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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
INTERACTIVE MULTIMEDIA NETWORK, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 65-0488983
(State of Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
3163 Kennedy Boulevard, Jersey City, New Jersey 07306
(Address of Principal Executive Offices) (Zip Code)
Telephone (201) 217-4137
Facsimile (201) 798-4627
(Registrant's Telephone Number, including Area Code)
With copies to: Irving Rothstein, Esq.
Heller, Horowitz & Feit, P.C.
292 Madison Avenue
New York, New York 10017
Tel. (212) 685-7600 Fax. (212)696-9459
Securities to be registered pursuant to Section 12(b) of the Act:
None.
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Stock, par value $0.001
Common Stock, par value $0.001
********************************************************************************
<PAGE> 1
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
DESCRIPTION SUBMISSION PAGE
PART I
ITEM 1 DESCRIPTION OF BUSINESS 3
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION 7
ITEM 3 DESCRIPTION OF PROPERTY 10
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 10
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS OWNING MORE THAN 10% 11
ITEM 6 EXECUTIVE COMPENSATION 11
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 12
ITEM 8 DESCRIPTION OF SECURITIES 12
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS 14
ITEM 2 LEGAL PROCEEDINGS 15
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 15
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES 15
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS 18
PART F/S 19
PART III
ITEM 1 INDEX TO EXHIBITS 52
ITEM 2 DESCRIPTION OF EXHIBITS 52
SIGNATURES 52
EXHIBIT EX-3.(i) 53
EXHIBIT EX-3.(ii) 56
EXHIBIT EX-4.(i) 67
EXHIBIT EX-10.(i) 68
EXHIBIT EX-16.(i) 82
EXHIBIT EX-21.(i) 83
EXHIBIT EX-27.(i) 84
EXHIBIT EX-27.(ii) 85
<PAGE> 2
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
PART I
ITEM I - DESCRIPTION OF BUSINESS
INTRODUCTION
The Company is an Internet based marketing company. The Company's primary
business activity is marketing through multiple media channels for the purpose
of facilitating on-line purchases of a variety of products and services. The
Company markets products for others and, increasingly, for itself. In both
cases it utilizes Interactive Convergence which is the simultaneous utilization
of television, the Internet and retail exposure to promote a product or service.
The Company uses the Internet, online computer services, such as America Online,
broadcast, cable and satellite television and retail exposure. It uses these
multiple channels of distribution for the introduction of new products, new
services, inventions and concepts. In addition to marketing other people's
products or services for a fee, the Company also sells cars, trucks and sport
utility vehicles directly to consumers through two wholly-owned subsidiaries.
The principal executive offices of the Company are located at 3163 Kennedy
Boulevard, Jersey City, New Jersey, tel. (201) 217-4137. The Company's stock
symbol on the Over-the-Counter Bulletin Board is "IMNI". As of January 13,
2000, the Company's stock was removed from the over the counter bulletin board
and it is presently traded on the "Pink Sheets". Upon acceptance of this filing
by the Securities and Exchange Commission the Company anticipates being
reinstated.
HISTORY
The Company was incorporated in the State of New Jersey on March 4, 1994.
On June 13, 1995, the New Jersey corporation migrated to Delaware via a merger
with a Delaware corporation formed for that purpose. There are 5,000,000 shares
of preferred stock authorized of which none are presently issued and outstanding
and there are 25,000,000 shares of common stock authorized of which 6,615,464
were issued and outstanding as of December 31, 1999.
The Company has three subsidiaries. AutoSmartUSA, Inc. and AutoSmartUSA
Leasing, Inc. are both wholly-owned subsidiaries. These subsidiaries operate in
tandem to operate the vehicle sales operations of the Company. CPM Associates
Holding Corp., a wholly-owned subsidiary owns an 80% interest in Contracting,
Planning and Management Associates, Inc., which, prior to its Chapter 7
Bankruptcy proceeding, operated the architectural wood products and store
fixture business of the Company.
BUSINESS ACTIVITIES
For its clients, the Company provides turnkey marketing solutions, i.e. a
complete marketing plan enabling individuals or entities that contract with the
Company an advertising program specifically tailored to their products or
services. This includes recommended media buys, target demographics, print,
television, Internet advertising and other necessary information and plans to
attempt to successfully bring that product or service to market. The Company
uses television, the Internet and retail exposure, simultaneously, to promote
sales and brand awareness for its clients' products and services. One avenue
which the Company uses is through the Internet web site known as
<PAGE> 3
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
Shop-the-Net.com (www.shop-the-net.com), which is a site owned and operated by
the Company. "Shop-The-Net"' is a virtual shopping mall available over the
World Wide Web. In this mall, the Company rents showroom space to companies and
individuals. A showroom is a section of the mall wherein a client's product
and/or services are highlighted and available for sale.
In February 1999, the Company formed two wholly-owned subsidiaries,
AutoSmart USA, Inc., a Nevada corporation and AutoSmart USA Leasing, Inc.,
a Florida corporation, collectively, AutoSmartUSA. AutoSmartUSA sells cars,
trucks and sport utility vehicles through the Internet at another of the
Company's websites, www.autosmartusa.com, and through a walk-in new car
showroom located in Pompano Beach, Florida.
AutoSmartUSA sells and leases all models of new cars, trucks and SUV's for
as low as 1% over factory invoice. AutoSmartUSA has made arrangements with over
1,300 new car dealers across the United States to furnish AutoSmartUSA's
customers with vehicles at appreciable discounts from MSRP (Manufacturer's
Suggested Retail Price). Through this dealer network AutoSmartUSA can deliver a
vehicle to a customer at the location of their choice at a price that is
typically 5 - 10% less than the customer could negotiate directly.
The AutoSmartUSA.com website allows customers to build their own car by
specifying the make, model, options and color choices desired. Usually within 4
hours, during normal business hours, a personalized printout is sent to the
customer containing the MSRP and factory invoice for the vehicle specified.
Armed with this information the customer can then make their purchasing decision
and determine whether to buy, lease or finance their new vehicle.
AutoSmartUSA has arrangements with multiple financing sources and can
generally obtain financing for the customer at a competitive rate. AutoSmartUSA
maintains its own finance and insurance department, just like most new car
dealers, and in most cases processes all of the necessary paperwork to complete
the transaction.
When it is in the consumers' best interest, i.e. access to a better finance
rate, better terms, etc., AutoSmartUSA will allow the dealer who is delivering
the vehicle to handle the transactional paperwork. This is necessary because
AutoSmartUSA is not a franchise dealer and as such cannot offer manufacturer
subsidized financing.
The American public has had a love affair with the Automobile for the past
100 years. The automotive industry has long recognized the appreciative and
collective nature of certain examples of cars that have been created and
manufactured throughout its history. Many of these "collectible" cars are sought
after due to a uniqueness of design or perhaps interesting or special features.
However, most are cherished, garnered and collected because of an intangible
referred to as nostalgia.
AutoSmartUSA recognizes the value and marketability of these special
vehicles and has begun to actively offer only the finest examples of these types
of collectibles in its Internet website. These collectibles are offered in two
ways, either through a free direct listing of the vehicle which includes a full,
accurate description of the vehicle, the vehicle identification number or VIN
and in most cases a recent color photograph or through the Silent Auction method
of selling whereby the vehicle is sold to the highest bidder. Most cars carry a
<PAGE> 4
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
"reserve price", thus insuring that the vehicle is only released for sale when
the winning bidder achieves a minimum price set by the vehicle owner. In both
cases, the seller and buyer only pay a very modest fee of one percent to
AutoSmartUSA for its services.
AutoSmartUSA is careful to select only the finest vehicles with authentic
lineage. No kit cars, replicas or vehicles that are not already totally restored
or near-perfect original examples are accepted for sale on the site.
AutoSmartUSA has been fortunate to assemble several automotive consultants
who are thoroughly knowledgeable in this field and as such are able to answer
any questions on most vintage or collectible cars from a perspective buyer. The
collectible car market is one that continues to expand, the growth of which has
been recently fueled by the vast number of baby boomers seeking to regain a
piece of history and their youth.
The Company's revenue comes from the sale of its own marketing services and
from the business activities of its subsidiaries. In the nine month period
ended December 31, 1999, AutoSmart USA accounted for $ 803,731 (or 87% of
revenue) and the core marketing business accounted for $117,874 (or 13% of
revenue). Contracting, Planning and Management Associates, Inc., an indirect
majority owned subsidiary is currently the subject of a Chapter 7 Bankruptcy
proceeding and will not likely return to operations.
DIFFERENTIATION FROM COMPETITION
The Company as a whole differentiates itself from competitors by offering
a diverse range of services to its clients and by offering a wide range of
products to consumers through multiple channels of distribution.
There are several companies that operate similar businesses to that of the
Company. For example E4L, Inc., produces and airs product oriented television
content (informercials), that is linked to the Internet to their web site,
www.e4l.com. Similarly, Buyitnow.com, LLC operates an Internet site known as
www.Buyitnow.com, that is promoted through infomercials for products produced
and aired by Buyitnow.com. Additionally, there are numerous, probably
thousands, of companies that design web sites and that can provide electronic
commerce solutions for all manner of businesses that are interested in selling a
product or service over the Internet. Some of these companies are substantially
larger and have far greater resources, including.
AutoSmart USA relies on its ability to satisfy customers requests through
its ever growing dealer network on a national basis. There are currently
approximately two dozen companies that are active in the online automotive sales
industry. Most of these competitors are predominantly referral based businesses,
such as AutobyTel.com, AutoWeb.com, CarPoint.com and Cars.com. These referral
businesses earn their revenue from fees paid to them by their member dealers in
return for the leads that are given to them. The majority of the referral
businesses charge a fee to the dealer to join the service. AutoSmartUSA charges
no up-front fees or lead fees. There are two companies that are directly in
competition with AutoSmart USA, CarsDirect.com and carOrder.com both of which
sell vehicles directly to the consumer, both of these companies are better
financed. AutoSmart USA also has competition in the form of web sites
established by the vehicle manufactures such as GMBuyPower.com, Toyota.com, etc.
all of these types of sites refer the consumer to the local franchised dealer in
the consumer's local market.
<PAGE> 5
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
SEASONALITY
The Company's business activities are not adversely affected by
seasonality since they are not seasonal in nature and in any event, as the
Company operates across the country the differentiation between places where the
weather and season could be a factor balance out.
MARKETING
The Company and its subsidiaries market their respective products and
services by direct sales, television, print, radio advertising and
Internet banner advertising. Specifically, the Company markets its marketing
services through direct sales, television commercials, print and radio ads and
Internet banner ads. AutoSmart USA utilizes direct sales, television
commercials, print and radio ads and Internet banner advertisements.
The Company and its subsidiaries' current customer base is composed of
commercial accounts and individuals throughout the United States. Specifically,
the Company has approximately active 45 clients. Regarding AutoSmart USA, the
number of clients using its service increases every day and to date tens of
thousands of individuals have benefitted from AutoSmartUSA's services.
FINANCING
The Company currently internally finances its routine operating
activities and does not presently have any outside financing sources available.
COMPETITION
Competition for the services offered by the Company is based on
service, quality, distribution, and price. Management believes it can
successfully compete in the marketplace. The Company believes that there are
other companies that operate in the same businesses as the Company and its
subsidiaries. Many of the competitors that operate in the same business are more
established, better financed and have greater market penetration.
GOVERNMENT REGULATION
AutoSmart USA operates in a highly regulated industry. A number of state
and federal laws and regulations affect its business. In every state in which it
operates, it must obtain various licenses in order to operate its businesses,
including sales, finance and insurance related licenses issued by state
regulatory authorities. Numerous laws and regulations govern our conduct of
business, including those relating to our sales, operating, advertising and
employment practices. These laws and regulations include state franchise laws
and regulations and other extensive laws and regulations applicable to new and
used motor vehicle dealers, as well as a variety of other laws and regulations.
Our financing activities with customers are subject to federal truth-in-
lending, consumer leasing and equal credit opportunity regulations as well
as state and local motor vehicle finance laws, installment finance laws, usury
laws and other installment sales laws. All states regulate finance fees and
charges that may be paid as a result of vehicle sales. Possible penalties for
violation of any of these laws include revocation of our licenses and fines.
In addition, many laws may give customers a private cause of action.
<PAGE> 6
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
TRADEMARKS
The Company has United States trademarks for the names "Interactive
Multimedia Network, Inc.", and "In Your Neighborhood". The retention of
these trademarks is not material to the future operations of the Company.
EMPLOYEES
As of December 31, 1999, the Company had 25 employees of which 5 are in
management and 6 are part-time employees. The Company believes that its
labor relations are good. No employee is represented by a labor union.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following Management Discussion and Analysis of Financial Condition is
qualified by reference to and should be read in conjunction with, the Company's
Consolidated Financial Statements and the Notes thereto as set forth beginning
on page 19.
FORWARD-LOOKING STATEMENT AND INFORMATION
The Company is including the following cautionary statement in this Form
10-SB for any forward-looking statements made by, or on behalf of, the
Company. Forward-looking statements include statements concerning plans,
objectives, goals, strategies, expectations, future events or performance
and underlying assumptions and other statements which are other than
statements of historical facts. Certain statements contained herein are
forward-looking statements and accordingly, involve risks and uncertainties
which could cause actual results or outcomes to differ materially from those
expressed in the forward-looking statements. The Company's expectations,
beliefs and projections are expressed in good faith and are believed by the
Company to have a reasonable basis, including without limitations,
management's examination of historical operating trends, data contained in
the Company's records and other data available from third parties, but there
can be no assurance that management's expectations, beliefs or projections
will result or be achieved or accomplished. In addition to other factors and
matters discussed elsewhere herein, the following are important factors
that, in the view of the Company, could cause actual results to differ
materially from those discussed in the forward-looking statements: the ability
of the Company to effectuate and successfully operate acquisitions and the
ability of the Company to obtain acceptable forms and amounts of financing to
fund planned acquisitions.
INTRODUCTION
The Company has the fiscal year end, March 31. The following presentation
of the Management Discussion and Analysis of Financial Condition covers the
years ended March 31, 1999 and 1998 and the nine months ended December 31, 1999
and December 31, 1998.
The Company and each of its subsidiaries maintain their own books and
records which are presented here as an audited consolidation for the years
ended March 31, 1999 and 1998 and an unaudited consolidation for the periods
ended December 31, 1999 and 1998.
Based upon accounting principles, due to CPM's Chapter 7 bankruptcy filing,
the Company's consolidated financial statements have been re-stated to omit the
impact of CPM's operations.
<PAGE> 7
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
YEARS ENDED MARCH 31, 1999 AND 1998
For the year ended March 31, 1999, the Company's principal source of
revenue consisted of the business activities of the Company and its
subsidiaries which were $991,968 for the period, compared to revenues for
the year ended March 31, 1998 of $140,506. More specifically, this was due to
an increase in media buying and Internet services for clients. AutoSmart
generated $2,033 in revenues in its first two months since its incorporation,
and all of its revenues for the period were consolidated into the
Company's. In March of 1998 the company had no subsidiaries.
Operating expenses for the year ended March 31, 1999 consisted of
general expenses of $984,961 for the Company as a whole. This figure
includes an expense charge of $157,500 for services rendered to the
Company by various consultants in exchange for 637,500 shares of common
stock. The same figure for operating expenses for March of 1998 was $916,668
consisting of selling, general and administrative expenses. The 657,500 shares
were issued at a rate of from $1.00 to $0.20 per share which was not lower than
the fair market value on the date of issuance.
The Company reported a Loss on Investment in Bankrupt Subsidiary of
$129,854. This reflects a write-off of certain loans made to CPM that the
Company believes will be compromised through the chapter 7 of CPM.
The Company, and its subsidiaries, had a net loss of $(196,184) for the
period ended March 31, 1999. This includes depreciation and amortization of
$12,106 reported by the Company. Compared with a net loss of $(838,222) for the
year ended March 30, 1998 which consists of non-cash losses of $302,680 (which
includes depreciation and amortization costs of $35,292, and expenses to
unrelated third parties for professional fees of $267,388).
NINE MONTH PERIODS ENDED DECEMBER 31, 1999 AND 1998
For the nine months ended December 31, 1999, the Company's principal
source of revenue consisted of the business activities of the Company and its
subsidiaries which totaled $921,605. The Company's revenues marketing and
Internet related activities were $117,874. The sales reported by AutoSmart USA
for the period were $803,731. During the nine month period ended December 31,
1998, the Company had no subsidiaries and its own business operation produced
sales of $101,439. The Company's sales increase is reflective of an increase in
the media buying services and Internet services provided during this period.
Operating expenses for the nine months ended December 31, 1999 consisted of
general expenses of $788,139 for the Company as a whole. This figure
includes an expense charge of $65,000 for services rendered to the
Company by various consultants in exchange for 65,000 shares of common
stock. The Company portion of the operating expenses for this period were
$497,335 and AutoSmart USA reported 290,804. Operating expenses for the nine
months ended December 31, 1998 consisted of general expenses of $63,566 for the
Company. This figure includes an expense charge of $2,500 for services
rendered to the Company by various consultants in exchange for 2,500 shares
of common stock.
The Company, and its subsidiaries, had a net loss of $(649,780) for the
nine months ended December 31, 1999. This includes amortization of $16,967
reported by the Company. During the nine month period ended December 31, 1998,
the Company had no subsidiaries and reported a net operating loss of $(251).
This includes amortization of $2,137.
<PAGE> 8
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
LIQUIDITY DISCUSSION
The Company believes that its own present operations require that the
Company obtain additional capital during the next twelve months. The
Company is exploring various options including, revolving bank credit lines,
equity and or debt financing through private placements. The Company is also
conducting preliminary discussions with various venture capital groups. No
assurance can be given that the Company will be successful in any of its
financing plans. The Company believes that it has sufficient cash on hand to
maintain its present operations until appropriate financing can be obtained.
However if financing is not obtained within six months the Company will be
required to curtail certain of its operations in an effort to conserve funds.
The Company believes that it can continue to generate sufficient revenues for
the foreseeable future to maintain operations at a reduced level. It is unknown
at this time whether the Company will be successful in raising capital on
reasonable terms.
Additionally, the Company is seeking additional funding to increase its
working capital for the AutoSmartUSA division, the majority of which will be
utilized for advertising and floor-plan financing. Floor plan financing is a
specific type of financing that is utilized by car dealers to purchase vehicle
inventory.
The Company anticipates substantial growth in the business activities
of the AutoSmart USA division. The accompanying audited financial statements
for the year ended March 31, 1999 reflect negligible revenues from
AutoSmart USA because the Pompano Beach location did not become fully
functional until after the fiscal year ending March 31, 1999. During the nine
month period ended December 31, 1999, AutoSmart USA reported gross sales of
$803,731 this represents the revenue derived from it selling vehicles valued at
over $6,500,000. Once AutoSmart USA secures adequate floor plan financing it
will then be in a position to acquire all of the vehicles it sells to consumers
from the dealers. Should this occur then AutoSmart USA would be able to show the
full value of the vehicles sold as its gross revenue and not just its portion of
the transactions, currently 2% of the factory invoice of the vehicles sold. As
an example had such financing been in place than AutoSmart USA would have
reported $6,573,625 in gross sales for this period as opposed to the $803,731 in
gross sales it did report.
Another avenue which the Company may pursue is to make strategic
acquisitions that would help enhance the Company's cash flow position. To date
the Company has not been active in this regard. Under its present circumstances,
the Company would not consider any acquisition that is not self sufficient or
that would otherwise not enhance the Company's overall financial outlook. In the
event the Company is successful in its financing activities the Company may also
seek to make acquisitions of complementary businesses. The Company anticipates
that most, if not all, of any acquisitions it may make during the next twelve
months would be of operating entities that have employees, or of assets
that have employees associated with such assets. Accordingly, the Company
anticipates there would be a significant increase in the number of its
employees at the operating unit or subsidiary level, at such time, if any, that
acquisitions may be consummated.
YEAR 2000 ISSUES
The Company has not experienced any adverse affects. All of its operating
systems are operating normally, in the same manner as prior to the new year.
Management does not anticipate any problems in this regard.
<PAGE> 9
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
ITEM 3. DESCRIPTION OF PROPERTY.
The Company's principal executive offices are located at 3163 Kennedy
Boulevard, Jersey City, New Jersey 07306 in 1,000 square feet of office space on
a month to month basis. There is no rent paid for the use of this office
space; it is located in the same building as Verdiramo & Verdiramo, P.A., a
law firm operated by the Company's former president, who is also the father of
the current president and the other partner of this firm is Vincent S. Verdiramo
the son of Vincent L. Verdiramo and the brother of the company's current
president, Richard J. Verdiramo. The Company also maintains a 1,400 square
foot office located in Boca Raton, Florida on an annually renewable lease
which expires in May 2001. The Company believes that it will successfully
renew this lease.
Prior to its bankruptcy, CPM occupied a 30,000 square foot building which
included 6,000 square feet of office space on nine acres of land located in
Brentwood, New Hampshire. This lease was terminated by the bankruptcy court.
AutoSmart USA, Inc., and AutoSmart USA Leasing, Inc., occupy an 8,000
square foot facility which is all office space located on 3 acres of
land. This facility is leased for a three year term and the current lease
expires in February 2002 and is renewable for three additional terms.
The Company believes that its properties are adequate for its present
needs and that suitable space will be available to accommodate its future
needs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of December 31,
1999, with respect to the beneficial ownership of shares of common stock by (i)
each person who is known to the Company to beneficially own more than 5% of the
outstanding shares of common stock (ii) each director of the Company, (iii)
each executive officer of the Company and (iv) all executive officers and
directors of the Company as a group. Unless otherwise indicated, each
stockholder has sole voting and investment power with respect to the
shares shown.
<TABLE>
Amount and Nature
Title of Name and Address of Beneficial Percent
Class of Beneficial Owner Ownership of Class
- --------- ------------------------------------ --------------------- ---------
<S> <C> <C> <C>
Common William J. Auletta (1) 1,215,750 18.69%
5581 B Coach House Circle
Boca Raton, Florida 33486
Common Richard J. Verdiramo (2) 100,000 1.54%
3163 Kennedy Boulevard
Jersey City, New Jersey 07306
Common Marion H. Verdiramo (3) 3,400,930 39.47%
3163 Kennedy Boulevard
Jersey City, New Jersey 07306
Common All Officers and Directors as
a Group- Two Persons 1,315,750 20.23%
</TABLE>
<PAGE> 10
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
(1) 1,115,750 of the shares are issued to Small Business Development Group,
Inc., a Florida Corporation of which William J. Auletta is the sole
stockholder.
(2) President and son of Marion H. Verdiramo
(3) Mother of Richard J. Verdiramo. Includes 2,000,000 currently
exercisable stock options.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
The following table sets forth the directors and executive officers
of the Company.
Name Age Position
- -------------------------- --- --------------------------------
Richard J. Verdiramo 35 Director, President, CEO
William J. Auletta 58 Director, Vice-President, COO
BIOGRAPHIES
Richard J. Verdiramo, 35, became President of the Company on March 1, 2000.
Prior thereto, he served as a Vice-President from May 1996. Mr. Verdiramo has
experience in the marketing of consumer products and brand development. From
1988 through 1996, Mr. Verdiramo was self-employed as a marketing consult,
developing marketing programs for various companies in a range of industries.
Mr. Verdiramo has a B.S. degree from Providence College.
Mr. William J. Auletta, 58, has served as COO and Vice President of the
Company since its inception. Prior thereto, he worked, as founder, president and
sole stockholder of Small Business Development Group, Inc., a marketing
consultancy, from 1980 through the present. In that capacity, Mr. Auletta has
created and implemented marketing plans for clients in more than 100 different
industries. Mr. Auletta attended Fairleigh Dickinson University and Rutgers
University.
ITEM 6. EXECUTIVE COMPENSATION.
The following table reflects compensation for services to the Company for
the fiscal years ended March 31, 1999 and 1998 of the executive officers. No
other executive officer of the Company received compensation which exceeded
$100,000 during this period.
<TABLE>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
Name Other Restricted
and Annual Stock
Principal Year Salary Bonus Comp. Awards(1)
Position ($) ($) ($) ($)
______________ ____ _______ _______ _______ __________
<C> <S> <S> <S> <S> <S>
Vincent L. 1999 $ -0- -0- -0- -0-
Verdiramo 1998 $ -0- -0- -0- -0-
President (2)
William J. 1999 $ 8,005 -0- -0- 100,000
Auletta 1998 $ -0- -0- -0- -0-
COO, VP
Richard J. 1999 $25,000 -0- -0- 100,000
Verdiramo 1998 $ -0- -0- -0- -0-
VP/President (3)
</TABLE>
<PAGE> 11
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
(1) In December 1998 the Board of Directors issued shares under Section 4(2) of
the Securities Act to Messrs. Verdiramo and Auletta for prior services rendered
to the Company.
(2) Vincent L. Verdiramo retired as president on March 1, 2000.
(3) Richard J. Verdiramo became president on March 1, 2000
EMPLOYEE STOCK OPTION PLAN
The Company believes that equity ownership is an important factor in its
ability to attract and retain skilled personnel and the Board of Directors of
the Company intends to adopt an employee stock option program. The purpose of
the stock option program will be to further the interest of the Company, its
subsidiaries and its stockholders by providing incentives in the form of stock
options to employees, consultants and directors who contribute materially to the
success and profitability of the Company. The grants will recognize and reward
outstanding individual performances and contributions and will give such
persons a proprietary interest in the Company, thus enhancing their personal
interest in the Company's continued success and progress. This program will
also assist the Company and its subsidiaries in attracting and retaining
employees and directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The current Board of Directors of the Company has adopted a policy that
Company affairs will be conducted in all respects by standards applicable to
publicly-held corporations and that the Company will not enter into any
transactions and/or loans between the Company and its officers and directors and
5% stockholders, unless the terms, as determined by the Board of Directors, are
110 percent more favorable than could be obtained from independent third parties
and unless such transactions are approved by a majority of the independent
disinterested directors of the Company.
In an effort to continue to fund CPM, the company loaned $332,400 to Ansam,
Inc., an affiliated entity owned by the Verdiramo family and controlled by
Vincent L. Verdiramo, the then president and CEO of the company. Ansam then
loaned 100% of these funds to CPM under the direction of a court order issued by
the bankruptcy court. This court order places Ansam's loan to CPM in a super
priority position with the loan being collateralized by the accounts receivable
of CPM. The company reflects this loan on its financials at a net amount of
$265,920 reflecting an allowance for bad debt of 20%. This allowance reflects
managements belief that under the chapter 7 the outstanding receivables are to
be collected by the trustee and are likely to be compromised to some degree.
Additionally the company's loan to Ansam and Ansam's loan to CPM are at a rate
of 8% interest.
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capital stock of the Company consists of 5,000,000 shares of
preferred stock, $0.001 par value and 25,000,000 shares of common stock, $0.001
par value. As of December 31, 1999 the Company had issued and outstanding
6,615,464 shares of common stock and no shares of preferred stock.
The following summary description of the securities of the Company is
qualified in its entirety by reference to the Articles of Incorporation
("Articles") and the Bylaws of the Company, copies of which are filed as
exhibits to this Form 10-SB.
<PAGE> 12
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
PREFERRED STOCK
The company is authorized to issue up to 5 million shares of non cumulative
preferred stock. As of the date hereof no shares of preferred stock have been
issued.
COMMON STOCK
The holders of common stock are entitled to one vote per share with respect
to all matters required by law to be submitted to stockholders of the Company.
The holders of common stock have the sole right to vote. The common stock does
not have any cumulative voting, preemptive, subscription or conversion rights.
The election of directors and other general stockholder action requires the
affirmative vote of a majority of shares represented at a meeting in which a
quorum is represented.
SHARES ELIGIBLE FOR FUTURE SALE
Of the 6,615,464 outstanding shares of common stock of the Company as of
December 31, 1999, approximately 3,202,450 are free trading shares, and
approximately 3,413,014 shares are restricted securities as that term is defined
in Rule 144 adopted under the Act ("Restricted Securities"). Rule 144 governs
resales of Restricted Securities for the account of any person, other than an
issuer, and restricted and unrestricted securities for the account of an
"affiliate" of the issuer. Restricted securities generally include any
securities acquired directly or indirectly from an issuer or its affiliates
which were not issued or sold in connection with a public offering registered
under the Securities Act. An affiliate of the issuer is any person who directly
or indirectly controls, is controlled by, or is under common control with, the
issuer. Affiliates of the Company may include its directors, executive officers,
and persons directly or indirectly owning 10% or more of the outstanding
common stock. Under Rule 144, unregistered resales of restricted common stock
cannot be made until it has been held for one year from the later of its
acquisition from the Company or an affiliate of the Company. Thereafter, shares
of common stock may be resold without registration subject to Rule 144's volume
limitation, aggregation, broker transaction, notice filing requirements, and
requirements concerning publicly available information about the Company
("Applicable Requirements"). Resales by the Company's affiliates of restricted
and unrestricted common stock are subject to the Applicable Requirements. The
volume limitations provide that a person, or persons who must aggregate their
sales, cannot, within any three-month period, sell more than the greater of (1)
one percent of the then outstanding shares, or (ii) the average weekly reported
trading volume during the four calendar weeks preceding each such sale. A
person who is not deemed an "affiliate" of the Company and who has beneficially
owned shares for at least two years would be entitled to sell such shares under
Rule 144 without regard to the Applicable Requirements.
No prediction can be made as to the effect, if any, that sales of shares of
common stock or the availability of such shares for sale will have on the market
prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of common stock may be sold in the public market would
likely have a material adverse effect on prevailing market prices for the common
stock and could impair the Company's ability to raise capital through the sale
of its equity securities.
<PAGE> 13
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON STOCK AND OTHER
SHAREHOLDER MATTERS.
The Company's trading symbol is "IMNI".
To the best of the Company's knowledge, from March 1994 to February 1997,
no broker-dealer made an active market or regularly submitted quotations for
the Company's stock, and that during this period, there were only a de minimis
and infrequent number of trades and de minimis trading volume. The following
information is from the National Association of Securities Dealers Automated
Quotation Service.
<TABLE>
HIGH LOW
QUARTER ENDED BID BID
- ----------------------- ---------------- ----------------
<S> <C> <C>
March 31, 1997 $ 8.00 $ 8.00
June 30, 1997 $ 8.00 $ 8.00
September 30, 1997 $ 8.00 $ 8.00
December 31, 1997 $ 8.00 $ 6.00
March 31, 1998 $ 5.67 $ 2.00
June 30, 1998 $ 2.63 $ 2.00
September 30, 1998 $ 2.63 $ 1.75
December 31, 1998 $ 2.56 $ 0.75
March 31, 1999 $ 3.00 $ 0.97
June 30, 1999 $ 1.03 $ 1.09
September 30, 1999 $ 1.12 $ 0.60
December 31, 1999 $ 0.60 $ 0.10
From February 1997 through December 10, 1999 the Company's common stock was
quoted on the OTC:BB. Since then it has been quoted on the Pink Sheets. The
bid price on the Company's common stock was $0.10 per share on December 31,
1999.
As of December 31, 1999, there were approximately 88 holders of record of
the Company's common stock.
The Company's transfer agent is Jersey Transfer and Trust Company, Inc.,
201 Bloomfield Avenue, Verona, New Jersey 07044, (973) 239-2712.
DIVIDEND POLICY
The Company has not paid, and the Company does not currently intend to pay
cash dividends on its common stock in the foreseeable future. The current policy
of the Company's Board of Directors is for the Company to retain all earnings,
if any, to provide funds for operation and expansion of the Company's business.
The declaration of dividends, if any, will be subject to the discretion of the
Board of Directors, which may consider such factors as the Company's results of
operations, financial condition, capital needs and acquisition strategy, among
others.
<PAGE> 14
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
ITEM 2. LEGAL PROCEEDINGS
The Company is a party to a legal action arising in the ordinary course of
business. The matter in question involves a failure to provide services. The
plaintiff in this matter is seeking damages in the amount of approximately six
million dollars. Management has retained the services of two independent law
firms to defend this matter and it is their conclusion that this matter is
totally without merit and a motion for summary judgement has been filed on
September, 1999 . The Company is awaiting a response. Management does not
expect any adverse effect on the Company to result from this matter.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Williams & Webster, P.S., conducted the audit of the Company for the
years ended March 31, 1999 and 1998. The Company's relationship with Williams
& Webster is ongoing.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the following transactions were affected by
the Company in reliance upon exemptions from registration under the Securities
Act of 1933 as amended (the "Act"), specifically Rule 144 as provided in Section
4(2) thereof except as otherwise indicated below. Each certificate issued for
unregistered securities contained a legend stating that the securities have not
been registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities. No underwriter participated in,
nor did the Company pay any commissions or fees to any underwriter in connection
with any of these transactions. None of the transactions involved a public
offering.
In June 1997 the Board of Directors issued 10,000 shares of common stock,
pursuant to Regulation S of the Securities Act, to Gino Zeppettini, as
compensation for services, specifically consulting services, rendered to the
Company valued at $10,000.
In June 1997 the Board of Directors issued 20,000 shares of common stock,
pursuant to Section 4(2) of the Securities Act, to Daniel J. Welsh, as
compensation for services, specifically legal consulting services, rendered to
the Company valued at $20,000.
In August 1997 the Board of Directors issued 31,875 shares of common stock,
pursuant to Regulation S of the Securities Act, to Christian Fave, as
compensation for services, specifically consulting services, rendered to the
Company valued at $31,875.
In August 1997 the Board of Directors issued 2,500 shares of common stock,
pursuant to Section 4(2) of the Securities Act, to Henry Finkelstein, as
compensation for services, specifically accounting services preformed by Myron
Finkelstein, father of Henry, rendered to the Company valued at $ 2,500.
In November 1997 the Board of Directors issued 1,000 shares of common
stock, pursuant to Section 4(2) of the Securities Act, to Patrick Desfosso, as
compensation for services, valued at $ 1,000.
In May 1998 the Board of Directors issued 2,000 shares of common stock,
pursuant to Section 4(2) of the Securities Act, to Tom Gavel as compensation
for services, specifically web design services, rendered to the Company valued
at $ 2,000.
<PAGE> 15
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
In June 1998 the Board of Directors issued 500 shares of common stock,
pursuant to Section 4(2) of the Securities Act, to Milton Hinojosa as
compensation for services, specifically consulting services, rendered to the
Company valued at $ 500.
In September 1998 the Board of Directors issued 25,000 shares of common
stock, pursuant to Rule 504 of the Securities Act, to Marjan Skubic as a direct
investment into the Company. The shares were sold to Mr. Skubic for $1.00 per
share.
In December 1998, the Company raised approximately $970,000 in cash
through the sale of 2,000,000 shares of its common stock in an offering
conducted under Rule 504 of Regulation D.
In December 1998 the Board of Directors issued 100,000 shares of common
stock, pursuant to Section 4(2) of the Securities Act, to William J. Auletta,
Director, CEO and Vice President of the Company, as compensation for prior
services rendered to the Company valued at $ 20,000.
In December 1998 the Board of Directors issued 200,000 shares of common
stock, pursuant to Regulation S of the Securities Act, to Bernard Gecker as
compensation for services, specifically consulting services, rendered to the
Company valued at $40,000.
In December 1998 the Board of Directors issued 100,000 shares of common
stock, pursuant to Section 4(2) of the Securities Act, to Maureen Hogan,
Secretary of the Company, as compensation for prior services rendered to the
Company valued at $20,000.
In December 1998 the Board of Directors issued 100,000 shares of common
stock, pursuant to Section 4(2) of the Securities Act, to Richard J. Verdiramo,
Vice President of the Company, as compensation for prior services rendered to
the Company valued at $20,000.
In December 1998 the Board of Directors issued 100,000 shares of common
stock, pursuant to Section 4(2) of the Securities Act, to Vincent S. Verdiramo
as compensation for services, specifically legal services, rendered to the
Company valued at $20,000. Mr. Vincent S. Verdiramo is the son of Vincent L.
Verdiramo, the company's former president, with whom he co-founded Verdiramo &
Verdiramo, P.A., the Company's legal counsel. Additionally, Mr. Vincent S.
Verdiramo is the brother of Richard J. Verdiramo, the president of the Company.
In March 1999 the Board of Directors issued 15,000 shares of common stock
to, pursuant to Section 4(2) of the Securities Act, Lee Lingreen as compensation
for services, specifically consulting services, rendered to the Company valued
at $15,000.
In March 1999 the Board of Directors issued 16,000 shares of common stock,
pursuant to Section 4(2) of the Securities Act, to Pompano Motor Company to be
held as a part of the lease agreement between AutoSmartUSA, Inc. and Pompano
Motor Company for the premises occupied by AutoSmartUSA, Inc. Said shares were
issued in lieu of rent valued at $24,000 or $1.50 per share.
In March 1999 the Board of Directors issued 15,000 shares of common stock,
pursuant to Section 4(2) of the Securities Act, to Kerri Robertson as
compensation for services, specifically consulting services, rendered to the
Company valued at $15,000.
<PAGE> 16
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
In March 1999 the Board of Directors issued 5,000 shares of common stock,
pursuant to Section 4(2) of the Securities Act, to Mark Tihasek as compensation
for services, specifically consulting services, rendered to the Company, valued
at $ 5,000.
In April 1999 the Board of Directors issued 30,000 shares of common stock,
pursuant to Regulation S of the Securities Act, to Bernard Gecker as
compensation for services, specifically consulting services, rendered to the
Company valued at $20,000.
In April 1999 the Board of Directors issued 1,000 shares of common stock,
pursuant to Section 4(2) of the Securities Act, to Bruce Hotchkiss as
compensation for services rendered, specifically the installation of the burglar
system at the AutoSmartUSA location, to the Company valued at $1,000.
In April 1999 the Board of Directors issued 1,000 shares of common stock,
pursuant to Section 4(2) of the Securities Act, to Silvia Hotchkiss as
compensation for services rendered, specifically the installation of the burglar
system at the AutoSmartUSA location, to the Company valued at $1,000.
In April 1999 the Board of Directors issued 2,000 shares of common stock,
pursuant to Section 4(2) of the Securities Act, to John F. Kenneally, as
compensation for services, specifically consulting services, rendered to the
Company valued at $2,000.
In April 1999 the Board of Directors issued 5,000 shares of common stock,
pursuant to Section 4(2) of the Securities Act, to Frank Reynolds as
compensation for services, specifically office renovation services, rendered to
the Company valued at $5,000.
In April 1999 the Board of Directors issued 5,000 shares of common stock,
pursuant to Section 4(2) of the Securities Act, to Robert Moser as compensation
for services, specifically technology consulting services, rendered to the
Company valued at $5,000.
In April 1999 the Board of Directors issued 1,000 shares of common stock,
pursuant to Section 4(2) of the Securities Act, to Joshua Ungerleider as
compensation for services, specifically consulting services, rendered by
Granville Ungerleider, the father of Joshua Ungerleider, to the Company valued
at $1,000.
In June 1999 the Board of Directors issued 20,000 shares of common stock,
pursuant to Regulation S of the Securities Act, to Domonick Roelandt as
compensation for services, specifically public relations services, rendered to
the Company valued at $20,000.
In September 1999 the Board of Directors issued 100,000 shares of common
stock, pursuant to Regulation S of the Securities Act, to Big Plans Investment
as a direct investment into the Company. The shares were sold to Big Plans
Investment for $0.50 per share.
In September 1999 the Board of Directors issued 10,000 shares of common
stock, pursuant to Rule 504 of the Securities Act, to DEM Consulting, Inc., as a
direct investment into the Company. The shares were sold to DEM Consulting,
Inc., for $0.50 per share.
<PAGE> 17
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The following summary description of certain provisions of the Company's
Articles of Incorporation and Bylaws is qualified in its entirety by reference
to the Articles of Incorporation ("Articles") and the Bylaws of the Company,
copies of which are included as exhibits to this Form 10-SB.
The Company's Articles of Incorporation provide that a Director or Officer
of the Company is not liable to either the Company or its shareholders for
breach of fiduciary duties involving any act or omission.
The Company's Bylaws provide for the indemnification of present and future
officers and directors for all liabilities against the officer or director in
connection with any claim by reason of his being or having been an officer or
director of the Company.
To the best of Management's information and believe these indemnification
provisions are consistent with federal and state law.
<PAGE> 18
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
PART F/S
INTERACTIVE MULTIMEDIA
NETWORK, INC.
Financial Statements
MARCH 31, 1999 AND 1998
WILLIAMS & WEBSTER, P.S.
Certified Public Accountants
Bank of America Financial Center
W 601 Riverside, Suite 1940
Spokane, WA 99201
(509) 838-5111
<PAGE> 19
INTERACTIVE MULTIMEDIA NETWORK, INC.
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations and Accumulated Deficit 3
Statement of Stockholders' Equity 4
Statements of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6
<PAGE> 20
Board of Directors
Interactive Multimedia Network, Inc.
Jersey City, New Jersey
Independent Auditor's Report
We have audited the accompanying balance sheets of Interactive Multimedia
Network, Inc. as of March 31, 1999 and 1998 and the related statements of
operations and accumulated deficit, cash flows, and stockholders' equity 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 audit.
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 financial statements referred to above present fairly, in
all material respects, the financial position of Interactive Multimedia Network,
Inc. as of March 31, 1999 and 1998, 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 2, the Company
has continuing losses and the realization of a major portion of the assets is
dependent upon the Company's ability to meet its future financing requirements,
and the success of future operations. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
regarding those matters are described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Spokane, Washington
April 24, 2000
<PAGE> 21
INTERACTIVE MULTIMEDIA NETWORK, INC.
BALANCE SHEETS
</TABLE>
<TABLE>
MARCH 31, MARCH 31,
1999 1998
--------------- ---------------
<S> <C> <C>
A S S E T S
CURRENT ASSETS
Cash $ 96,802 $ 5,763
Prepaid rent 26,400 -
Other receivables 76,724 -
TOTAL CURRENT ASSETS 199,926 5,763
--------------- ---------------
PROPERTY AND EQUIPMENT
Computer equipment 29,312 29,153
Furniture and equipment 19,753 16,896
Web-site 53,250 -
Software 199,564 197,938
Less: accumulated depreciation and amortization (222,578) (211,245)
--------------- ---------------
TOTAL PROPERTY AND EQUIPMENT 79,301 32,742
--------------- ---------------
OTHER ASSETS
Deferred offering costs, net of amortization - 695
Trademark, net of amortization 999 1,076
Investment in bankrupt subsidiary 119,782 -
--------------- ---------------
TOTAL OTHER ASSETS 120,781 1,771
--------------- ---------------
TOTAL ASSETS $ 400,008 $ 40,276
=============== ===============
L I A B I L I T I E S & S T O C K H O L D E R S ' E Q U I T Y
CURRENT LIABILITIES
Accounts payable $ 18,377 17,171
Note payable to officer 9,870 5,100
--------------- ---------------
TOTAL CURRENT LIABILITIES 28,247 22,271
--------------- ---------------
COMMITMENTS AND CONTINGENCIES - -
--------------- ---------------
STOCKHOLDERS' EQUITY
Preferred stock - non-cumulative $ 0.001
par value; 5,000,000 shares authorized;
no shares issued and outstanding - -
Common stock - $0.001 par value;
25,000,000 shares authorized;
6,440,464 and 5,757,964 shares issued
and outstanding 6,440 5,758
Additional paid-in capital 2,174,501 1,298,683
Common stock options; 2,000,000 issued
and outstanding 330,000 -
Subscriptions receivable (656,560) -
Accumulated deficit (1,482,620) (1,286,436)
--------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 371,761 18,005
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 400,008 $ 40,276
=============== ===============
The accompanying notes are an integral part of these financial statements.
<PAGE> 22
INTERACTIVE MULTIMEDIA NETWORK, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
</TABLE>
<TABLE>
YEAR ENDING YEAR ENDING
MARCH 31, MARCH 31,
1999 1998
--------------- ---------------
<S> <C> <C>
R E V E N U E S $ 991,968 $ 140,506
COST OF REVENUES 73,401 63,227
--------------- ---------------
GROSS PROFIT 918,567 77,279
--------------- ---------------
E X P E N S E S
Professional services 6,190 267,388
Internet services 19,358 227,043
Selling and administrative expenses 127,051 195,980
Consulting services 213,647 141,395
Advertising and promotional 618,715 84,862
--------------- ---------------
TOTAL EXPENSES 984,961 916,668
--------------- ---------------
OPERATING INCOME (LOSS) (66,394) (839,389)
--------------- ---------------
OTHER INCOME (EXPENSE)
Loss on investment in bankrupt subsidiary (129,854) -
Interest income 64 1,167
--------------- ---------------
(129,790) 1,167
--------------- ---------------
LOSS BEFORE INCOME TAXES (196,184) (838,222)
INCOME TAX BENEFIT - -
--------------- ---------------
NET LOSS (196,184) (838,222)
ACCUMULATED DEFICIT, BEGINNING BALANCE (1,286,436) (448,214)
--------------- ---------------
ACCUMULATED DEFICIT, ENDING BALANCE $ (1,482,620) $ (1,286,436)
=============== ===============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.04) $ (0.16)
=============== ===============
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF
COMMON STOCK SHARES OUTSTANDING 5,555,589 5,270,451
=============== ===============
The accompanying notes are an integral part of these financial statements.
<PAGE> 23
INTERACTIVE MULTIMEDIA NETWORK, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
*begin 8pt type*
</TABLE>
<TABLE>
Common Stock
------------------------ Additional Total
Number Paid-in Stock Subscriptions Accumulated Stockholders'
of Shares Amount Capital Options Receivable Deficit Equity
------------ ---------- ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning
balance at
March 31, 1997 4,894,000 $ 4,894 $ 591,824 $ $ $ (448,214) $ 148,504
Issuance of
common stock
in August, 1997
for cash at
$8.00 per share 62,505 63 499,977 500,040
Issuance of
common stock
in November,
1997 for
services at
$.252 per share 668,733 668 168,331 168,999
Issuance of
common stock
in November, 1997
for cash at
$.252 per share 125,726 126 31,558 31,684
Issuance of
common stock
in December, 1997
for services at
$1.00 per share 2,000 2 1,998 2,000
Issuance of
common stock
in February, 1998
for services at
$1.00 per share 5,000 5 4,995 5,000
Loss for year
ending March 31,
1998 (838,222) (838,222)
------------ ---------- ------------ ----------- ------------- ------------ -------------
Balance
March 31, 1998 5,757,964 $ 5,758 $ 1,298,683 $(1,286,436) $ 18,005
------------ ---------- ------------ ----------- ------------- ------------ -------------
</TABLE>
*end 8pt type*
The accompanying notes are an integral part of these financial statements.
<PAGE> 24
INTERACTIVE MULTIMEDIA NETWORK, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
*begin 8pt type*
<TABLE>
Common Stock
------------------------ Additional Total
Number Paid-in Stock Subscriptions Accumulated Stockholders'
of Shares Amount Capital Options Receivable Deficit Equity
------------ ---------- ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
March 31, 1998 5,757,964 $ 5,758 $ 1,298,683 $(1,286,436) $ 18,005
------------ ---------- ------------ ----------- ------------- ------------ -------------
Issuance of
common stock at
$1.00 per share
for services,
September 1998 2,500 2 2,498 - - - 2,500
Issuance of
common stock at
$1.00 per share
for cash,
September 1998 25,000 25 24,975 - - - 25,000
Issuance of
common stock at
mininum value of
$.20 per share
for services,
December 1998 600,000 600 119,400 - - - 120,000
Capital stock
reorganization (2,000,000) (2,000) (328,000) 330,000 - - -
Issuance of
common stock at
$.50 per share for
cash and notes,
December 1998 2,000,000 2,000 998,000 - (656,560) - 343,440
Issuance of
common stock at
no value in
acquisition of
bankrupted
subsidiary 4,000 4 (4) - - - -
Issuance of
common stock
at $1.00 per
share for services,
March 1999 35,000 35 34,965 - - - 35,000
Issuance of
common stoc at
$1.50 per share
for prepaid rent,
March 1999 16,000 16 23,984 - - - 24,000
Loss for year ending
March 31, 1999 - - - - - (196,184) (196,184)
------------ ---------- ------------ ----------- ------------- ------------ -------------
Balance,
March 31, 1999 6,440,464 $ 6,440 $ 2,174,501 $ 330,000 $ (656,560) $ (1,482,620) $ 371,761
============ ========== ============ =========== ============= ============ =============
</TABLE>
*end 8pt type*
The accompanying notes are an integral part of these financial statements.
<PAGE> 25
INTERACTIVE MULTIMEDIA NETWORK, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
YEAR ENDING YEAR ENDING
MARCH 31, MARCH 31,
1999 1998
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (196,184) $ (838,222)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation and amortization 12,106 35,292
Services and expenses paid by issuance
of common stock 181,500 176,000
Loss on investment in bankrupt subsidiary 129,854 -
Decrease (Increase) in :
Accounts receivable (76,724) 12,850
Prepaids and other assets (26,400) 78,432
Increase (Decrease) in :
Accounts payable 1,206 (20,937)
Accrued expenses - (236)
--------------- ---------------
Net cash provided (used) in
operating activities 25,358 (556,821)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,642) (12,527)
Purchase of software and website (53,250) -
Investment in bankrupt subsidiary (249,637) -
Deposit on leased property - 280
--------------- ---------------
Net cash (used) by
investing activities (307,529) (12,247)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of stock 368,440 531,724
Proceeds from notes payable to officer 4,770 -
--------------- ---------------
Net cash provided by
financing activities 373,210 531,724
--------------- ---------------
Net increase (decrease ) in cash 91,039 (37,344)
Cash, beginning of period 5,763 43,107
--------------- ---------------
Cash, end of period $ 96,802 $ 5,763
=============== ===============
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest and income taxes:
Interest $ 71 $ 46
=============== ===============
Income taxes $ - $ -
=============== ===============
The accompanying notes are an integral part of these financial statements.
<PAGE> 26
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Interactive Multimedia Network, (hereinafter "the Company"), was incorporated in
the State of New Jersey on March 4, 1994 and reincorporated in the State of
Delaware on June 13, 1995. The Company's primary business activity is marketing
through multiple media channels for the purpose of facilitating on-line
purchases of a variety of products and services. The corporate offices of the
Company are located in the State of New Jersey and the operational office in the
State of Florida. The Company's fiscal year end is March 31.
The Company's core business is Internet marketing of goods and services. With
the acquisition of CPM Associates (CPM), in January 1999, the Company tried to
the business of manufacturing specialty wood products for use by retailers at
retail store locations, but this company was not able to emerge from bankruptcy
(See Note 6).
The Company was developing two subsidiaries as of March 31, 1999 and planned to
serve as a holding company for its core and subsidiaries' operations.
References herein to the Company include the Company and its subsidiaries,
unless the context otherwise requires. As of March 31, 1999, the subsidiaries
had not begun significant operations nor acquired any significant assets or
liabilities (See Note 11).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Interactive Multimedia
Network, Inc. is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management, which is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
Principles of Consolidation
- -----------------------------
The Company will consolidated financial statements in the future when the
subsidiaries have begun operations, and the statements will include the accounts
of the Company and its subsidiaries. All significant intercompany transactions
and balances will be eliminated in consolidation.
Accounting Method
- ------------------
The Company's financial statements are prepared using the accrual method of
accounting.
Loss Per Share
- ----------------
In December 1997, the Company adopted Statement of Financial Accounting
Standards Statement (SFAS) No. 128, Earnings Per Share. Basic earnings per
share is computed using the weighted average number of common shares
outstanding. Diluted net loss per share is the same as basic net loss per share
as the inclusion of common stock equivalents would be antidilutive. As of March
31, 1999, restricted stock warrants of 62,505 and common stock options of
2,000,000 were not included in computing diluted per share because their effects
were antidilutive.
<PAGE> 27
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
Advertising Costs
- ------------------
Advertising costs are charged to expense as incurred. Advertising expenses for
fiscal years 1999 and 1998 were $618,715 and $84,862, respectively.
Cash and Cash Equivalents
- ----------------------------
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Minor Reclassifications
- ------------------------
Certain expenses shown in the Company's March 31, 1998 Statement of Operations
have been restated. The effect of this restatement is to reclassify some
expenses into larger, more appropriate expense categories. No changes to the
Company's balance sheet or to the Company's reported net loss have been made as
a result of these minor reclassifications.
Revenue and Cost Recognition
- -------------------------------
Revenues from information technology services are recognized when services and
products are furnished or delivered. During 1998 and 1999 the Company's
operations included "Shop the Net" Internet sales in which the Company
recognized commission as an agent for commercial participants in this web
marketing service. Commissions are recognized as earned at the time of sale.
The Company is currently bringing a new automobile marketing web-site on-line in
March 1999. The Company will recognize revenue from the sale of vehicles or
commissions for representing other dealers providing vehicles, which have
contracted through this web-site.
Fair Value of Financial Instruments
- ---------------------------------------
The carrying amounts for cash, marketable securities, accounts receivable,
accounts payable, notes payable and accrued liabilities approximate their fair
value.
Provision for Income Taxes
- -----------------------------
At March 31, 1999, the Company had a net operating loss carryforward of
approximately $1,450,000. No provision for taxes or tax benefit has been
reported in the financial statements, as there is not a measurable means of
assessing future profits or losses.
Segment Information
- --------------------
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," in the fiscal year ended March 31, 1999. SFAS No. 131
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise," replacing the "industry segment" approach with the "management"
approach. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of the Company's reportable segments. SFAS No. 131 also requires
disclosures about products and services, geographic areas and major customers.
The adoption of SFAS No. 131 did not affect the Company's results of operations
or financial position. For the year ending March 31, 1999, the Company had no
significant segments.
<PAGE> 28
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
Use of Estimates
- ------------------
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
Concentration of Credit Risk
- -------------------------------
A portion of the Company's revenues is derived from services provided to others
through Internet online services and from an Internet online advertising agency,
which collects Company revenues and pays related charges. As a result, the
Company has some concentration of credit risk among its customer base and its
advertising agency.
Year 2000
- ----------
The Company like other firms, could be adversely affected if the computer
systems used by it, its suppliers or customers do not properly process and
calculate date-related information and data from the period surrounding and
including January 1, 2000. This is commonly known as the "Year 2000" issue.
Additionally, this issue could impact non-computer systems and devices such as
production equipment. At this time, because of the complexities involved in the
issue, management cannot provide assurances that the Year 2000 issue will not
have an impact on the Company's operations. The Company has not had any
significant problems as of the first quarter of year 2000.
The Company has reviewed its technology, including software and hardware, and
has determined that there will be no adverse effects to the Company's operation
regarding Year 2000 issues. Management also believes that Year 2000 issues
should not adversely affect the ability of its clients and customers to conduct
business with the Company. The Company has estimated the cost of compliance to
be approximately $10,000. Any costs associated with Year 2000 compliance are
expensed when incurred.
Going Concern
- --------------
As shown in the accompanying financial statements, the Company incurred net
losses of $196,184 and $838,222 for the years ended March 31, 1999 and 1998,
respectively. The Company is currently putting technology in place which will,
if successful, mitigate these factors which had raised substantial doubt about
the Company's ability to continue as a going concern.
Management has established plans designed to increase the sales of the Company's
products. Management intends to seek new capital from new equity securities
issuance that will provide funds needed to increase liquidity, fund internal
growth and fully implement its business plan.
During 1999, the Company received $368,000 in new equity. In the nine months
subsequent to March 31, 1999, the Company received over $626,560 from stock
subscriptions. A substantial amount of these funds were invested in CPM until
December 1999 when the bankruptcy was converted to a liquidation.
Impaired Asset Policy
- -----------------------
In March 1995, the Financial Accounting Standards Board issued a statement
titled "Accounting for Impairment of Long-lived Assets." In complying with this
<PAGE> 29
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
standard, the Company will review its long-lived assets quarterly to determine
if any events or changes in circumstances have transpired which indicate that
the carrying value of its assets may not be recoverable. The Company determines
impairment by comparing the undiscounted future cash flows estimated to be
generated by these assets to their respective carrying amounts. The Company
does not believe any adjustments are needed to the carrying value of its assets
at March 31, 1999.
Derivative Instruments
- -----------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This new standard establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires that entities recognize all derivatives as either assets or liabilities
in the consolidated balance sheet and measure those instruments at fair value.
At March 31, 1999, the Company has not engaged in any transactions that would be
considered derivative instruments or hedging activities.
NOTE 3 - PROPERTY AND EQUIPMENT
Furniture and equipment
- -------------------------
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. The useful
lives of property, plant and equipment for purposes of computing depreciation
and amortization are five to seven years. The following is a summary of
property, equipment and accumulated depreciation:
Cost Accumulated Depreciation
---------- -------------------------
Computers $ 29,312 $ 24,911
Furniture and equipment 19,753 11,357
---------- -------------------------
$ 49,065 $ 36,268
========== =========================
Maintenance and repairs are expensed as incurred. Replacements and betterments
are capitalized. The cost and related reserves of assets sold or retired are
removed from the accounts, and any resulting gain or loss is reflected in
results of operations.
Software is stated at cost. Amortization is provided using the straight-line
method over the estimated useful lives of the assets. The useful life of the
Company's software for purposes of computing amortization is three years. The
following is a summary of software and accumulated amortization.
Cost Accumulated Depreciation
---------- -------------------------
Software $ 199,564 $ 184,764
Website 53,250 1,546
---------- -------------------------
$ 252,814 $ 186,310
========== =========================
<PAGE> 30
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
The Company has capitalized $199,564, which is the cost of software purchased
from an independent software supplier. No portion of this software was
internally developed and, accordingly, there are no internal costs associated
with this software, which were charged to research and development. Consistent
with SOP 98-1, the costs of this software-which was purchased solely for
internal use and will not be marketed externally-have been capitalized.
NOTE 4 - INTANGIBLE ASSETS
Organization and Trademark Costs
- -----------------------------------
In prior years, Interactive Multimedia Network, Inc. incurred organization and
trademark costs of $2,612 and $1,305, respectively. These costs are being
amortized over the useful life of sixty months. During the year ending March
31, 1999, $695 and $229 were recorded as amortization expenses for organization
and trademark costs, respectively. In accordance with SOP 98-5 (effective for
fiscal years beginning after December 15, 1998), the Company has written off its
organization costs in 1999, thereby incurring a one-time-only charge of $695.
NOTE 5 - COMMON STOCK
During the period ending March 31, 1999, the Company issued 2,000,000 common
stock shares under Regulation D, Rule 504 at $.50 per share. These 2,000,000
common stock shares were not the same shares returned to the Company by Marion
Verdiramo, nor did Marion Verdiramo participate in the Regulation D, Rule 504
offering. See Note 10. Another 25,000 common shares were issued for cash at
$1.00 per share and 637,500 common shares were issued for services at values of
$0.20 to $1.00 per share. The Company valued these services at $157,500. The
Company also issued 16,000 common shares for prepaid rent for a new subsidiary
valued at $24,000. As part of the failed acquisition of CPM, the Company had
issued 4,000 shares of common stock for no additional value.
The outstanding stock subscriptions, resulting from the Regulation D, Rule 504
issuance, were $656,560,as of March 31, 1999, and were secured by the common
stock. Subsequent to the year-end but prior to issuance of the financial
statements, $626,650 was collected from these subscriptions.
NOTE 6 - ACQUISITION OF CONTRACTING, PLANNING AND MANAGEMENT ASSOCIATES, INC.
AND SUBSEQUENT BANKRUPTCY
On January 2, 1999, the Company through its subsidiary CPM Holdings, Inc.
acquired 80% of the common stock of Contracting, Planning and Management
Associates, Inc. (hereinafter "CPM"), a wood products manufacturer located in
Brentwood, New Hampshire. The transaction, which was to be accounted for as a
purchase, involved the payment of $50,000 in cash to CPM's shareholders in
exchange for stock. As part of the transaction, the Company obligated itself to
provide working capital financing of $350,000 to CPM. As part of the
acquisition, the Company acquired property and equipment with a fair market
value of $729,119, which is equivalent to the book value of the assets in CPM's
records. These assets will be depreciated over lives of five to thirteen years.
The Company also acquired control of inventory, receivables and other current
assets valued at $336,454.
<PAGE> 31
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
On January 8, 1999, CPM (the "Debtor") filed petitions for relief under Chapter
11 of the federal bankruptcy laws in the United States Bankruptcy Court for the
District of New Hampshire. Under Chapter 11, certain claims against the Debtor
in existence prior to the filing of the petitions for relief under the federal
bankruptcy laws are stayed while the Debtor continues business operations as
Debtor-in-possession
The activities of the Company and CPM are not consolidated for the period from
January 2, 1999 to March 31, 1999 and 1998, because the control of this
subsidiary was only never achieved and in December 1999, the court converted the
bankruptcy to a liquidation under Chapter 7 of the Bankruptcy Code.
At the time of its bankruptcy filing, CPM had reported assets of $1,600,000 and
liabilities of $2,300,000. Other than the original investment of $50,000, the
Company had loaned an additional $199,563 as of March 31, 1999. This loan was
to have interest paid at 8% and no interest has been accrued because of the
subsequent bankruptcy filing. The Company currently estimates that it will
receive approximately sixty percent of its original loans in the liquidation.
The Company has reduced its investment with a charge to loss on investments of
$50,000 for the stock investment and $79,854 on its debt investment.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Lease Commitments
- ------------------
The Company leases office space for its Florida operation under a month-to-month
lease agreement. This lease requires a monthly lease payment of $975.
Lease expense paid during the year ended March 31, 1999 was $11,700.
On February 22, 1999 the Company entered into a lease of office space for the
use of AutoSmart USA, Inc., a subsidiary which was being formed as of March 31,
1999. The lease was for three years with a base rent of $6,000 per month and a
grant of 16,000 shares of common stock with a value of $24,000. The stock grant
was to cover an additional $2,000 per month in rent and is being treated as
prepaid rent and being charged to operations monthly as of March 31, 1999.
Future stock grants will be dependent on the sales activities generated at this
site and the effect upon the landlord's related business. In addition to the
unamortized prepaid rent of $22,000 as of March 31, 1999, $4,400 of the March
rent payment of $6,000 was considered as prepaid rent for April 1999. The
future minimal lease payments for years ended March 31 are:
Lease Payments Year
- --------------- ----
$72,000 2000
72,000 2001
60,000 2002
Legal Matters
- --------------
The Company is involved in a legal action. See Note 13.
Contingent Liability
- ---------------------
The Company is contingently liable for bonuses based on CPM earnings. See Note
8.
<PAGE> 32
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
NOTE 8 - RELATED PARTIES
Legal services to Interactive Multimedia Network, Inc. are performed by
Verdiramo & Verdiramo, P.A. This professional association is owned by Vincent
L. Verdiramo, the former President of Interactive Multimedia Network, Inc. and
his son Vincent S. Verdiramo. Verdiramo & Verdiramo, P.A. is providing limited
use of office space for the benefit of the Company, with no charge for rent.
For the year ended March 31, 1999, the Company paid $11,800 to this law firm for
legal services.
The Company has been involved in periodic transactions, whereby money has been
advanced to the President of the Company and the President has advanced money to
the Company. The Company made an unsecured loan of $8,900 on March 15, 1996 to
the President. This note, due on demand with an interest rate equal to the
prevailing Federal Reserve Rate, was satisfied in fiscal 1997. The President
advanced later, additional funds to the Company. As of March 31, 1999 the
Company was obligated to the former President for a total of $9,870. This
amount is non-interest bearing and is due on demand.
Space leased in the name of William J. Auletta, Vice President of Interactive
Multimedia Network, Inc., is used by the Company to conduct business in Florida.
The Company pays the lessor directly. See Note 7.
The Company routinely sends funds to Small Business Development Group, Inc., a
corporation owned solely by William J. Auletta. These funds are used to pay
postage, utilities and other office expenses on behalf of the Company's office
in Florida.
NOTE 9 - MINORITY INTEREST
CPM Holdings, Inc. owns 80% of CPM Associates. The remaining 20% of CPM
Associates is held by four related shareholders. This Company is reorganizing
under bankruptcy protection, and as such has no current equity. The subsequent
bankruptcy developments makes the establishment of a minority interest in the
financial statements highly improbable.
NOTE 10 - STOCK REORGANIZATION AND STOCK OPTIONS
Marion Verdiramo, a related party, returned 2,000,000 shares of common stock to
the Company as part of a capital restructuring and in return received 2,000,000
common stock options at $.10 per share which can be exercised any time during
the subsequent three years. This exchange was believed to be beneficial to the
Company as it reduced its outstanding float. These options were valued at
$330,000 based upon the Black-Scholes value of the common stock at the time of
the options' issuance. The Black-Scholes model assumes that the stock value at
issuance of the option is $0.25 per share and that volatility is 0.3, and the
risk free interest value is 0.05. Based on these values, the model values each
of the options to be worth $0.165, resulting in a total value of $330,000.
These 2,000,000 shares had been issued originally as part of an issuance of
3,400,000 in satisfaction for loans of approximately $340,000.
Marion Verdiramo has never been an employee, officer, director or independent
consultant for the Company. Marion Verdiramo converted a loan to the Company
for 2,000,000 shares of restricted common stock. Subsequently, those shares
were never freed from restrictive legend and returned to the Company. This was
done to facilitate the Company's ability to issue additional stock into the
market place. The Company chose to reduce outstanding stock in this manner
instead of implementing a reverse stock split.
<PAGE> 33
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
NOTE 11 - SUBSIDIARIES
CPM Holdings, Inc. is a wholly owned subsidiary holding the Company's 80%
interest in CPM Associates. CPM is not consolidated because of the bankruptcy,
which results in only temporary control and in accordance with Statements on
Financial Accounting Standards No. 94 requiring consolidation of a majority
owned subsidiaries. AutoSmart USA, Inc. is a Nevada corporation and is a
wholly owned subsidiary of IMNI. AutoSmart USA Leasing Inc. is a Florida
corporation and is also a wholly owned subsidiary. These subsidiaries were
established in 1999 and had no activities prior to the Company's year-end and
were preparing to begin operations in April 1999.
NOTE 12 - PREFERRED STOCK
The Company's preferred stock has not been issued. The Company is authorized to
issue 5,000,000 shares of $0.001 par value preferred stock, which contains no
voting privileges and is not entitled to accrued dividends or conversion into
shares of the Company's common stock.
NOTE 13 - LITIGATION
The Company is a party to a legal action arising in the ordinary course of
business. Management has retained the services of two law firms to defend this
matter and it is their conclusion that the matter is totally without merit and a
motion for summary judgment has been filed. Management does not expect any
adverse effect on the Company to result from this matter.
NOTE 14 - RESTRICTED STOCK WARRANTS
In August 1997, the Company issued 62,505 share of common stock at $8.00 per
share. Attached to each share purchased was a restricted warrant for the
purchase of an additional share at $12.00 per common share. These restricted
stock warrants became exercisable in August 1998 for a one-year period. At
issuance, the warrants were deemed to have no value since the exercisable price
exceeded the minimum value of the common stock as calculated under the fair
value method for valuation of stock based compensation. As of August 31, 1999,
the restricted warrants had expired.
<PAGE> 34
INTERACTIVE MULTIMEDIA
NETWORK, INC.
Consolidated Financial Statements
DECEMBER 31, 1999
WILLIAMS & WEBSTER, P.S.
Certified Public Accountants
Bank of America Financial Center
W 601 Riverside, Suite 1940
Spokane, WA 99201
(509) 838-5111
<PAGE> 35
INTERACTIVE MULTIMEDIA NETWORK, INC.
TABLE OF CONTENTS
ACCOUNTANT'S REVIEW REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets 2
Consolidated Statements of Operations and Accumulated Deficit 3
Consolidated Statement of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6
<PAGE> 36
Board of Directors
Interactive Multimedia Network, Inc.
Jersey City, New Jersey
Accountant's Review Report
We have reviewed the accompanying consolidated balance sheets of Interactive
Multimedia Network, Inc. as of December 31, 1999 and the related consolidated
statements of operations and accumulated deficit, consolidated cash flows, and
consolidated stockholders' equity for the nine months ended December 31, 1999,
and 1998. These consolidated financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. 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 consolidated financial statements in order for them
to be in conformity with generally accepted accounting principles.
The consolidated financial statements for the year ended March 31, 1999 were
audited by us and we expressed an unqualified opinion on them in our report
dated April 24, 2000, but we have not performed any auditing procedures since
that date.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2, the
Company has continuing losses and the realization of a major portion of the
assets is dependent upon the Company's ability to meet its future financing
requirements, and the success of future operations. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans regarding those matters are described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Spokane, Washington
May 1, 2000
<PAGE> 37
(Begin 9pt type)
INTERACTIVE MULTIMEDIA NETWORK, INC.
CONSOLIDATED BALANCE SHEETS
</TABLE>
<TABLE>
DECEMBER 31, 1999 MARCH 31, 1999
(unaudited)
----------------- ----------------
<S> <C> <C>
A S S E T S
CURRENT ASSETS
Cash $ 55,037 $ 96,802
Inventory 63,293 -
Prepaid rent 8,400 26,400
Other receivables 27,800 76,724
----------------- ----------------
TOTAL CURRENT ASSETS 154,530 199,926
----------------- ----------------
PROPERTY AND EQUIPMENT
Computer equipment 51,761 29,312
Furniture and equipment 50,309 19,753
Web-site 53,250 53,250
Software 199,564 199,564
Less: accumulated depreciation and amortization (239,487) (222,578)
----------------- ----------------
TOTAL PROPERTY AND EQUIPMENT 115,397 79,301
----------------- ----------------
OTHER ASSETS
Trademark, net of amortization 941 999
Note receivable from related party 265,920 -
Investment in bankrupt subsidiary 197,746 119,782
----------------- ----------------
TOTAL OTHER ASSETS 464,607 120,781
----------------- ----------------
TOTAL ASSETS $ 734,534 $ 400,008
================= ================
L I A B I L I T I E S & S T O C K H O L D E R S ' E Q U I T Y
CURRENT LIABILITIES
Accounts payable $ 130,655 $ 18,377
Advance from stockholders 127,373 -
Accrued interest 5,095 -
Note payable to officer 2,870 9,870
----------------- ----------------
TOTAL CURRENT LIABILITIES 265,993 28,247
----------------- ----------------
COMMITMENTS AND CONTINGENCIES - -
----------------- ----------------
STOCKHOLDERS' EQUITY
Preferred stock - non-cumulative $ 0.001 par value;
5,000,000 shares authorized; no shares issued and
outstanding - -
Common stock - $0.001 par value; 25,000,000 shares
authorized; 6,615,464 and 6,440,464 shares issued
and outstanding 6,615 6,440
Additional paid-in capital 2,264,326 2,174,501
Common stock options; 2,000,000 issued and outstanding 330,000 330,000
Subscriptions receivable - (656,560)
Accumulated deficit (2,132,400) (1,482,620)
----------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 468,541 371,761
----------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 734,534 $ 400,008
================= ================
</TABLE>
See accountants' review report and accompanying notes to the financial
statements.
<PAGE> 38
INTERACTIVE MULTIMEDIA NETWORK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
NINE MONTHS NINE MONTHS
QUARTER ENDING QUARTER ENDING ENDING ENDING
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
(unaudited) (unaudited) (unaudited) (unaudited)
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
R E V E N U E S $ 613,367 $ 11,595 $ 921,605 $ 101,439
COST OF REVENUES 522,750 2,970 656,715 8,079
-------------- -------------- -------------- -------------
GROSS PROFIT 90,617 8,625 264,890 93,360
-------------- -------------- -------------- -------------
E X P E N S E S
Professional services 77,590 15,418 102,653 27,278
Internet services 1,406 1,718 11,486 9,778
Selling and administrative expenses 92,370 31,597 392,439 46,721
Consulting services 65,000 120,000 95,000 122,500
Advertising and promotional 48,489 2,033 186,561 9,273
-------------- -------------- -------------- -------------
TOTAL EXPENSES 284,855 170,766 788,139 215,550
-------------- -------------- -------------- -------------
OPERATING LOSS (194,238) (162,141) (523,249) (122,190)
-------------- -------------- -------------- -------------
OTHER INCOME (EXPENSE)
Loss on investment in bankrupt
subsidiary (121,788) - (121,788) -
Interest expense (5,135) - (5,135) -
Interest income - - 392 39
-------------- -------------- -------------- -------------
(126,923) - (126,531) 39
-------------- -------------- -------------- -------------
LOSS BEFORE INCOME TAXES (321,161) (162,141) (649,780) (122,151)
INCOME TAX BENEFIT - - - -
-------------- -------------- -------------- -------------
NET (INCOME) LOSS (321,161) (162,141) (649,780) (122,151)
ACCUMULATED DEFICIT,
BEGINNING BALANCE (1,811,239) (1,246,446) (1,482,620) (1,286,436)
-------------- -------------- -------------- -------------
ACCUMULATED DEFICIT,
ENDING BALANCE $ (2,132,400) $ (1,408,587) $ (2,132,400) $ (1,408,587)
============== ============== ============== =============
BASIC AND DILUTED LOSS PER
COMMON SHARE $ (0.05) $ (0.03) $ (0.10) $ (0.02)
============== ============== ============== =============
BASIC AND DILUTED WEIGHTED
AVERAGE NUMBER OF COMMON
STOCK SHARES OUTSTANDING 6,582,964 5,450,464 6,527,964 5,550,339
============== ============== ============== =============
</TABLE>
See accountants' review report and accompanying notes to the financial
statements.
<PAGE> 39
(Begin 8pt type)
INTERACTIVE MULTIMEDIA NETWORK, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
Common Stock
------------------------ Additional Total
Number Paid-in Stock Subscriptions Accumulated Stockholders'
of Shares Amount Capital Options Receivable Deficit Equity
------------ ---------- ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance March
31, 1998 5,757,964 $ 5,758 $ 1,298,683 - - $ (1,286,436) $ 18,005
------------ ---------- ------------ ----------- ------------- ------------ -------------
Issuance of
common stock at
$1.00 per share
for services,
September 1998 2,500 2 2,498 - - - 2,500
Issuance of
common stock at
$1.00 per share
for cash,
September 1998 25,000 25 24,975 - - - 25,000
Issuance of
common stock
at mininum value
of $.20 per share
for services,
December 1998 600,000 600 119,400 - - - 120,000
Capital stock
reorganization (2,000,000) (2,000) (328,000) 330,000 - - -
Issuance of
common stock
at $.50 per
share for cash
and notes,
December 1998 2,000,000 2,000 998,000 - (656,560) - 343,440
Issuance of
common stock at
no value in
acquisition of
bankrupted
subsidiary 4,000 4 (4) - - - -
Issuance of
common stock at
$1.00 per share
for services,
March 1999 35,000 35 34,965 - - - 35,000
Issuance of
common stock at
$1.50 per share
for prepaid rent,
March 1999 16,000 16 23,984 - - - 24,000
Loss for year ending
March 31, 1999 - - - - - (196,184) (196,184)
------------ ---------- ------------ ----------- ------------- ------------ -------------
Balance March
31, 1999 6,440,464 6,440 2,174,501 330,000 (656,560) (1,482,620) 371,761
------------ ---------- ------------ ----------- ------------- ------------ -------------
</TABLE>
See accountants' review report and accompanying notes to the financial
statements.
<PAGE> 40
INTERACTIVE MULTIMEDIA NETWORK, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
Common Stock
------------------------ Additional Total
Number Paid-in Stock Subscriptions Accumulated Stockholders'
of Shares Amount Capital Options Receivable Deficit Equity
------------ ---------- ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Carryforward
March 31, 1999 6,440,464 6,440 2,174,501 330,000 (656,560) (1,482,620) 371,761
------------ ---------- ------------ ----------- ------------- ------------ -------------
Payments and
adjustments from
subscriptions
receivable - - (30,000) - 656,560 - 626,560
Issuance of
common stock at
$1.00 per share
for services 65,000 65 64,935 - - - 65,000
Issuance of
common stock
at $0.50 per
share for cash,
September 1999 110,000 110 54,890 - - - 55,000
Loss for nine
months ending
December 31,
1999 - - - - - (649,780) (649,780)
------------ ---------- ------------ ----------- ------------- ------------ -------------
Balance December
31, 1999
(unaudited) 6,615,464 $ 6,615 $ 2,264,326 $ 330,000 $ - $ (2,132,400) $ 468,541
============ ========== ============ =========== ============= ============ =============
</TABLE>
(end 8pt type)
(begin 9pt type)
See accountants' review report and accompanying notes to the financial
statements.
<PAGE> 41
INTERACTIVE MULTIMEDIA NETWORK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
NINE MONTHS NINE MONTHS
ENDING ENDING
DECEMBER 31, DECEMBER 31,
1999 1998
(unaudited) (unaudited)
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (649,780) $ (122,151)
Adjustments to reconcile net loss
to net cash provided (used)
by operating activities:
Depreciation and amortization 16,967 8,757
Services and expenses paid by issuance
of common stock 65,000 122,500
Loss on investment in bankrupt subsidiary 121,788 -
Decrease (Increase) in:
Accounts receivable 48,924 (49,607)
Inventory (63,293) -
Prepaids and other assets 18,000 -
Increase (Decrease) in :
Accounts payable 112,278 (623)
Accrued expenses 5,095 -
-------------- --------------
Net cash used in operating activities (325,021) (41,124)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (53,005) (4,642)
Loans to related party (332,400) -
Investment in bankrupt subsidiary (133,272) -
Deposit on leased property - (280)
-------------- --------------
Net cash used in investing activities (518,677) (4,922)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of stock 681,560 49,000
Advances from stockholders 127,373 -
Payments on notes payable to officer (7,000) -
-------------- --------------
Net cash provided in financing activities 801,933 49,000
-------------- --------------
Net increase (decrease ) in cash (41,765) 2,954
Cash, beginning of period 96,802 5,763
-------------- --------------
Cash, end of period $ 55,037 $ 8,717
============== ==============
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest and income taxes:
Interest $ 40 $ 46
============== ==============
Income taxes $ - $ -
============== ==============
</TABLE>
(end 9pt type)
See accountants' review report and accompanying notes to the financial
statements.
<PAGE> 42
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Interactive Multimedia Network, (hereinafter "the Company"), was incorporated in
the State of New Jersey on March 4, 1994 and reincorporated in the State of
Delaware on June 13, 1995. The Company's primary business activity is marketing
through multiple media channels for the purpose of facilitating on-line
purchases of a variety of products and services. The corporate offices of the
Company are located in the State of New Jersey and the operational office in the
State of Florida. The Company's fiscal year end is March 31.
The Company's core business is Internet marketing of goods and services. With
the acquisition of CPM Associates (CPM), in January 1999, the Company tried to
enter the business of manufacturing specialty wood products for use by retailers
at retail store locations, but this company was not able to emerge from
bankruptcy The Company has an investment in CPM, which may be recovered in the
bankruptcy liquidation (See Note 6).
The Company has two other operating subsidiaries, which were organized in 1999.
As of December 31, 1999, the Company serves as a holding company for its core
and subsidiaries' operations. References herein to the Company include the
Company and its subsidiaries, unless the context otherwise requires. As of
March 31, 1999, the subsidiaries had not begun significant operations nor
acquired any significant assets or liabilities (See Note 11).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Interactive Multimedia
Network, Inc. is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management, which is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
Principles of Consolidation
- -----------------------------
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions and balances are
eliminated in the consolidation.
Accounting Method
- ------------------
The Company's financial statements are prepared using the accrual method of
accounting.
Loss Per Share
- ----------------
In December 1997, the Company adopted Statement of Financial Accounting
Standards Statement (SFAS) No. 128, Earnings Per Share. Basic earnings per
share is computed using the weighted average number of common shares
outstanding. Diluted net loss per share is the same as basic net loss per share
as the inclusion of common stock equivalents would be antidilutive. As of March
31, 1999, restricted stock warrants of 62,505 and common stock options of
2,000,000 were not included in computing diluted per share because their effects
were antidilutive.
<PAGE> 43
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Advertising Costs
- ------------------
Advertising costs are charged to expense as incurred. Advertising expenses for
fiscal year 1999 was $618,715 and $186,561 for the nine months ended December
31, 1999.
Cash and Cash Equivalents
- ----------------------------
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Minor Reclassifications
- ------------------------
Certain expenses shown in the Company's December 31, 1999 consolidated financial
statements have been restated. The effect of this restatement is to reclassify
some expenses into larger, more appropriate expense categories. No changes to
the Company's balance sheet or to the Company's reported net loss have been made
as a result of these minor reclassifications.
Revenue and Cost Recognition
- -------------------------------
Revenues from information technology services are recognized when services and
products are furnished or delivered. During 1998 and 1999 the Company's
operations included "Shop the Net" Internet sales in which the Company
recognized commission as an agent for commercial participants in this web
marketing service. Commissions are recognized as earned at the time of sale.
The Company is currently bringing a new automobile marketing web-site on-line in
March 1999. The Company will recognize revenue from the sale of vehicles or
commissions for representing other dealers providing vehicles, which have
contracted through this web-site. The subsidiaries, AutoSmart USA, Inc. and
AutoSmart USA Leasing, Inc. recognize revenues through the sale and leasing of
vehicles through the use of the Internet.
Fair Value of Financial Instruments
- ---------------------------------------
The carrying amounts for cash, marketable securities, accounts receivable,
accounts payable, notes payable and accrued liabilities approximate their fair
value.
Provision for Income Taxes
- -----------------------------
At March 31, 1999, the Company had a net operating loss carryforward of
approximately $2,100,000. No provision for taxes or tax benefit has been
reported in the financial statements, as there is not a measurable means of
assessing future profits or losses.
<PAGE> 44
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Segment Information
- --------------------
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," in the fiscal year ended March 31, 1999. SFAS No. 131
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise," replacing the "industry segment" approach with the "management"
approach. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of the Company's reportable segments. SFAS No. 131 also requires
disclosures about products and services, geographic areas and major customers.
The adoption of SFAS No. 131 did not affect the Company's results of operations
or financial position. For the year ending March 31, 1999 the Company had not
adopted any segments and considers its operations as related Internet based
sales.
Use of Estimates
- ------------------
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
Concentration of Credit Risk
- -------------------------------
A portion of the Company's revenues is derived from services provided to others
through Internet online services and from an Internet online advertising agency,
which collects Company revenues and pays related charges. As a result, the
Company has some concentration of credit risk among its customer base and its
advertising agency.
Year 2000
- ----------
The Company like other firms, could be adversely affected if the computer
systems used by it, its suppliers or customers do not properly process and
calculate date-related information and data from the period surrounding and
including January 1, 2000. This is commonly known as the "Year 2000" issue.
Additionally, this issue could impact non-computer systems and devices such as
production equipment. At this time, because of the complexities involved in the
issue, management cannot provide assurances that the Year 2000 issue will not
have an impact on the Company's operations. The Company has not had any
significant problems as of the first quarter of year 2000.
The Company has reviewed its technology, including software and hardware, and
has determined that there will be no adverse effects to the Company's operation
regarding Year 2000 issues. Management also believes that Year 2000 issues
should not adversely affect the ability of its clients and customers to conduct
business with the Company. The Company has estimated the cost of compliance to
be approximately $10,000. Any costs associated with Year 2000 compliance are
expensed when incurred.
<PAGE> 45
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Going Concern
- --------------
As shown in the accompanying financial statements, the Company incurred net
losses of $196,184 for the year ended March 31, 1999 and $649,780 for the nine
months ended December 31, 1999. The Company is currently putting technology in
place which will, if successful, mitigate these factors which had raised
substantial doubt about the Company's ability to continue as a going concern.
Management has established plans designed to increase the sales of the Company's
products. Management intends to seek new capital from new equity securities
issuance that will provide funds needed to increase liquidity, fund internal
growth and fully implement its business plan.
During 1999, the Company received $368,000 in new equity. In the nine months
subsequent to March 31, 1999, the Company received over $626,560 from stock
subscriptions. A substantial amount of these funds were invested in CPM until
December 1999 when the bankruptcy was converted to a liquidation.
Impaired Asset Policy
- -----------------------
In March 1995, the Financial Accounting Standards Board issued a statement
titled "Accounting for Impairment of Long-lived Assets." In complying with this
standard, the Company will review its long-lived assets quarterly to determine
if any events or changes in circumstances have transpired which indicate that
the carrying value of its assets may not be recoverable. The Company determines
impairment by comparing the undiscounted future cash flows estimated to be
generated by these assets to their respective carrying amounts. The Company
does not believe any adjustments are needed to the carrying value of its assets
at March 31, 1999.
Derivative Instruments
- -----------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This new standard establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires that entities recognize all derivatives as either assets or liabilities
in the consolidated balance sheet and measure those instruments at fair value.
At December 31, 1999, the Company has not engaged in any transactions that would
be considered derivative instruments or hedging activities.
Comprehensive Income
- ---------------------
There were no items of other comprehensive income in year ended March 31, 1999
or the subsequent nine months ended December 31, 1999, and thus, net income is
equal to comprehensive income for those periods.
Inventories
- -----------
Inventories are stated at the lower of cost or market determined by the LIFO
method and specific identification. As of March 31, 1999, the Company had no
inventory. As of December 31, 1999, AutoSmart USA, Inc. had $63,293 in vehicle
inventory.
<PAGE> 46
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Interim Financial Statements
- ------------------------------
The interim financial statements as of and for the nine months ended December
31, 1999 included herein have been prepared for the Company, without audit.
They reflect all adjustments, which are, in the opinion of management, necessary
to present fairly the results of operations for these periods. All such
adjustments are normal recurring adjustments. The results of operations for the
periods presented are not necessarily indicative of the results to be expected
for the full fiscal year.
NOTE 3 - PROPERTY AND EQUIPMENT
Furniture and equipment
- -------------------------
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. The useful
lives of property, plant and equipment for purposes of computing depreciation
and amortization are five to seven years. The following is a summary of
property, equipment and accumulated depreciation as of December 31, 1999:
Cost Accumulated Depreciation
--------- -------------------------
Computers $ 51,761 $ 31,850
Furniture and equipment 50,309 15,357
--------- -------------------------
$ 102,070 $ 47,177
========= =========================
Maintenance and repairs are expensed as incurred. Replacements and betterments
are capitalized. The cost and related reserves of assets sold or retired are
removed from the accounts, and any resulting gain or loss is reflected in
results of operations.
Software is stated at cost. Amortization is provided using the straight-line
method over the estimated useful lives of the assets. The useful life of the
Company's software for purposes of computing amortization is three years. The
following is a summary of software and accumulated amortization.
Cost Accumulated Depreciation
--------- -------------------------
Software $ 199,564 $ 185,764
Website 53,250 6,546
--------- -------------------------
$ 252,814 $ 192,310
========= =========================
The Company has capitalized $199,564, which is the cost of software purchased
from an independent software supplier. No portion of this software was
internally developed and, accordingly, there are no internal costs associated
with this software, which were charged to research and development. Consistent
with SOP 98-1, the costs of this software-which was purchased solely for
internal use and will not be marketed externally-have been capitalized.
<PAGE> 47
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 4 - INTANGIBLE ASSETS
Organization and Trademark Costs
- -----------------------------------
In prior years, Interactive Multimedia Network, Inc. incurred organization and
trademark costs of $2,612 and $1,305, respectively. These costs are being
amortized over the useful life of sixty months. During the year ending March
31, 1999, $695 and $229 were recorded as amortization expenses for organization
and trademark costs, respectively. As of December 31, 1999, an additional $58 in
trademark amortization was recognized. In accordance with SOP 98-5 (effective
for fiscal years beginning after December 15, 1998), the Company has written off
its organization costs in 1999, thereby incurring a one-time-only charge of
$695.
NOTE 5 - COMMON STOCK
During the period ending March 31, 1999, the Company issued 2,000,000 common
stock shares under Regulation D, Rule 504 at $.50 per share. These 2,000,000
common stock shares were not the same shares returned to the Company by Marion
Verdiramo, nor did Marion Verdiramo participate in the Regulation D, Rule 504
offering. See Note 10. Another 25,000 common shares were issued for cash at
$1.00 per share and 637,500 common shares were issued for services at values of
$0.20 to $1.00 per share. The Company valued these services at $157,500. The
Company also issued 16,000 common shares for prepaid rent for a new subsidiary
valued at $24,000. As part of the failed acquisition of CPM, the Company had
issued 4,000 shares of common stock for no additional value.
The outstanding stock subscriptions, resulting from the Regulation D, Rule 504
issuance, were $656,560, as of March 31, 1999, and were secured by the common
stock. Subsequent to the year-end but prior to issuance of the financial
statements, $626,650 was collected from these subscriptions. The Company
deemed $30,000 of the outstanding subscriptions as uncollectible and charged
that amount back against additional paid-in capital. In September 1999, the
Company issued 110,000 common shares for $55,000 in cash. Also during the nine
months ended December 31, 1999, the Company issued 65,000 common shares for
services valued at $65,000.
NOTE 6 - ACQUISITION OF CONTRACTING, PLANNING AND MANAGEMENT ASSOCIATES, INC.
AND SUBSEQUENT BANKRUPTCY
On January 2, 1999, the Company through its subsidiary CPM Holdings, Inc.
acquired 80% of the common stock of Contracting, Planning and Management
Associates, Inc. (hereinafter "CPM"), a wood products manufacturer located in
Brentwood, New Hampshire. The transaction, which was to be accounted for as a
purchase, involved the payment of $50,000 in cash to CPM's shareholders in
exchange for stock. As part of the transaction, the Company obligated itself to
provide working capital financing of $350,000 to CPM. As part of the
acquisition, the Company acquired property and equipment with a fair market
value of $729,119, which is equivalent to the book value of the assets in CPM's
records. These assets will be depreciated over lives of five to thirteen years.
The Company also acquired control of inventory, receivables and other current
assets valued at $336,454.
<PAGE> 48
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
On January 8, 1999, CPM (the "Debtor") filed petitions for relief under Chapter
11 of the federal bankruptcy laws in the United States Bankruptcy Court for the
District of New Hampshire. Under Chapter 11, certain claims against the Debtor
in existence prior to the filing of the petitions for relief under the federal
bankruptcy laws are stayed while the Debtor continues business operations as
Debtor-in-possession.
The activities of the Company and CPM are not consolidated for the period from
January 2, 1999 to March 31, 1999 and 1998, because the control of this
subsidiary was only never achieved and in December 1999, the court converted the
bankruptcy to a liquidation under Chapter 7 of the Bankruptcy Code.
At the time of its bankruptcy filing, CPM had reported assets of $1,600,000 and
liabilities of $2,300,000. Other than the original investment of $50,000, the
Company had loaned an additional $332,909 as of December 31, 1999. This loan
was to have interest paid at 8% and no interest has been accrued because of the
subsequent bankruptcy filing. The Company currently estimates that it will
receive approximately sixty percent of its original loans in the liquidation.
The Company has reduced its investment with a charge to loss on investments of
$50,000 for the stock investment and $79,854 on its debt investment for the year
ended March 31, 1999. The Company further reduced its recoverable asset by
$55,308 as of December 31, 1999.
Another corporation controlled by the Verdiramo Family named Ansam, Inc., loaned
an additional amount to CPM. Prior to the bankruptcy being changed to Chapter 7
liquidation, Ansam loaned a total of $332,400. This loan was to be secured by
inventory, work in progress and receivables and was to bear an interest rate of
8% (See Note 8).
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Lease Commitments
- ------------------
The Company leases office space for its Florida operation under a month-to-month
lease agreement. This lease requires a monthly lease payment of $975.
Lease expense paid during the nine months ended December 31, 1999 was $8,775.
On February 22, 1999 the Company entered into a lease of office space for the
use of AutoSmart USA, Inc., a subsidiary which was being formed as of March 31,
1999. The lease was for three years with a base rent of $6,000 per month and a
grant of 16,000 shares of common stock with a value of $24,000. The stock grant
was to cover an additional $2,000 per month in rent and is being treated as
prepaid rent and being charged to operations monthly as of March 31, 1999.
Future stock grants will be dependent on the sales activities generated at this
site and the effect upon the landlord's related business. In addition to the
unamortized prepaid rent of $22,000 as of March 31, 1999, $4,400 of the March
rent payment of $6,000 was considered as prepaid rent for April 1999. As of
December 31, 1999, the future minimal lease payments for years ended March 31
are:
Lease Payments Year
- -------------- ----
$18,000 2000
72,000 2001
60,000 2002
<PAGE> 49
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Legal Matters
- --------------
The Company is involved in a legal action. See Note 13.
Contingent Liability
- ---------------------
The Company is contingently liable for bonuses based on CPM earnings. See Note
8.
NOTE 8 - RELATED PARTIES
Verdiramo & Verdiramo, P.A perform legal services to Interactive Multimedia
Network, IncVincent L. Verdiramo, the former President of Interactive Multimedia
Network, Inc. and his son Vincent S. Verdiramo own this professional
association. Verdiramo & Verdiramo, P.A. is providing limited use of office
space for the benefit of the Company, with no charge for rent. For the year
ended March 31, 1999, the Company paid $11,800 to this law firm for legal
services.
The Company has been involved in periodic transactions, whereby money has been
advanced to the President of the Company and the President has advanced money to
the Company. The Company made an unsecured loan of $8,900 on March 15, 1996 to
the President. This note, due on demand with an interest rate equal to the
prevailing Federal Reserve Rate, was satisfied in fiscal 1997. The President
advanced later, additional funds to the Company. As of March 31, 1999 the
Company was obligated to the former President for a total of $9,870, and this
amount was reduced to $2,870 by December 31, 1999. This amount is non-interest
bearing and is due on demand.
Space leased in the name of William J. Auletta, Vice President of Interactive
Multimedia Network, Inc., is used by the Company to conduct business in Florida.
The Company pays the lessor directly. See Note 7.
The Company routinely sends funds to Small Business Development Group, Inc., a
corporation owned solely by William J. Auletta. These funds are used to pay
postage, utilities and other office expenses on behalf of the Company's office
in Florida.
Loan to related party
- ------------------------
The Company loaned $332,400 to Ansam, Inc., a corporation controlled by the
Verdiramo Family so that Ansam could loan funds to CPM in a protected status.
This loan was to be at 8% interest and would have been repaid upon CPM achieving
a stable financial position. These funds ($332,400) are now restricted in the
bankruptcy and management estimates that only eighty percent will be reasonably
expected to be repaid. The Company has charged $66,480 to its loss on its CPM
investment as of December 31, 1999. Management will review the collectibility
of this loan quarterly, and make the appropriate adjustments.
NOTE 9 - ADVANCES FROM STOCKHOLDERS
During the nine months ended December 31, 1999, the Company had received
$127,373 in loans and advances from stockholders. These transactions are in the
form of unsecured demand loans bearing interest at 8% per annum. The Company
has accrued $5,095 for interest on these liabilities.
<PAGE> 50
INTERACTIVE MULTIMEDIA NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 10 - STOCK REORGANIZATION AND STOCK OPTIONS
Marion Verdiramo, a related party, returned 2,000,000 shares of common stock to
the Company as part of a capital restructuring and in return received 2,000,000
common stock options at $.10 per share which can be exercised any time during
the subsequent three years. This exchange was believed to be beneficial to the
Company as it reduced its outstanding float. These options were valued at
$330,000 based upon the minimal value of the common stock at the time of the
options' issuance. These 2,000,000 shares had been issued as part of an
issuance of 3,400,000 in satisfaction for loans of approximately $340,000.
Marion Verdiramo has never been an employee, officer, director or independent
consultant for the Company. Marion Verdiramo converted a loan to the Company
for 2,000,000 shares of restricted common stock. Subsequently, those shares
were never freed from restrictive legend and returned to the Company. This was
done to facilitate the Company's ability to issue additional stock into the
market place. The Company chose to reduce outstanding stock in this manner
instead of implementing a reverse stock split.
NOTE 11 - SUBSIDIARIES
CPM Holdings, Inc. is a wholly owned subsidiary holding the Company's 80%
interest in CPM Associates. CPM is not consolidated because of the bankruptcy,
which results in only temporary control by the Company, and is in accordance
with Statements on Financial Accounting Standards No. 94 requiring consolidation
of a majority owned subsidiaries.
AutoSmart USA, Inc. is a Nevada corporation and is a wholly owned subsidiary of
IMNI. AutoSmart USA Leasing Inc. is a Florida corporation and is also a wholly
owned subsidiary. These subsidiaries were established in 1999 and began
operating in April 1999. Total sales generated during the nine months ended
December 31, 1999 were $819,521 with cost of sales of $656,715.
NOTE 12 - PREFERRED STOCK
The Company's preferred stock has not been issued. The Company is authorized to
issue 5,000,000 shares of $0.001 par value preferred stock, which contains no
voting privileges and is not entitled to accrued dividends or conversion into
shares of the Company's common stock.
NOTE 13 - LITIGATION
The Company is a party to a legal action arising in the ordinary course of
business. Management has retained the services of two law firms to defend this
matter and it is their conclusion that the matter is totally without merit and a
motion for summary judgment has been filed. Management does not expect any
adverse effect on the Company to result from this matter.
NOTE 14 - RESTRICTED STOCK WARRANTS
In August 1997, the Company issued 62,505 share of common stock at $8.00 per
share. Attached to each share purchased was a restricted warrant for the
purchase of an additional share at $12.00 per common share. These restricted
stock warrants became exercisable in August 1998 for a one-year period. At
issuance, the warrants were deemed to have no value since the exercisable price
exceeded the minimum value of the common stock as calculated under the fair
value method for valuation of stock based compensation. As of August 31, 1999,
the restricted warrants had expired.
<PAGE> 51
INTERACTIVE MULTIMEDIA NETWORK, INC.
FORM 10SB
PART III
Item 1 - Index to Exhibits.
3.1 Articles of Incorporation and Amendments thereto.
3.2 By-Laws and Amendments thereto.
4.1 Form of Common Stock Certificate.
10.1 CPM Associates, Inc. Acquisition Agreement December 1998.
16.1 Letter on change of certifying accountant
21.1 Subsidiaries of the registrant
27.1 Financial Data Schedule for the period ended March 31, 1998
27.2 Financial Data Schedule for the period ended March 31, 1999
27.3 Financial Data Schedule for the period ended June 30, 1999
Item 2 Description of Exhibits.
The Exhibits required by this item are included as set forth in the
Exhibit Index.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its hereby the
undersigned, thereunto dully authorized.
Interactive Multimedia Network, Inc.
(Registrant)
Date: May 16 ,1999 By /s/ Richard J.. Verdiramo
Richard J. Verdiramo
Director and President
State of Delaware
Office of the Secretary of State
I, Edward H. Freel, Secretary of the State of Delaware, do hereby certify the
attached is a true and correct copy of the certificate of incorporation of
INTERACTIVE MULTIMEDIA NETWORK, INC., filed in this office on the thirteenth day
of June, A.D. 1995 at 4:30 o'clock P.M.
Seal of the State of Delaware
/s/ Edward H. Freel
Secretary of State
05-06-96
The undersigned, a natural person, for the purpose of organizing a corporation
for conducting the business and promoting the purposes hereinafter stated, under
the provisions and subject to the requirements of the law3s of the State of
Delaware (particularly Chapter 12, Title 8 of the Delaware Code and the acts
amendatory thereof and supplemental thereto, and known, identified and referred
to as the "General Corporate Law of the State of Delaware") hereby certifies
that:
FIRST: The name of the corporation (hereinafter the "corporation") is:
INTERACTIVE MULTIMEDIA NETWORK, INC.
SECOND: The address, including street, number, city and county, of the
registered office of the corporation in the State of Delaware is 32 Loockerman
Square, Suite L-100, City of Dover, County of Kent; and the name of the
registered agent of the corporation at such address is the Prentice-Hall
Corporation System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporate Law
of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is 30,000,000. Five million (5,000,000) shares will be
designated preferred, non-cumulative at $.001 par value. Twenty five million
(25,000,000) shares shall be designated common at $.001 per share.
No holder of any of the shares of the stock of the corporation, whether now or
hereafter authorized and issued, shall be entitled as of right to purchase or
subscribe for any unissued stock of any class, or any additional shares of any
class to be issued by reason of any increase of the authorized capital stock of
any class of the corporation, or bonds, certificates of indebtedness,
debentures, or other securities convertible into stock of any class of the
corporation, or carrying any right to purchase stock of any class of the
corporation, but any such unissued stock or any such additional authorized issue
of any stock or of other securities convertible into stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to resolutions
of the Board of Directors to such persons, firms corporations, or associations,
and upon such terms, as may be deemed advisable by the Board of Directors in the
exercise of its discretion.
<PAGE> 53
FIFTH: The name and mailing address of the incorporator is as follows:
NAME MAILING ADDRESS
Ernest A. Curtin, Jr. Prentice-Hall
830 Bear Tavern Road
West Trenton, New Jersey 08628
SIXTH: The corporation shall have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation in consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH: For the management of the business and the conduct of affairs of
the corporation, as in further definition, limitation, and regulation of the
powers of the corporation and of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed by,
or in the manner provided by the Bylaws. The phrase "whole Board" and the
phrase "total number of directors" shall be deemed to have the same meaning, to
wit, the total number of directors which the corporation would have if there
were no vacancies. No election of directors need be by written ballot.
2. After the original or other Bylaws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporate Law of the State of Delaware,
and, after the corporation has received any payment for any of its stock, the
power to adopt, amend or repeal the Bylaws of the corporation may be exercised
by the Board of Directors of the corporation; provided, however, that any
provision for the classifications of directors of the corporation for staggered
terms pursuant to the provisions of subsection (d) of Section 141 of the General
Corporate Law of the State of Delaware shall be set forth in an initial Bylaw or
in a Bylaw adopted by the stockholders entitled to vote of the corporation
unless provisions for such classification shall be set forth in this certificate
of incorporation.
<PAGE> 54
3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever the
corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under the
provisions of the certificate of incorporation shall entitle the holder thereof
to the right to vote at any meeting of stockholders except as the provisions of
paragraph (2) of subsection (h) of Section 242 of the General Corporate Law of
the State of Delaware shall otherwise require; provided, that no share of any
such class which is otherwise denied voting power shall entitle the holder
thereof to vote upon the increase or decrease in the number of authorized shares
of said class.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated in the fullest extent by the provisions of paragraph (7) of
subsection (b) of Section 102 of the General Corporate Law of the State of
Delaware, as the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extend permitted by the
provisions of Section 145 of the General Corporate Law of the State of Delaware,
as the same may be amended and supplemented, indemnify any and all persons whom
it shall have power to indemnify under said section from and against any and all
of the expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office, and shall continue as to a person who has
ceased to be a director, officer, employee, or agent and shall inure to the
benefit of the heirs, executors, and administrators of such a person.
ELEVENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered, or repealed and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on June 23, 1995 /s/ Ernest A. Curtin Jr.
Incorporator
BYLAWS
OF
INTERACTIVE MULTIMEDIA NETWORK, INC.
(A DELAWARE CORPORATION)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in the
corporation shall be signed by, or in the name of, the corporation by the
Chairman or Vice-Chairman of the Board of Directors, if any, or by the President
or a Vice-President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the corporation. Any or all the
signatures on any such certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one class
of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or uncertificated
shares in place of any certificate theretofore issued by it, alleged to have
been lost, stolen, or destroyed, and the Board of Directors may require the
owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the
General Corporation Law, the Board of Directors of the corporation may provide
by resolution or resolutions that some or all of any or all classes or series of
the stock of the corporation shall be uncertificated shares. Within a
reasonable time after the issuance or transfer of any uncertificated shares, the
corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
<PAGE> 56
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be
required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered form (either
represented by a certificate or uncertificated) or bearer form (represented by a
certificate) which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share or an uncertificated fractional share shall, but scrip or
warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the assets of the corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the conditions
that they shall become void if not exchanged for certificates representing the
full shares or uncertificated full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
4. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and, in the case of shares represented by certificates, on
surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining the stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
the General Corporation Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
<PAGE> 57
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by the General Corporation Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action. In order that
the corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such rights
notwithstanding that the certificate of incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the certificate of incorporation, except as any provision of law
may otherwise require.
7. STOCKHOLDER MEETINGS
- TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the directors.
- PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Delaware, as the directors may, from time
to time, fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
- CALL. Annual meetings and special meetings may be called by the
directors or by any officer instructed by the directors to call the meeting.
<PAGE> 58
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date, and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally
or by mail, not less than ten days nor more than sixty days before the date of
the meeting, unless the lapse of the prescribed period of time shall have been
waived, and directed to each stockholder at his record address or at such other
address which he may have furnished by request in writing to the Secretary of
the corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid,, in the United States Mail. If a meeting is adjourned
to another time, not more than thirty days hence, and/or to another place, and
if an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the
directors, after adjournment, fix a new record date for the adjourned meeting.
Notice need not be given to any stockholder who submits a written waiver of
notice signed by him before or after the time stated therein. Attendance of a
stockholder at a meeting of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided over
by one of the following officers in the order of seniority and if present and
acting - the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, a Vice President, or, if none of the foregoing is in office
and present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the Chairman of the meeting shall appoint a secretary of
the meeting.
<PAGE> 59
- PROXY REPRESENTATION. Every stockholder may authorize another person or
persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take and sign an
oath faithfully to execute the duties of inspectors at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots, or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots, or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question, or matter determined by him or them and execute a
certificate of any fact found by him or them.
- QUORUM. The holders of a majority of the outstanding shares of stock
shall constitute a quorum at a meeting of stockholders for the transaction of
any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each share of stock shall entitle the holders thereof to one
vote. Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. Any other action shall be authorized by a majority of
the votes cast except where the General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any other
action, voting need not be by ballot.
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Action taken pursuant to this paragraph shall be
subject to the provisions of Section 228 of the General Corporation Law.
<PAGE> 60
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The
initial Board of Directors shall consist of 3 persons. Thereafter the number of
directors constituting the whole board shall be at least one. Subject to the
foregoing limitation and except for the first Board of Directors, such number
may be fixed from time to time by action of the stockholders or of the
directors, or, if the number is not fixed, the number shall be 3. The number of
directors may be increased or decreased by action of the stockholders or of the
directors.
3. ELECTION AND TERM. The first Board of Directors, unless the members
thereof shall have been named in the certificate of incorporation, shall be
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. Except
as the General Corporation Law may otherwise require, in the interim between
annual meetings of stockholders or of special meetings of stockholders called
for the election of directors and/or for the removal of one or more directors
and for the filling of any vacancy in that connection, newly created
directorships and any vacancies in the Board of Directors, including unfilled
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the State
of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the time
and place have been fixed. Special meetings may be called by or at the direction
of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, of
the President, or of a majority of the directors in office.
<PAGE> 61
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for
regular meetings for which the time and place have been fixed. Written, oral, or
any other mode of notice of the time and place shall be given for special
meetings in sufficient time for the convenient assembly of the directors
thereat. Notice need not be given to any director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
vote of the majority of the directors present at a meeting at which a quorum is
present shah be the act of the Board. The quorum and voting provisions herein
stated shall not be construed as conflicting with any provisions of the General
Corporation Law and these Bylaws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present
and acting, shall preside at al) meetings. Otherwise, the Vice-Chairman of the
Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General
Corporation Law, any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors.
6. COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of any member of any such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation with the exception of
any authority the delegation of which is prohibited by Section 141 of the
General Corporation Law, and may authorize the seal of the corporation to be
affixed to all papers which may require it.
<PAGE> 62
7. WRITTEN ACTION. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken without
a meeting if ail members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President, a Secretary,
a Treasurer, and, if deemed necessary, expedient, or desirable by the Board of
Directors, a Chairman of the Board, a Vice-Chairman of the Board, an Executive
Vice-President, one or more other Vice-Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers with such
titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board of
Directors choosing him, no officer other than the Chairman or Vice-Chairman of
the Board, if any, need be a director. Any number of offices may be held by the
same person, as the directors may determine.
Unless otherwise provided in the resolution choosing him, each officer
shall be chosen for a term which shall continue until the meeting of the Board
of Directors following the next annual meeting of stockholders and until his
successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform such
duties in the management and operation of the corporation as shall be prescribed
in the resolutions of the Board of Directors designating and choosing such
officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may be removed,
with or without cause, by the Board of Directors. Any vacancy in any office may
be filled by the Board of Directors.
ARTICLE IV
INDEMNIFICATION
1. ACTIONS BY OTHERS. The Corporation (1) shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he or she is or was a director or an officer of the
Corporation and (2) except as otherwise required by Section 3 of this Article,
may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he or she is
or was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, agent of or
participant in another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts actually and reasonably incurred by such person in connection with such
action, suit or proceeding if he or she acted in good faith and in a manner he
<PAGE> 63
or she reasonably believed to be in or not opposed to the best interests of the
Corporation, and with respect to any criminal action or proceeding, has no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person seasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he or
she is or was a director, officer, employee or agent of the Corporation, or is
or was service at the request of the Corporation as a director, officer,
employee, agent of or participant in another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made in
respect of any claim, suit or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his or
her duty to the Corporation unless and only to the extent that the Delaware
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper.
3. SUCCESSFUL DEFENSE. To the extent that a person who is or was a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or. proceeding referred
to in Section 1 or Section 2 of this Article, or in defense of any claim, issue
or matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
therewith.
4. SPECIFIC AUTHORIZATION. Any indemnification under Section 1 or Section 2
of this Article (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in said Sections 1 and 2. Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders .
5. ADVANCE OF EXPENSES. Expenses incurred by any person who may have a
right of indemnification under this Article in defending a civil or criminal
actions, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding as authorized by the Board
of Directors in the specific case upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he or she is entitled to be indemnified by the
Corporation pursuant to this Article.
<PAGE> 64
6. RIGHT OF INDEMNITY NOT EXCLUSIVE. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
7. INSURANCE. The corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of or participant in another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of such person's
status as such, whether or not the Corporation would have the power to indemnify
him or her against such liability under the provisions of this Article, Section
145 of the General Corporation Law of the State of Delaware or otherwise.
8. INVALIDITY OF ANY PROVISIONS OF THIS ARTICLE. The invalidity or
unenforceability of any provision of this Article shall not affect the validity
or enforceability of the remaining provisions of this article.
ARTICLE V
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors shall
prescribe.
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter, or repeal
these Bylaws and to adopt new Bylaws may be exercised by the Board of Directors
or by the stockholders.
I HEREBY CERTIFY that the foregoing is a fall, true, and correct copy of
the Bylaws of Interactive Multimedia Network, Inc., a Delaware corporation, as
in effect on the date hereof.
Dated:
Maureen Hogan
Secretary of Interactive Multimedia Network, Inc.
(SEAL)
SAMPLE OF COMPANY'S STANDARD STOCK CERTIFICATE CONTAINING THE FOLLOWING
INFORMATION:
1. Number of certificate
2. Number of shares represented by certificate
3. Title of stock and CUSIP number
4. Name of stockholder
5. Date of issuance
6. Corporate seal
7. Signatures of president and secretary of corporation at time of issuance.
ACQUISITION AGREEMENT
Acquisition agreement made this 23rd day of December, 1998 among:
CPM Associates Holding Corp.
184 West Main Street
Tarrytown, New York, 10591
("Buyer")
and
Contracting, Planning, Management, Associates, Inc.
D/b/a CPM Associates, Inc.
195 Route 125
Brentwood, New Hampshire 03833,
a New Hampshire corporation
(the "Company")
and
William J. Poleatewich, Jr. and Marta L. Poleatewich
195 Route 125
Brentwood, New Hampshire, 03833
Married individuals
("Seller")
WHEREAS;
A. Buyer, directly and through one or more subsidiaries, intends to engage in
the Furniture and Fixture business.
B. The parties hereto deem it to be in the best interest of each of them that
Buyer purchase 80 percent of the issued and outstanding capital stock of the
Company, an S Corporation, and generally succeed to the business of the Company,
all pursuant to such terms, provisions and conditions as the parties hereto
shall agree.
<PAGE> 67
NOW, THEREFORE, WITNESSETH, that for and in consideration of the premises and of
the mutual promises and covenants hereinafter set forth, the parties hereto
agree as follows:
I. CERTAIN DEFINITIONS
As used in this agreement, the term:
A. "Environmental, Health and Safety Laws" means, collectively, the
Comprehensive Environmental Response, Compensation and Liability act, 42 USC
Section 9601 et. seq.; Emergency Planning and Community Right to Know Act, 42,
USC 11001 et.seq.; the Resource Conservation and Recovery Act, 42 USC Section
691 et. seq.; the Federal Water Pollution Act, 33 USC Section 1251, et. seq.;
the Safe Drinking Water Act, 42 USC Section 330(f) et. seq.; the Toxic Substance
Control Act, 15 USC Section 7401 et. seq.; the Occupational Safety and Health
Act, 29 USC Section 651, et. seq.; 42 U.S.C. Section 7401 et. seq. Each as
amended together with the regulations promulgated in connection with the above
statutes and those pertaining to asbestos including 40 CFR part 61 subpart M and
29 CFR 1910.1001 and 1926.58; N.H. RSA 125-C, 125-I, 146-A, 146-C, 147, 147-A,
147-B, 149-M, 482-A, 485, 485-A, 485-C; including all regulations thereunder.
B. "Knowledge" (including derivatives, e.g. "Know", etc.) means actual
knowledge, including that knowledge which would result from a reasonable
investigation following actual knowledge of any underlying facts or
circumstances relating thereto, but nothing herein shall obligate a Party to
undertake any special investigation in conjunction with the transaction
contemplated by this
Agreement.
C. "Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes and including Loans.
II. PURCHASE AND PAYMENT
1. Purchase and Sale of Stock.
A. Buyer agrees to purchase from the Seller and Seller agrees to sell, assign,
transfer and deliver to Buyer 80 percent of the issued and outstanding shares of
stock of the company owned by Seller as described in Schedule A annexed hereto
and made a part of (collectively, the "Stock").
B. The purchase and payment for the Stock by Buyer shall take place as the time
and in the manner hereinafter provided, and the sale, assignment, transfer and
delivery of the Stock by the Seller, shall take place on the Closing Date at the
Closing as those terms are hereinafter defined, subject tot the fulfillment of
the conditions hereinafter provided.
<PAGE> 68
III. REPRESENTATION AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants that (I) Buyer is a duly organized and
validly existing corporation under the laws of the State of Nevada, (ii) the
execution, delivery and performance of this Agreement by the Buyer has been duly
authorized by all necessary corporate action, (iii) this Agreement is a valid
and legally binding obligation of the Buyer enforceable in accordance with the
terms hereof, (iv) no governmental authorization, approval, order, license,
permit, franchise or consent and no registration or fling with any governmental
authority is required in connection with the execution, delivery or performance
of this Agreement by the Buyer, (v) the Buyer acknowledges that the Company w8ll
lose its status an as S corporation as a result of the closing of the
transaction contemplated by this Agreement (the "Transaction"), (vi) the
business and financial condition of the company has deteriorated since the date
of the internal Financial Statements, as such term is defined herein, and that,
(vii) after having performed such due diligence through its experienced and
sophisticated principals and such experts as they deemed necessary or
appropriate, are buying the lettered or restricted Stock for its investment
purposes and not with a view to redistribution on the terms set forth herein
IV. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY.
Seller and the Company hereby warrant and represent to Buyer that, as of the
date hereof except as otherwise stated herein and to the best of their Knowledge
as businesspersons, but not as accountants or attorneys, on such date, the
following statements are true and correct in all material respects, except for
such exemptions as are set forth in Schedule D annexed hereto and made a part
hereof, or elsewhere in this Agreement, except as to statements in Sections C.2
and C.6. which are made only by Seller who owns the Stock with respect to which
the statement is made.
1. Corporate Status.
The Company is (a) duly organized, validly existing and in good standing under
the laws of the State of New Hampshire; (b) has full corporate power to own all
of its properties and carry on its business as it is now being conducted; and
(c) is qualified to do business as a foreign corporation in each of the
jurisdictions in which it operates and the character of the properties owned by
the Company or could qualify to do business as a foreign corporation without
payment of any significant penalty should qualifications prove to be necessary,
or the nature of the business transacted by the company does not make
qualification necessary in any other jurisdiction or jurisdictions.
2. Authority to Sell.
Except for any limitations or restrictions imposed by federal and state statutes
regulating, restricting or governing the sale of unregistered securities (the
"Securities Regulation Statutes"), Seller has full right, power and authority
with the terms of this Agreement, and otherwise to consummate and close the
transaction provided for in this Agreement in the manner and upon the terms
herein specified herein.
3. Hazardous Substances.
Except for hazardous substances and wastes, as such terms are used in the
Environmental health and Safety laws generated, stored or used by the Company at
its business premises in the ordinary course of business, the Company has not
generated, stored or used hazardous substances or wastes on or within its
business premises to the best of the Company's and the Seller's Knowledge.
<PAGE> 69
4. Financial Statements.
On or about September __, 1998, the Company delivered to Buyer internal
financial statements dated as of August 31, 1998, comprising Schedule E - 1
hereto (the "Internal Financial Statements"), including the related notes and
explanatory notes, present fairly the financial position of the company as of
the date thereof and the results of its operations for the periods therein
indicated.
5. Period Since Date of Internal Financial Statements.
From the date of the Balance Sheet constituting a part of the Internal Financial
Statements included in the Company's Schedule E Financials, the Company has:
A. Not affirmatively waived, canceled or compromised any of its rights, debts
or claims of substantial value, except for its claims, demands and causes of
action against Fleet Bank-NH.
B. No issued any additional shares of stock, rights or options to purchase or
convert into such stock or other securities.
C. Not made any distribution to its shareholders, as shareholders, of any
assets, by way of dividends, purchase of shares or otherwise, except as
disclosed on Schedule D hereto.
D. Not mortgaged, pledged or granted a lien or encumbrance on any of its
properties or assets, except with respect to equipment purchased by the company
during such period.
E. Not sold or transferred any of its assets, tangible or intangible, except
motor vehicles and except inventory and other assets sold or disposed of in the
ordinary and usual course of business.
F. Not incurred any uninsured casualty losses and/or incurred or become liable
for any obligations or liabilities except the new, current liabilities incurred
in the ordinary and usual course of business, or made any extraordinary
expenditures other than for the purchase of motor vehicles and for additions and
betterments to existing plant, equipment and facilities.
G. Not increased the rate of compensation for any of its officers or directors
nor for any executive employees, except as may be in accord with pas practices
and in the usual and ordinary course of business of the Company
H. Not experienced any material adverse effect on its business, properties and
assets as the result of fire, explosion, flood, drought, windstorm, accident,
strike, embargo, confiscation of vital equipment, material or inventory,
cancellation of contracts by any domestic or foreign government, or any agency
thereof, or customer whose business with seller represents 5% or more of sellers
gross revenue, riot, activities of armed forces, or acts of God or the public
enemy although the Company has missed or been forced to notify customers or
re-scheduled delivery dates.
<PAGE> 70
6. Capital Structure.
The Company (a) had authority under its charter and applicable law to issue
capital stock of the type and having par values as set forth in Schedule A
hereto; (b) has no issued and outstanding shares of its capital stock whatever,
except as specifically indicated in Schedule A hereto, all of which such shares
are fully paid and non-assessable; (c) does not have authorized, issued or
outstanding any subscription, option, warrant, conversion or other rights to the
issuance or receipt of shares of its capital stock except as set forth in
Schedule A hereto other than pre-emptive rights appurtenant to the shares
identified in Schedule A; (d) has all voting rights vested exclusively in the
presently issued and outstanding capital stock; and (e) has outstanding no
bonds, debentures or other similar evidences of long-term indebtedness except as
specifically disclosed in its balance sheet as of August 31, 1998, (and related
notes thereto).
7. Ownership of Stock.
All of the issued and outstanding shares of capital stock of the company are
owned by William J. Poleatewich, Jr. and Marta I. Poleatewich, individuals
married to each other. Seller owns beneficially and of record the number of
shares set forth in Schedule A hereto opposite Seller's name. Seller holds such
stock free and clear of all liens, claims, debts, encumbrances and assessments,
and any and all restrictions as to sale, assignment or transferability thereof,
except as otherwise disclosed in the Certificate for such Stock or herein.
Subject to compliance with the requirements of all federal and state statutes
and administrative regulations governing or restricting the issuance of
securities to the extent necessary. Seller has full right, power and authority
to sell, transfer and delivery all of the shares of Stock owned by said Seller
and the certificates therefor, sold hereunder, to Buyer in accordance wit the
terms of this Agreement, and otherwise to consummate and close the transaction
provided for in this Agreement in the manner and upon the terms herein
specified.
8. Title to Assets.
The company has good and marketable title to all of the assets which it owns, as
set forth on Schedule B hereto, which good and marketable title is free and
clear of all mortgages, pledges, liens, credit agreements, title retention
agreements (other than leases), security agreements, taxes, claims, debts and
other obligations and encumbrances except (a) as specifically set forth in
Schedule D, including the security interests held by Fleet Bank-NH, (b) if any,
of current taxes not yet due and payable and (c) such additional encumbrances or
imperfections of title, if any, which are not substantial in character, amount
or extent and which do not materially detract from the value, or materially
interfere wit the present or future intended use, of the properties subject
thereto or affected thereby, and which do not otherwise materially impair or
affect the business and operations of the Company. The Company hereby
acknowledges that it shall pay any and all present outstanding taxes owed to the
New Hampshire State Sales Tax Division and the Internal Revenue Service.
<PAGE> 71
9. Peaceable Possession of Assets.
The ownership and/or possession of all of the assets of the company have been
peaceably and undisturbed and the title thereto has never been disputed or
question to the knowledge of the company, nor does the Company know of any facts
by reason of which the possession or title thereof by the company might be
disturbed or questioned or by reason of which any claim to its assets might
arise or be set up adverse to the company. This section is predicated on the
acceptance of a proposed chapter 11 filing by the appropriate jurisdiction of
the Bankruptcy court of Hillsboro County, New Hampshire.
10. Regulatory Good Standing.
The Company has all material rights, certificates, authorities, permits,
licenses, franchises and other authorizations necessary to and has complied in
material respects with all laws applicable to, the conduct of its business in
the manner and in the areas in which such business is presently being conducted
and all such certificates, authorities, rights, permits, licenses, franchises
and authorizations are valid, in good standing, in full force and effect, under
no orders of suspension or restraints, and subject to no disciplinary,
probationary or other orders. To the best of its knowledge, the Company has
engaged in no activity whatever which would cause or lead to proceedings
involving revocation, suspension, restraint, disciplinary action or any other
action whereby any of such certificates, authorities, rights, permits, licenses,
franchises or authorizations, or any part thereof, might be canceled,
terminated, suspended, impaired, lost or otherwise adversely affected, and no
action or proceeding looking to or contemplating any of the foregoing is pending
or to the company's knowledge threatened, except as specifically set forth in
Schedule D annexed hereto and made a part hereof. The foregoing shall not be
deemed to constitute a warranty or representation that the company as not
heretofore or shall not hereafter suffer to be committed minor and unintentional
violations of any governmental regulations of such nature as not to cause either
suspension or revocation of the Company's operating authority.
11. Insurance.
The policies of insurance described in Schedule F are presently in full force
and effect.
12. Litigation.
Except as set forth in Schedule B or D hereof, the on-going IRS audit and the
pending litigation with Fleet, the Company is not a party to any pending or to
its Knowledge threatened suit, action, proceeding, prosecution or litigation
which might materially adversely affect the financial condition, business,
assets, properties, certificates, rights, authorities, franchises or
authorizations of the Company, or materially interfere therewith, nor to the
knowledge of the Company is there any threatened or pending governmental
investigation involving the company or any of its operations, including
inquires, citations or complains by any federal, state or local administration
or agency, which would materially adversely affect the financial condition,
business assets or properties of the company; and there are no outstanding,
existing or pending judgments, orders, decrees, rulings, directives,
stipulations or other mandates of any court or any public or quasi-public
agency, body or official which have been in any way violated as they relate to
or affect the Company or any of the Company's properties, businesses,
operations, affairs or activities.
<PAGE> 72
13. Defaults.
Except as set forth in Schedule B or D annexed hereto and made a part hereof,
there are no material defaults on the part of the company under any material
contract, lease, mortgage, pledge, credit agreement, title retention agreement,
security agreement, lien, encumbrance or any other commitment, contract,
agreement or undertaking to which the Company is a party.
14. Tax Returns.
Except as set forth in Schedule B or D annexed hereto and mad a part hereof or
otherwise disclosed herein, all returns for federal, state and other
governmental income taxes, surtaxes, excess profits taxes, franchise taxes,
sales and use taxes, real and personal property taxes and any and all other
taxes to which the Company, or its assets, operations or income may be subject,
due as of the date hereof, have been duly prepared and filed in good faith and
all taxes shown thereon have been paid or are accrued on the books of the
Company.
15. Tax Accruals.
Except for the unpaid payroll taxes due the IRS and any sums which have been or
are assess as a result of the Audit, all other taxes and other assessments and
levies which the company 8s required by law to withhold or to collect have been
duly withheld and collected and have been paid over to the proper governmental
authorities or are held by the Company for such payment and all such withholding
and collections and all other payments unpaid and due in connection therewith as
of August 31, 1998 are duly reflected in the balance sheet of the company as of
said date.
16. Labor Problems.
Except as set forth in Schedule B or D annexed hereto and made a part hereof, no
labor or labor union problems or difficulties, strikes, walk-outs, slow downs,
job actions, boycotts, arbitrations, investigations, litigations or similar
proceedings with respect thereto, are presently existing, suffered, pending, or
threatened with respect to the Company, its employees, business operations,
assets or properties.
17. Compliance with Law.
Except as set forth in Schedule B or D annexed hereto and made a part hereof,
all of the properties, assets and business operations of the company conform in
material respects with all applicable ordinances, regulations, laws and
statutes, including but not limited to building, zoning, safety, highway and
other such laws, rules, regulations and ordinances.
18. Infringements.
The Company has never been charged with infringement or violation of any
adversely held patent, trademark, trade name, or copyright, with claims reading
on operations of the company or on apparatus or methods employed by the Company
in effecting the same, which would materially adversely affect any operations of
the Company, nor is the Company using or in any way making use of any
confidential information or trade secrets, of any former employer or any present
or past employee of the Company except as a result of the acquisition of the
business of such former employer.
<PAGE> 73
19. Truth of Representation.
No representation by the Company made in this Agreement and no statement made in
any certif8icate or schedule furnished in connection with the transaction herein
contemplated contains or will contain any knowingly untrue statement of a
material fact or knowingly omits or will omit to state any material fact
reasonably necessary to make any such representation or any such statement not
misleading to the Buyer in light of the due diligence of the Buyer and its
officers, employees and agents have performed and will perform prior to the
Closing.
V. COVENANTS OF THE SELLER AND THE COMPANY.
Seller hereby covenants and agrees as follows:
1. Inspection of Records.
Through the date of this Agreement (the "Due Diligence Period"), the Buyer has
had the right and opportunity at its own expense to make such examination and
investigations of the Company's business, properties and affairs as the Buyer
deemed necessary or desirable for all purposes relating to this Agreement (the
"Due Diligence") and to that end, throughout the Due Diligence Period, the
Company has allowed and granted the Buyer, its officers, counsel, accountants,
auditors and executive employees (collectively, the "Buyer") full, free and
continuos access, during normal business hours and without interference with the
conduct of the Company's business, to all of the premises, properties,
contracts, commitments, leases, books, papers, documents, instruments, books of
account, minutes and other records of the company and furnished and provided the
Buyer with all such financial and other statements and all such additional
information and particulars in respect of the business, properties and affairs
of the Company as the Buyer requested from time to time during the Due Diligence
Period.
2. Conduct of Business.
During the period from the date hereof to the Closing Date as that term is
hereinafter defined, the Company shall:
A. Conduct its business and operations solely in its normal and ordinary
course;
B. Issue no additional shares of stock, options, calls or other rights to
purchase such stock, or any other securities of any kind whatever;
C. Make no distributions to its shareholders, as shareholders of any of its
assets or properties by way of dividends, purchase of shares, redemptions or
otherwise;
D. Not transfer to any person, firm or corporation any customers, customer
lists or customer accounts of the Company;
E. Make no increase of any kind in salary, wages, bonus or compensation of any
officer, employee, representative or agent of the Company or pay any extra
compensation of any kind whatever to any of such persons, except with respect to
such increases in or additions to compensation as may be required to be paid in
accordance with existing firm and binding contracts and commitments of the
company and except as may be in accordance with past procedures and in the usual
and ordinary course of business of the Company;
<PAGE> 74
F. Not sell, transfer or dispose of any of the Stock;
G. Not sell, transfer or dispose of any of its business, properties or assets,
tangible or intangible, except for a full and fair consideration in the usual
and ordinary course of business;
H. Make no purchases or acquisitions of any real or personal property nor
increase or decrease inventory, except in the usual and ordinary course of
business;
I. Not subject any of its business, property or assets whatever, tangible or
intangible, to any mortgage, lien, pledge, hypothecation or encumbrance in any
manner except for a full and fair consideration in the usual and ordinary course
of business;
J. Not borrow any money, make any unusual or extraordinary expenditures or
incur or become liable for any obligations or liabilities except current
liabilities in the usual and ordinary course of its business
K. Not make any loans or advances or extend any credit except in the usual and
ordinary course of its business.
3. Publicity.
All notices to third parties other than Seller and all other publicity
concerning the transactions contemplated by this Agreement shall be planned and
coordinated jointly by Buyer and by the Company
VI. CONDITIONS PRECEDENT TO CLOSING.
1. Seller's Conditions Precedent:
All obligations of the Seller under this Agreement are subject to the
fulfillment of each of the following conditions, in additions to the fulfillment
of any and all other conditions set forth in this Agreement:
A. Bridge Loan.
Buyer shall make available to the Company a Bridge Loan in the amount of
$350,000 to provide working capital to the Company. This Loan shall be made at
the prime rate of interest as published in the "Wall Street Journal". This Loan
shall be made available pursuant to the acceptance and approval of the
appropriate jurisdiction of the Bankruptcy Court of Hillsboro County, New
Hampshire.
B. Performance of Covenants.
Each and every covenant herein made by Buyer and the Parent, which are to be
performed at or prior to the Closing Date, shall have been duly performed by
such times including, without limitation, the payment of the Purchase Price and
the execution and delivery of the related documents.
2. Buyer's Conditions of Precedent.
All of the obligations of the buyer under this Agreement are subject to the
fulfillment of each of the following conditions, in addition to the fulfillment
of any and all other conditions set forth in this Agreement:
<PAGE> 75
A. Effectiveness of Warranties.
Except for any representation or warranty which by its terms relates to a date
earlier than the closing or has been waived by the expiration of the Due
Diligence Period without objection insofar as any circumstance, event or fact
which existed on or before such expiration date, each and every on of the
warranties and representations of Seller and the Company as hereinbefore set
forth in Paragraph C hereof, shall be true at and as of the Closing Date as
though such representations were made at and as of such time.
B. Performance of Covenants.
Each and every covenant herein made by Seller and the company, as set forth in
paragraph D, which are to be performed at or prior to the Closing Date, shall
have been duly performed by such time.
VII. INDEMNIFICATION
1. Buyer shall be indemnified by Seller and the Company as follows:
Seller and the Company shall indemnify and hold harmless the buyer from and
against any losses, damages or expenses which may be suffered or incurred by
Buyer arising from or by reason of the inaccuracy of any Surviving
Representation. Without expanding Seller's liability under the terms of this
Agreement, Seller shall have no liability under this Section for any loss,
damage, expense or amount suffered or incurred by Buyer or the Company (a) as a
result of any election made by the Buyer or the Company subsequent to the
Closing under Section 338 of the Internal Revenue Code of 1954, as amended or
(b) which is covered by Insurance maintained by the Company on the Closing Date.
2. The Buyer shall indemnify the Company and Seller and shall hold the
Company and Seller harmless, on demand, from and against any losses, damages or
expenses which may be suffered or incurred by the Company or Seller arising from
or by reason of the inaccuracy of any statements, representation or warranty of
the Buyer made herein or in any statement, representation or warranty of the
Buyer made herein or in any document or instrument delivered by the Buyer to
Seller or the Company in connection with the transactions herein contemplated,
or the failure of Buyer to perform any agreement or covenant made by it herein
or in any document or instrument delivered by Buyer to Seller or the Company in
connection with the transactions herein contemplated.
VII. CLOSING
1. Time and Place.
The closing under this Agreement (the "Closing") and all deliveries hereunder
shall take place on a date and place acceptable to both parties (the "Closing
Date").
2. Delivery of Documents.
At the Closing, the Company will deliver to the Buyer the following documents:
<PAGE> 76
A. A written opinion, dated on the Closing Date, of counsel representing the
Company, in the form of Schedule G hereto, to the effect that the Company has
been duly incorporated and is on the closing date validly existing as a
corporation in good standing under the laws of the state of its incorporation;
that the Company is duly qualified or licenses as a foreign corporation in all
other states in which it does business; that the shares of capital stock
delivered by Seller to Buyer at the closing have been validly issued and are
outstanding, fully paid, and non-assessable, and constitute all of the issued
and outstanding shares of capital stock of the Company; that such counsel
knows of no litigation, proceeding or investigations pending or threatened
against the Company or Seller which might result in any material adverse
change in the validity of this Agreement or of any action taken or to be taken
pursuant to or in connection with the provisions of this Agreement, other than
as represented elsewhere in this Agreement; and that to thee knowledge of
such counsel the sale, transfer, assignment and delivery by Seller to Buyer of
the Stock pursuant to this Agreement will vest in buyer all rights, title and
interest in and to such Stock free and clear of all liens, encumbrances,
and equities.
B. A written confirmation dated the Closing Date, by the Accountant who
reviewed any and all of the financial statements of the Company and who most
recently examined the books and records of the Company in the form of Schedule H
hereto.
C. A certificate of the Chief Operating Officer and the Chief Financial Officer
of the Company, dated the Closing Date certifying to the best of his knowledge,
in reasonable detail as buyer may request on and as of said date, to the
fulfillment, as of the Closing Date, of each and every one of the conditions
precedent to the closing set forth in paragraph E hereof to the extent required
thereby.
D. Such additional copies or duplicate originals of the above described
documents and such other documents, undertakings and assurances as Buyer shall
reasonably require, all of which documents, undertakings and assurances shall be
delivered to Buyer sufficiently in advance of the Closing Date, as Buyer shall
reasonably require, so as to permit adequate inspect8ion and examination
thereof, all of which documents undertakings and assurances shall be in form
reasonably satisfactory to counsel to Buyer.
At the Closing, Buyer will deliver to each Seller the following:
E. A written opinion of counsel to Buyer, dated as of the Closing, to the
effect of the representations of Buyer and the Majority Stockholders in Section
B hereof.
IX. CONFIDENTIALITY.
All information and documentation provided or to be provided by the Company or
Seller to Buyer in connection with this Agreement and the transactions
contemplated hereby has been and shall be provided in the strictest confidence.
Pending the Closing, Buyer covenants and agrees not to use any of such
information or documentation in or for the benefit of any business engaged in
directly or indirectly by buyer and not to furnish or disclose any of such
information or documentation to any person or company. If the transactions
contemplated by this Agreement are not consummated, Buyer covenants and agrees
to return all such information and documentation to the Company and not retain
any copies thereof, and buyer further covenants and agrees to maintain the
confidentiality of such information and documentation and to neither use any of
it in or for the benefit of any business engaged in directly or indirectly by
the Buyer nor furnish or disclose any of it to any person or company.
<PAGE> 77
X. GENERAL PROVISIONS.
1. Brokerage Fees.
Buyer will pay brokerage fees to BKR International Mergers & Acquisitions group,
LLC and Leveson Associates, Inc. by separate agreements and the Buyer shall
hold the Seller harmless from any claim for the payment of such fees.
2. Conversion Rights.
William J. Poleatewich, Jr. and Marta L. Poleatewich will have the right to
convert their stock into the shares of any public company that may in the future
acquire or merge with the Buyer.
3. Due Diligence.
The Buyer has conducted its own Due Diligence and has a right granted to it by
this Agreement the authority to have its own auditors conduct a full and
expansive audit of the books and records of CPM, in the normal course of
auditing for year end purposes on or before August 1, 1999 (the "Unwind Date").
Should it be finally determined that Seller or the Company has breached any
Surviving Representation, then the Buyer shall have the right to call upon the
un-wind provisions as delineated herein.
4. Restructure of Debt.
The Seller and the Company agree to make a good faith effort to restructure the
debt with Fleet Bank and various other vendors. The parameters of the
restructure is to include:
A. Fleet Bank accepting $360,.000 in full payment of debt owed to it from the
Company at closing.
B. Mutual releases covering Fleet Bank, the Company and the guarantors of the
debt.
C. The Company will make a good faith effort to restructure outstanding
accounts payable.
5. Employment Contracts.
William J. Poleatewich, Jr. will continue as president and Chief Operating
Officer of the Company pursuant to an employment agreement terms of which to
include a salary of $100,000 per year for a 5 year period. This Agreement is
subject to the execution of Employment contracts satisfactory to both parties.
Marta L. Poleatewich will continue as Vice President and Chief Financial Officer
of the Company pursuant to an employment agreement terms of which to include a
salary of $40,000 per year for a 5 year period. This Agreement is subject to
the execution of Employment Contracts satisfactory to both parties.
6. Non-Compete Agreements.
William J. Poleatewich and Marta L. Poleatewich will sign non-compete agreements
satisfactory to the Buyer and to the Seller.
<PAGE> 78
7. Corporate Action.
Prior to the Closing Date, the Board of Directors of the Company and the Buyer
shall have duly adopted resolutions to the same effect with respect to the
aforesaid matters.
8. Termination.
In the event any of the foregoing conditions shall not be fulfilled prior to the
Closing, unless caused by any action or failure to act on the part of Buyer,
Buyer shall have the right to terminate the Agreement by notice thereof in
writing to the Company, and the parties thereto shall be restored as far as
possible to status quo, whereupon the parties hereto shall have no further
obligations or liabilities hereunder, one against the other, except for the
obligation of Buyer under Section H hereof which shall survive a termination of
this Agreement.
9. Refinancing of Certain Debt.
The Seller and the Company will make a good faith effort to pursue the
refinancing of certain corporate debt through key bank and will notify the Buyer
promptly of any change in the status of these negotiations.
10. Survival of Representations, Warranties and Covenants.
The affirmations, representations and warranties by Seller and/or the Company in
Paragraph IV, 3. and 4. of this Agreement (the "Surviving Representations")
shall survive the Closing until August 1, 1999 when they shall expire and become
non-actionable. Except for the Surviving Representations, the representations,
warranties, covenants indemnities and other agreements herein contained shall
not survive the closing and shall expire and become non-actionable automatically
at the conclusion of the Closing for a period not to exceed nine months from the
date of Closing.
11. Diligence.
The parties hereto agree that each shall with reasonable diligence proceed to
take all action which may be reasonably required to consummate the transaction
herein contemplated.
12. Waivers.
Each party hereto may:
A. Extend the time for performance of any of the obligations of the other
party;
B. Waive in writing any inaccuracies in representations and warranties made to
it contained in this Agreement or any schedule hereto or any certificate or
certificates delivered by any of the other parties pursuant to this Agreement;
and
C. Waive in writing the failure of performance of any of the agreements,
covenants, obligations or conditions of the other parties herein set forth or
alternatively terminate this Agreement for such failure.
<PAGE> 79
13. Non-Waiver.
The waiver by any party hereto of any breach, default, inaccuracy or failure by
another party with respect to any provision of this Agreement or any schedule
hereto shall not operate or be construed as a waiver of any other provision
thereof or of any subsequent breach thereof.
14. Further Assurances.
Each party hereto agrees to execute such further documents or instruments,
requested by the other party, s may be reasonably necessary or desirable to the
effect the purposes of this Agreement and to carry out its provisions, at the
expense of the party requesting the same.
15. Entire Agreement.
This Agreement constitutes a complete statement of all the arrangements,
understandings and agreements between the parties, and all prior memoranda and
oral understandings with respect thereto are merged in this Agreement. There
are no representations, warranties, covenants, conditions or other agreements
among the parties except as herein specifically set forth, and none of the
parties hereto shall rely on any statement by or on behalf of the other parties
which is not contained in this Agreement.
16 Governing Law.
Irrespective of the place of execution or performance of this Agreement, it
shall be governed by and construed in accordance with the laws of the State of
new Hampshire applicable to contracts made and to be performed in the State of
New Hampshire, and cannot be changed, modified, amended or terminated except in
writing, signed by the parties hereto.
17. Benefit and Assignablity.
This agreement shall bind and inure to the benefit of the parties hereto and
their respective legal representatives, successors and assigns, provided,
however, that this Agreement cannot be assigned by any party except by or with
the written consent of the others. Nothing herein expressed or implied is
intended or shall be construed to confer upon or to give any person, firm or
corporation other than the parties hereto and their respective legal
representatives, successors, and assigns any rights or benefits under or by
reason of this Agreement.
18. Approval of Counsel.
The form of all legal proceedings and of all papers and documents used or
delivered hereunder, shall be subject tot the approval of counsels to Buyer and
Seller.
19. Costs.
The Buyer shall not be entitled to reimbursement of the Buyer's costs and
expenses of the transaction. The costs and expenses of the Seller in connection
with this Agreement and the transactions contemplated hereby shall be borne and
paid by CPM Associates.
<PAGE> 80
20. Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same Agreement.
21. Notices.
Any notices and other communications under this Agreement shall be in writing
and shall be considered given if delivered personally or mailed by certified
mail to the party, for whom such notice is intended, at the address indicated at
the outset hereof (or at such other address as such party may specify by notice
to the other parties hereto).
22. Headings.
The headings in this Agreement are intended solely for the convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
23. Further Action.
Any further action required or permitted to be taken under this Agreement,
including giving notices, executing documents, waiving conditions, and agreeing
to amendments or modifications, may be taken on behalf of a party by its Board
of Directors, its President or any other person designated by its Board of
Directors, and when so taken shall be deemed the action of such party
IN WITNESS WHEREOF, the parties hereto have respectively executed this Agreement
the day and year first above written.
BUYER SELLER
CPM ASSOCIATES HOLDING CORP. By: /s/ William J. Poleatewich, Jr.
Witness: /s/ signed
By: /s/ Richard J. Verdiramo By: /s/ Marta L. Poleatewich
Richard J. Verdiramo, Vice President Witness: /s/ signed
Witness: /s/ signed THE COMPANY
CONTRACTING, PLANNING, MANAGEMENT,
ASSOCIATES, INC.
By: /s/ William J. Poleatewich, Jr.
William J. Poleatewich, Jr. President
Witness: /s/ signed
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------
Board of Directors
Interactive Multimedia Network, Inc.
Jersey City, New Jersey
We consent to the use of our audit report dated April 24, 2000 on the
consolidated financial statements of Interactive Multimedia Network, Inc. as of
March 31, 1999, for the filing with and attachment to the Form 10-K for the year
ending March 31, 1999.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
May 15, 2000
21.l SUBSIDIARIES OF THE REGISTRANT
CPM Associates Holding Corp, a Nevada corporation, 100% owned.
AutoSmartUSA, Inc., a Nevada corporation, 100% owned.
AutoSmartUSA Leasing, Inc., a Florida corporation, 100% owned.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet for INTERACTIVE MULTIMEDIA NETWORK, INC. at
March 31, 1999, and the Consolidated Statement of Operations and
Accumulated Deficit for the fiscal year ended March 31, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 96,802
<SECURITIES> 0
<RECEIVABLES> 76,724
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 199,926
<PP&E> 301,879
<DEPRECIATION> 222,578
<TOTAL-ASSETS> 400,008
<CURRENT-LIABILITIES> 28,247
<BONDS> 0
0
0
<COMMON> 6,440
<OTHER-SE> 365,321
<TOTAL-LIABILITY-AND-EQUITY> 400,008
<SALES> 991,968
<TOTAL-REVENUES> 991,968
<CGS> 73,401
<TOTAL-COSTS> 984,961
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 129,854
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (196,184)
<INCOME-TAX> 0
<INCOME-CONTINUING> (196,184)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (196,184)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet for INTERACTIVE MULTIMEDIA NETWORK, INC. at
Dec. 31, 1999, and the Consolidated Statement of Operations and
Accumulated Deficit for the nine month period ended Dec. 31, 1999 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 55,037
<SECURITIES> 0
<RECEIVABLES> 27,800
<ALLOWANCES> 0
<INVENTORY> 63,293
<CURRENT-ASSETS> 154,530
<PP&E> 354,884
<DEPRECIATION> 239,487
<TOTAL-ASSETS> 734,534
<CURRENT-LIABILITIES> 265,993
<BONDS> 0
0
0
<COMMON> 6,615
<OTHER-SE> 461,926
<TOTAL-LIABILITY-AND-EQUITY> 734,534
<SALES> 921,605
<TOTAL-REVENUES> 921,605
<CGS> 656,715
<TOTAL-COSTS> 788,139
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 121,788
<INTEREST-EXPENSE> 5,135
<INCOME-PRETAX> (649,780)
<INCOME-TAX> 0
<INCOME-CONTINUING> (649,780)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (649,780)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
