompanying notes are an integral part of these financial
statements.
<PAGE> -2-
MORGAN COOPER, INC.
(f/k/a Goung Hei Investment Co., Ltd.)
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
NET SALES $ 671,346
COST OF GOODS SOLD
Purchases 528,417
Less: inventory at end of year 48,330
----------
Cost of Goods Sold 480,087
----------
GROSS PROFIT $ 191,259
==========
OPERATING EXPENSES:
Product development 149,978
Consulting fee 209,271
Reorganization and settlement 142,062
Rent 45,509
Hong Kong office expenses 52,200
Advertising and promotion 17,228
Professional fees 66,338
Telephone 16,102
Quality control - production 6,460
Travel and entertainment 76,623
Warehouse 5,127
General insurance 5,079
Freight-in 7,654
Office expenses 8,312
Interest and bank charges 1,582
----------
Total Operating Expenses 809,525
----------
NET LOSS BEFORE PROVISION FOR INCOME TAXES (618,265)
PROVISION FOR STATE AND CITY INCOME TAXES 380
----------
NET LOSS $ (618,645)
==========
NET LOSS PER COMMON SHARE $ (0.27)
==========
WEIGHTED AVERAGE NUMBER
COMMON SHARES OUTSTANDING 2,298,765
==========
The accompanying notes are an integral part of these financial
statements.
<PAGE> -3-
<TABLE>
MORGAN COOPER, INC.
(f/k/a Goung Hei Investment Co., Ltd.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
YEAR ENDED DECEMBER 31, 1999
<S> <C> <C> <C> <C> <C>
Common Common Additional
Stock Stock Paid-in Accumulated
Shares Par Value Capital Deficit Total
-----------------------------------------------------------
Balance at
December 31, 1998
(restated) 2,286,649 $ 23 $ 5,270 $ (5,293) $ -
Paid in Capital 50,710 50,710
Shares issued in
connection with
business combination
(Note 3) 9,637,652 96 9,060 - 9,156
Shares issued in
connection with
conversion of
bridge loans 2,000,000 20 499,980 - 500,000
Net loss for year ended
December 31, 1999 (618,645) (618,645)
-----------------------------------------------------------
Balance at
December 31, 1999 13,924,301 $139 $565,020 $(623,938) $ (58,779)
===========================================================
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE> -4-
MORGAN COOPER, INC.
(f/k/a Goung Hei Investment Co., Ltd.)
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
CASH FLOWS PROVIDED BY (USED FOR):
OPERATING ACTIVITIES:
Net loss $ (618,645)
Adjustments to reconcile net income to cash
provided by operating activities:
Changes in certain assets
and liabilities:
(Increase) decrease in:
Accounts receivable -
Inventory (48,330)
Security deposit (11,500)
Increase (decrease) in:
Accounts payable 198,407
Accrued expenses and taxes 380
----------
Net Cash Used for
Operating Activities (479,688)
----------
FINANCING ACTIVITIES:
Additional paid in capital 59,872
Proceeds from Bridge Loans Payable 445,000
----------
Net Cash Provided by
Financing Activities 504,872
----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 25,184
----------
CASH AND CASH EQUIVALENTS:
Beginning of year -
----------
End of year $ 25,184
==========
Non Cash Investing and Financing Activities:
Holders of $500,000 convertible bridge loans, converted the
loans to 2,000,000 shares of the Company's common stock.
The Company entered into $125,000 of bridge loan payable
agreements with investors in exchange for promissory notes
receivable by the Company.
The Company entered into a business combination whereby the
combining companies exchanged common stock with each other.
The accompanying notes are an integral part of these financial
statements.
<PAGE> -5-
MORGAN COOPER, INC.
(f/k/a Goung Hei Investment Co., Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - ORGANIZATION:
Goung Hei Investment Co., Ltd. ("GHIC") was incorporated on
October 12, 1988, under the laws of the State of Delaware. The
purpose of GHIC, was to seek out and acquire potential business
opportunities. GHIC had limited financial activities. Morgan
Cooper, Inc. ("MCII") was incorporated on August 2, 1999, under
the laws of the State of New York. Pursuant to a business
combination, (see Note 3), MCII became a wholly owned subsidiary
of GHIC. On November 24, 1999, GHIC acquired the assets of
Tinjain Garment USA, Inc. at which time Tinjain became a wholly
owned subsidiary of GHIC. The consolidated Company designs and
imports men's and women's private label and name brand apparel,
which will be sold to retailers throughout the country.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation:
The consolidated financial statements include the accounts of
Morgan Cooper, Inc. (DE) f/k/a Goung Hei Investment Co., Ltd.,
and its wholly-owned subsidiaries Morgan Cooper, Inc. (NY) and
Tinjain Garment USA, Inc.. All significant intercompany
transactions and balances have been eliminated in consolidation.
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 expenses during the reporting
period. Actual results could differ from those estimates.
Accounts Receivable:
The company considers accounts receivable to be fully
collectible; accordingly no allowance for doubtful accounts is
required.
Advertising:
Advertising costs are expensed as incurred.
Cash and Cash Equivalents:
Cash and cash equivalents consist primarily of cash at banks and
highly liquid investments with maturities of three months or
less.
Inventories:
Inventories are valued at lower of cost or market.
Federal Income Taxes:
The Financial Accounting Standards Board issued Statement No.
109, "Accounting for Income Taxes" (SFAS 109), which provides for
the recognition of deferred tax assets, net of an applicable
valuation allowance, related to net operating loss carryforwards
and certain temporary differences.
Stock Options:
The Company accounts for stock options in accordance with
Accounting Principles Board Opinion No. 25 (APB 25), "Accounting
for Stock Issued to Employees." Under APB 25, the Company
recognizes no compensation expense related to employee stock
options, as no options are granted at a price below the market
price on the date of grant.
NOTE 3 - BUSINESS COMBINATION:
Pursuant to a Reorganization and Stock Purchase Agreement dated
November 18, 1999, GHIC issued 9,637,652 shares of common stock
to the stockholders of MCI in exchange for all of the outstanding
shares of MCI. The transaction made MCI a wholly owned
subsidiary of GHIC. As part of this combination, the Company
also rolled up Tianjian Garment USA, Inc. These transaction have
been accounted for under the purchase method of accounting.
Since all entities had minimal operations and assets prior to the
combination, the transaction has been valued at zero and no
goodwill has been recorded.
In January 2000, GHIC changed its name to "Morgan Cooper, Inc."
(a Delaware Corporation)
NOTE 4 - GOING CONCERN:
As shown in the accompanying financial statements, the Company
has negative working capital and has incurred a material net loss
for the year ended December 31, 1999. In addition, the Company
has not generated material revenues in the first quarter of 2000
and is currently unable to meet its obligations as they come due.
These factors raise substantial doubt about the Company's ability
to continue as a going concern.
Management has issued a Private Placement Memorandum with a stock
offering of up to 1,600,000 shares generating a maximum of
$6,000,000. The proceeds from this private placement will be
used as working capital, to repay currently outstanding
indebtedness and general corporate purposes. There can not be
any assurance as the success of this offering.
The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a
going concern.
NOTE 5 - INCOME TAXES:
The Company's total deferred tax liabilities, deferred tax assets
and valuation allowance consists of the following at December 31,
1999:
Total deferred tax liabilities $ -
Total deferred tax assets 170,350
Total valuation allowance 170,350
---------
$ -
=========
NOTE 6 - NOTES PAYABLE:
During 1999, the Company issued $470,000 of 12% convertible
promissory notes to prospective investors via a subscription
agreement. The notes provide that the promissory notes are
convertible into common stock at a price equal to 50% of the
price at which such securities are provided in the offering. As
of December 31, 1999, $400,000 of the notes were converted into
common stock of the Company.
NOTE 7 - COMMITMENTS AND CONTINGENCIES:
On November 23, 1999, employment contracts were entered into with
the Company's Chairman/President and the Executive Vice
President/Lead Designer. Both agreements expire in February 2003
and provide a salary of $250,000 and $160,000 per annum,
respectively. The agreements provide increases in salary plus
bonuses and stock options when the Company achieves certain
financial milestones. In addition, payments in the amount of
$60,000 will be made on behalf of the Chairman/President in
connection with payment of interest on indebtedness of the
Company's predecessor, which were personally guaranteed by the
Chairman.
In addition, during 1999, the Company entered into employment
agreements with four key individuals. These agreements became
effective January 3, 2000. The employment agreements are for a
term of thirty-nine months and provide for aggregate annual
salaries of $1,110,000. The agreements also provide for bonus
and stock option incentives based upon specified performance
criteria.
NOTE 8 - LEASE COMMITMENTS:
During December 31, 1999, the Company entered a four year, three
month sub-lease agreement for showroom space with monthly rent of
$3,733 per month. On February 15, 2000, a two-year lease was
entered into for a design studio with rent of $5,000 per month.
On April 1, 2000, a one-year, seven-month sub-lease agreement was
entered into for office space with monthly rent of $6,000 per
month. Rent expense for the year ended December 31, 1999 was
$45,509.
At December 31, 1999, future minimum payments on the leases are
as follows:
Year
-----
2000 $153,800
2001 166,800
2002 54,800
2003 44,800
--------
$420,200
========
NOTE 9 - STOCK OPTION PLANS:
Under terms of the Company's incentive stock option plans,
officers and certain other employees may be granted options to
purchase the Company's common stock at no less than 100% of the
market price on the date the option is granted. As of December
31, 1999, the Company's stock options available are based on the
performance goals of the Company as noted in key personnel
employee agreements. At December 31, 1999, there were no options
outstanding.
NOTE 10 - SUBSEQUENT EVENTS:
On March 15, 2000, the Company issued a Private Placement
Memorandum offering up to 1,600,000 shares of common stock with
an attached warrant open for three years to purchase a share of
common stock for an offering price of $3.75 per unit. The
Memorandum provides that up to 13% of the proceeds may be paid to
a broker/dealer as a commission and for selling expenses.
As discussed in Note 8, the Company entered into two lease
agreements for office and design space.
On January 27, 2000, pursuant to an amendment to the articles of
incorporation, Goung Hei Investment Co., Limited, changed its
name to Morgan Cooper, Inc., a Delaware corporation.
In April 2000, the Company, its wholly owned subsidiary, Tianjian
Garments USA, Inc. and certain of its key employees have been
named as defendants in a lawsuit seeking compensatory and
punitive damages. The suit alleges tortious interference of
contract from the Company's hiring of two former employees of the
plaintiff who were subject to employment agreements. The
plaintiff initially obtained a temporary restraining order
against the Company from doing business with any of the
plaintiff's customers, but the Company was successful in having
this TRO vacated. The Company intends to vigorously contest the
lawsuit, however management is unable to evaluate the ultimate
outcome or whether the resulting liability, if any, would have a
material adverse effect on the financial condition and results of
operations of the Company.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Pursuant to a letter dated December 28, 1999, Morgan Cooper,
Inc. (the "Registrant") was informed by its auditors, S. W.
Hatfield, CPA, that the firm would no longer be representing the
Registrant as its accountants. The Registrant's Board of
Directors subsequently accepted the auditors' resignation.
In connection with the audits of the fiscal year ended
December 31, 1998, and up to the date of resignation, there were
no disagreements between the Registrant and Hatfield regarding
any matter of accounting principles or practice, financial
statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to their satisfaction would have
caused them to make reference in connection with their opinion to
the subject matter of the disagreement, and the firm has not
advised the registrant of any reportable events.
The accountant's report on the financial statements for the
previous fiscal year did not contain an adverse opinion or a
disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope, or accounting principles.
As of March 23, 2000, Morgan Cooper, Inc. (the "Company")
retained and appointed the accounting firm of Sobel & Co., LLC as
the Company's new independent accountants to audit the Company's
financial statements for the fiscal year ending December 31,
1999. The decision to retain and appoint the accounting firm of
Sobel & Co., LLC has been approved by the Company's Board of
Directors.
Notwithstanding the foregoing, there have been no
disagreements with accountants with respect to accounting and/or
financial disclosure for any periods reported on in this Form
10-KSB.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS: COMPLIANCE WITH SECTION 16(A)
OF THE EXCHANGE ACT
The following table sets forth certain information
concerning the current directors and executive officers of the
Company:
Name Age Position
- -------------- ------- --------------------------
Morgan Cooper 41 President, Chief Executive
Officer, Director and Lead
Designer
Zarina Cooper 38 Executive Vice President,
Director and Designer
George Powell 47 Director and Chief Executive
Officer of Tianjin
Gary Kotler 45 Chief Financial Officer
Each director holds office for a one-year term until his
successor has been elected and qualified at the annual meeting of
the Company's shareholders. Corporate Officers are elected by
the Board of Directors and serve at the discretion of the Board.
Morgan Cooper, President, CEO, Director and Lead Designer.
Morgan Cooper from 1984 through 1995 was the co-founder,
President and CEO of Synergy Sport International LTD.
("Synergy"). The company was founded with three employees and
during Mr. Cooper's tenure with the company, grew to employ 135
persons supporting the warehouse facilities, including 70 people
in the main office in Hong Kong. During this time Mr. Cooper was
in charge of outsourcing for production, as well as sales and
merchandising, and he established all sales pricing for the
company product lines. Under Mr. Cooper's guidance, Synergy
achieved sales levels in excess of $69 million. The Company's
annual pre-tax profits averaged $8 million per annum. Key
accounts included, among others, Ralph Lauren, Calvin Klein, The
Gap, J.C. Penney, Sears, Walmart and K-mart. The Company at this
time had established production agreements with three Chinese
joint venture factories in Beijing, ShangHi and Jiangsu.
In 1998 Morgan Cooper founded Sin by Morgan Cooper, Inc.,
the predecessor to the Company. Mr. Cooper was responsible for
the development and sales of both the Morgan Cooper label and the
private label business and for developing and maintaining all
sales accounts. He was also in charge of developing
relationships with the private label customers, which customers
will come with Mr. Cooper to the Company. Mr. Cooper was also
responsible for overseeing production and sourcing of both raw
materials and the quality inspection of finished goods for both
the Morgan Cooper and the private label businesses.
Zarina Cooper, Executive Vice President, Director and
Designer. Zarina Cooper from 1989 to 1991 worked in the fashion
industry as a model for three European modeling agencies -
Fotogen in Zurich, Silhoutte in Geneva and Glamourette in Paris.
During this time Zarina participated in most of the haute couture
fashion shows in Grand Palais in Paris. Zarina also worked as a
fashion model for designers such as ALALA, Bernard Paris, Yves
St. Laurent, Jean Louis Scherrer and Emmanual Ungaro. Her
experience during this time also included participating in many
commercials including a Sony campaign for Asis, BMW Germany,
Renault France, La Perla lingerie and modeling swimsuits for
Gottex. She also served as a personal stylist for Alaia's
collection and as a house model.
From September 1991 through June 1993 Zarina Cooper attended
L'Ecole des Langues et Commerce, the business school division of
the University of Geneva where she graduated from the school of
Business Management and Diplomacy. From August through December
1993 she trained at the United Nations in Geneva for a position
as the Executive Secretary to the Director of Protocol. In 1994
she relocated to the United States to work part-time for her
present employer, with her major responsibilities relating to
sales and design assistance for Cooper sportswear. In 1998 she
began full time employment at Sin By Morgan Cooper, Inc., where
she headed the design department and served as Executive Vice
President.
George Powell, CEO of Tianjin and Director of the Company.
George Powell from 1996 through 199 was Vice President of Synergy
and in charge of marketing and sales for all sales to J.C.
Penney. During 1994 and 1995, he was President of Opex USA where
he developed strategic plans for building direct factory sales to
mass market retailers. From 1989 through 1993, Mr. Powell was
Corporate Accounts Manager for Synergy with responsibility for
all sales to J.C. Penney retail and catalogue accounts. From
July 1986 through 1988, Mr. Powell was Vice President of
Corporate Accounts for Zeppelin of California, a young men's
national brand sportswear manufacturer. From 1976 through June
1986, Mr. Powell was a corporate buyer for J.C. Penney.
Gary Kotler, Chief Financial Officer. As an accomplished
globally focused Chief Financial Officer and Vice-President of
Finance, he brings with him over twenty years experience in the
Apparel industry. As a multifaceted leader with a track record
of extending expertise beyond finance to improve all areas of an
operation. Mr. Kotler has worked in various domestic and
international garment manufacturers which have gone thru
explosive growth in his previous positions as a CFO and Vice-
President of Finance. He has previously worked at Deloitte &
Touche.
Compliance with Section 16 of The Securities Exchange Act of 1934
To the Company's knowledge, based on a review of such
materials as are required by the SEC, no officer, director, or
beneficial holder of more than five percent of the Company's
issued and outstanding shares of common stock has filed with the
SEC any form or report required to be so filed pursuant to
section 16(a) of the Securities Exchange Act of 1934 during the
fiscal year ended December 31, 1999 or prior thereto (see Item 11
for a list of the Company's officers, directors and beneficial
holders of more than five percent of the Company's issued and
outstanding shares of common stock).
Based solely on a review of such materials as is required by
the SEC, the Company is not aware of any transactions that were
not reported.
ITEM 10. EXECUTIVE COMPENSATION
In December of 1999, Mr. Cooper entered into an employment
agreement with the Company, pursuant to which he will serve as
the Company's President, Chief Executive Officer and Lead
Designer. Under the agreement, which expires in February, 2003,
Mr. Cooper will receive a salary of $250,000 per annum, subject
to yearly increases, and will be eligible for certain bonuses and
stock options based upon the achievement of certain sales
targets.
In December of 1999, Zarina Cooper entered into an
employment agreement with the Company, pursuant which she will
serve as the Company's Executive Vice President and Designer.
The thirty-nine month agreement provides for a salary of $160,000
per annum, subject to yearly increases, and certain bonuses,
based upon the achievement of certain sales targets.
Tianjin has entered into employment agreements with each of
its four executives. In the aggregate the agreements call for
the annual payment of $1,110,000 in annual base salary, plus
stock options and bonuses.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The persons set forth on the chart below are known to the
Company to be the beneficial owners of more than five percent of
the Company's outstanding voting common stock as of March 31,
2000. Information concerning the number and percentage of shares
of voting common stock of the Company owned on record and
beneficially by management is set forth on the chart below:
Shares of common Percent of
Name and Address of stock beneficially common stock
beneficial owner owned owned
Morgan Cooper 6,540,920 47.0%
214 West 39th Street, Suite 1006
New York, New York 10018
S.M.P. Financial 900,000 6.5%
Consultants, Inc.
One West Camino Real, Suite 118
Boca Raton, Florida 33432
All Directors and Officers 6,540,920 47.0%
as a group (one person)
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- ----------------------------------------------
2 Reorganization and Stock Purchase Agreement
(incorporated by reference to the Form 8-K filed
on November 24, 1999)
10.1 Employment Agreement for Morgan Cooper
10.2 Employment Agreement for Zarina Cooper
16 Letter of resignation from the Company's former
auditors (incorporated by reference to the Form
8-K filed on March 6, 2000)
27 Financial Data Schedule
Reports on Form 8-K
On November 24, 1999, the Company filed a Form 8-K
indicating a change in control of the Company and changes in
officers and directors resulting therefrom. The filing included
the Reorganization and Stock Purchase Agreement dated November
18, 1999 and a Press Release dated November 22, 1999.
A copy of any of the exhibits listed or referred to above
will be furnished at a reasonable cost to any person who was a
shareholder of the Company on December 31, 1999 upon receipt from
any such person of written request for any such exhibit. Such
request should be sent to the Company with the attention directed
to the Corporate Secretary.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Exchange Act, the Company has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MORGAN COOPER, INC.
Date: April 17, 2000 /s/ Morgan Cooper
Morgan Cooper,
President, CEO and Director
Date: April 17, 2000 /s/ Zarina Cooper,
Zarina Cooper,
Executive Vice President and
Director
Date: April 17, 2000 /s/ George Powell
George Powell,
Director
Date: April 17, 2000 /s/ Gary Kotler
Gary Kotler,
Chief Financial Officer
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the Company
and in the capacities end on the dates indicated.
Date: April 17, 2000 /s/ Morgan Cooper
Morgan Cooper,
President, CEO and Director
Date: April 17, 2000 /s/ Zarina Cooper,
Zarina Cooper,
Executive Vice President and
Director
Date: April 17, 2000 /s/ George Powell
George Powell,
Director
Date: April 17, 2000 /s/ Gary Kotler
Gary Kotler,
Chief Financial Officer
<PAGE>
EXHIBIT 10.1 - Employment Agreement for Morgan Cooper
Morgan Cooper, Inc.
214 West 39th Street
New York, New York 10018
Dec. 2, 1999
Mr. Morgan Cooper
27 West 67 Street - Apt. 6FW
New York, New York 10023
Re: Term Sheet
Dear Mr. Cooper:
The purpose of this letter is to summarize our proposal
whereby Morgan Cooper, Inc. ("Employer") intends to enter into a
formal employment agreement with Morgan Cooper ("Employee").
This letter is subject to the parties entering into a formal
agreement, mutually acceptable to all parties. This letter will
serve as evidence of each party's good faith and intention to
proceed with the transaction subject to the conditions outlined
below.
1. Compensation.
(a) The employee will be paid a base salary at a rate
of one hundred seventy-five thousand dollars
($175,000.00) per annum.
(b) The Base Salary shall be increased to Two Hundred
Fifty Thousand Dollars ($250,000.00) per annum
upon the closing of the acquisition of Tianjin
Garments USA Inc.
(c) Additionally, the Base Salary shall be increased
at the end of each "Annual Period" of this
Agreement by fifteen (15%) over the prior years
Base Salary as increased by the prior year's
Annual Escalations plus an increase of the cost of
living over the Base Calender year of 1999. (The
15% escalation and the cost of living escalation
shall be jointly referred to as the "Annual
Escalations").
2. Commissions. (a) The Employee will be paid a
quarterly commission of one percent (1%) of the Net
Quarterly Sales with respect to merchandise sold under
the Morgan Cooper label and any other private label
brand of the Employer. Additionally, the Employee
shall receive a quarterly commission of one-half of one
percent (1/2 of 1%) of the sales of Tianjin Garments
USA, Inc.
3. Threshold Compensation.
A. Option Grant
Upon execution of this employment agreement, the
Company shall grant to the Employee options to purchase
an aggregate of 9,000 shares of the common stock of the
Company at an exercise price of $2.625 per share.
These options shall become exercisable upon the
achievement of certain sales targets. Subject to
certain restrictions described below, for each
incremental increase in the yearly gross sales of the
Company in the amount of $20,000,000, options to
purchase 1,000,000 shares shall vest and become
exercisable. Vesting of options occur on the last date
of each fiscal year and shall be restricted during the
first two fiscal years following execution of this
employment agreement as follows:
For the year ended December 31, 2000, no more than
800,000 options shall become exercisable. Vesting of
any additional options to which the Employee would be
entitled due to achievement of sales targets during
this fiscal year, shall be delayed. Such additional
options shall be exercisable on December 31, 2002.
For the years ended December 31, 2001, no more
than 800,000 options shall become exercisable. Vesting
of any additional options to which the Employee would
be entitled due to achievement of sales targets during
this fiscal year, shall be delayed. Such additional
options shall be exercisable on December 31, 2002.
The options shall terminate on December 31, 2007.
B. Bonus Share Award
In the event that yearly gross sales of the
Company exceed $180 million, the Company shall award,
to the Employee 1,000,000 shares of Common Stock of the
Company for each incremental increase in the yearly
gross sales of the Company in the amount of $20,000,000
in addition to the option awarded above; provided that
such shares shall not be awarded before December 31,
2002.
4. Term. The employment term shall be for a period
of thirty-nine (39) months. The "First Annual Period"
shall be deemed the first fifteen )15) months from the
Commencement Date of the Employment hereunder. The
Second Annual Period shall be the twelve (12) month
period commencing at the end of the First Annual Period
and the "Third Annual Period" shall be the twelve (12)
month period following the end of the Second Annual
Period.
5. Position. The Employee will be elected as
Chairman of the Board and President of the Employer.
6. Benefits. The Employee shall be provided, at no
cost to the Employee, with the following benefits:
(a) Vacation - Three (3) weeks paid vacation
during each Annual Period of this Agreement.
(b) Life Insurance - The Company shall provide
and pay for $1,000,000 Life Insurance policy
to be taken out on the live of the Employee.
The Employee shall be free to designate the
beneficiary on any such life insurance policy
paid for by the Company.
(c) Medical - The Employee shall be provided with
medical insurance which shall provide for
100% reimbursement of any medical costs
incurred by the Employee.
(d) The Company shall provide and pay for the
preparation of the Employee's annual Tax
Returns and Estate Planning advice and
analysis.
(e) Automobile. - The Employee shall be provided
with a luxury automobile and the Company will
pay all leasing, parking, maintenance, gas,
insurance, repairs and all other automobile
related expenses.
If this letter sets forth our understanding, please indicate
your acceptance by executing the Term Sheet in the lower left
hand corner.
Very truly yours,
MORGAN COOPER INC.
By:__________________________
Agreed and Accepted
______________________
Morgan Cooper
<PAGE>
EXHIBIT 10.2 - Employment Agreement for Zarina Cooper
Morgan Cooper, Inc.
214 West 39th Street
New York, New York 10018
Dec. 3, 1999
Ms. Zarina Cooper
27 West 67th Street - Apt. 6FW
New York, New York 10023
Re: Term Sheet
Dear Ms. Cooper:
The purpose of this letter is to summarize our proposal
whereby Morgan Cooper, Inc. ("Employer") intends to enter into a
formal employment agreement with Morgan Cooper ("Employee").
This letter is subject to the parties entering into a formal
agreement, mutually acceptable to all parties. This letter will
serve as evidence of each party's good faith and intention to
proceed with the transaction subject to the conditions outlined
below.
1. Compensation.
(a) The employee will be paid a base salary at a rate
of one hundred sixty thousand dollars
($160,000.00) per annum.
(b) Additionally, the Base Salary shall be increased
at the end of each "Annual Period" of this
Agreement by fifteen (15%) over the prior years
Base Salary as increased by the prior year's
Annual Escalations plus an increase of the cost of
living over the Base Calender year of 1999.
2. Commissions. (a) The Employee will be paid a
quarterly commission of one percent (1%) of the Net
Quarterly Sales with respect to merchandise sold under
the Morgan Cooper label and one-half of one percent
(1/2 of 1%) on the private label brands of the
Employer.
3. Term. The employment term shall be for a period of
thirty-nine (39) months. The "First Annual Period"
shall be deemed the first fifteen )15) months from the
Commencement Date of the Employment hereunder. The
Second Annual Period shall be the twelve (12) month
period commencing at the end of the First Annual Period
and the "Third Annual Period" shall be the twelve (12)
month period following the end of the Second Annual
Period.
5. Position. The Employee will be elected as
Secretary-Treasurer of the Employer.
6. Benefits. The Employee shall be provided, at no
cost to the Employee, with the following benefits:
(a) Vacation - Three (3) weeks paid vacation
during each Annual Period of this Agreement.
(b) Life Insurance - The Company shall provide
and pay for $1,000,000 Life Insurance policy
to be taken out on the live of the Employee.
The Employee shall be free to designate the
beneficiary on any such life insurance policy
paid for by the Company.
(c) Medical - The Employee shall be provided with
medical insurance which shall provide for
100% reimbursement of any medical costs
incurred by the Employee.
(d) The Company shall provide and pay for the
preparation of the Employee's annual Tax
Returns and Estate Planning advice and
analysis.
(e) Automobile. - The Employee shall be provided
with a luxury automobile and the Company will
pay all leasing, parking, maintenance, gas,
insurance, repairs and all other automobile
related expenses.
If this letter sets forth our understanding, please indicate
your acceptance by executing the Term Sheet in the lower left
hand corner.
Very truly yours,
MORGAN COOPER INC.
By:__________________________
Agreed and Accepted
______________________
Morgan Cooper
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