SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] Annual Report Pursuant To Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended: June 30, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No.: 333-63063
THE LIVING CARD COMPANY, INC.
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(Name of Small Business Issuer in its Charter)
Nevada 87-0583192
-------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1174 East 2700 South, #16
Salt Lake City, Utah 84106
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(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (801) 485-0430
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Securities Registered Pursuant to Section 12(g) of the Act:
None
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Check whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not obtained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $4,120.
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State the aggregate market value of voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of a specified date within the past 60 days: Based on the public offering
price, the value of such common stock held by non-affiliates as of the date of
this filing, was $200,000. The common stock of the Company has not traded in
the over-the-counter market since the completion of its public offering in the
beginning of July, 1999, and at present there is no trading market for the
Company's securities. Therefore, it is impossible to ascribe a market value
for the shares held by non-affiliates based on market prices.
As of the date of the filing of this report, the Registrant had a total
of 8,000,000 shares of its common stock, par value $ 0.001, issued and
outstanding.
TABLE OF CONTENTS
Item Number and Caption Page No.
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PART 1
Item 1. Business.............................................. 3
Item 2. Properties ........................................... 9
Item 3. Legal Proceedings .................................... 9
Item 4. Submission of Matters to a Vote of Security Holders .. 10
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters .......................... 10
Item 6. Management's Discussion and Analysis
or Plan of Operations ................................ 11
Item 7. Financial Statements ................................. 13, F-1
Item 8. Changes in and Disagreements on Accounting
and Financial Disclosure ............................. 13
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with Section 16(a)
of the Exchange Act ................................... 14
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Item 10. Executive Compensation ................................ 15
Item 11. Security Ownership of Certain Beneficial
Owners and Management ................................. 16
Item 12. Certain Relationships and Related Transactions ........ 16
Item 13. Exhibits and Reports on Form 8-K ...................... 17
Signatures ..................................................... 18
PART I
ITEM 1. BUSINESS
HISTORY
The Living Card Company, Inc. (the "Registrant" or the "Company"), was
organized as a Nevada corporation on May 8, 1998. Following organization of
the Company, John F. Lund and R. Blair Lund, officers and directors,
contributed to the Company all of their rights to certain self-contained
garden greeting cards designed, created and developed by them over the past
two years. On organization of the Company, a total of 6,000,000 shares of
Common Stock was issued to John F. Lund and R. Blair Lund in consideration of
their contribution of the product line, and $10,000 in cash to the Company.
An additional $10,000 was subsequently contributed to the Company as equity.
The Company is a Salt Lake City based corporation organized for the
purpose of specializing in the creation, development and marketing of unique,
educational and low-cost "garden" greeting cards. Management believes the
Company has a unique line of products which combine greeting card themes with
a variety of plants or flowers in a package which can be shipped by U.S. mail.
The Company is attempting to compete in the greeting card industry by
establishing a niche market for its unique products. The Company offers its
products through a few established brokers in selected territories in the
United States, and through direct sales to various retail markets and outlets.
The Company has established a relationship with a number of such distributors,
who have commenced efforts to distribute the Company's products in grocery
stores, gift stores and other retail outlets.
In the end of June, 1999, the Company completed a public offering of a
total of 2,000,000 shares of common stock at a price of $.10 per share, or a
total offering of $200,000, pursuant to a registration statement on Form SB-1
filed with the U.S. Securities and Exchange Commission ("SEC"), and declared
effective as of April 22, 1999. The Company received net proceeds of
approximately $168,000, from the offering, after offering costs.
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GENERAL
The Living Card Company, Inc. (the "Company"), is a Nevada corporation
that specializes in creative, educational, and low-cost "garden" greeting
cards. Upon organization in May, 1998, the Company acquired from John F. Lund
and R. Blair Lund, officers and directors, all of the rights to certain
"garden greeting cards" designed and developed over the past two years. The
Company undertook its public offering to provide it with funding to further
develop and market its products.
The Company's products were created as a result of the belief by
management that a substantial "niche" market exists in the greeting card
industry, for unique products. The Company's products, or "Living Cards," are
self-contained gardens, designed as relatively low-cost and unique greeting
cards. Management believes its Living Cards offer an affordable alternative
to traditional greeting card and gift products by providing a combination of a
conventional greeting card with a variety of plants or flowers which are
packaged for shipping by U.S. mail.
In 1998, the Company completed the development of its initial product
line, and has subsequently established relationships with suppliers of the
various materials comprising the Living Card products. The Company has
established a relationship with a Salt Lake City packaging firm, which
provides the Company with packaging, warehousing and distribution services.
The Company has also entered into a number of distribution relationships with
brokers in the industry, covering the states of Utah, Florida, Texas, New
Mexico, Oklahoma and other states. The Company has recently established
distribution with one of the largest lawn and garden distributors in the
United States. In addition, the Company has recently entered into a marketing
arrangement with National Sales and Marketing, Inc., a national sales and
marketing organization specializing in the lawn and garden sector, with sales
and marketing representation throughout the United States and Canada. Through
these firms, the Company's products have been placed in grocery stores, gift
stores and other retail operations. Contracts are currently being made with
other prospective distributors in different areas of the country. The Company
has also undertaken efforts to market its products through various retail
markets, including convenience stores, fundraising activities, gift and
specialty stores and direct sales through a toll-free number. The Company is
currently in the process of designing a Company web page to generate internet
sales.
The Company has been in operation for approximately 16 months, and has no
significant history of operations.
Products
--------
Each "Living Card" in the Company's product line has been designed to
provide the buyer with an alternative to the typically short-lived personal
greeting card, which is generally disposed of shortly after the event which it
commemorates (e.g., Christmas, birthdays, Valentine's Day).
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Each "Living Card" is designed as a small garden, which will grow with minimal
care. The Living Cards are self-contained gardens, designed to be relatively
low cost, educational and entertaining cards. The Living Cards are packaged
for low-cost shipping via U.S. mail.
The Company has initially created eight styles of cards for a variety of
themes and holiday occasions, as follows:
a. The Original Pop-Up Garden
b. My Very First Garden
c. Mom's Magic Herb Garden
d. Mom's Magic Tea Garden
e. Happy Birthday
f. Thinking of You
g. Get Well Soon
h. Missing You
Additional Living Card garden products, covering a variety of additional
holiday events or themes, are in design, and will be introduced into the
market as the Company's financial situation and operating and marketing
results dictate. All aspects of the cards, including the peat, box, plastic
containers, and seeds, are adaptable to additional holidays, themes, corporate
logos, educational needs, and events.
Each Living Card is packaged in a pop-up box (shippable package), six
inches square and approximately one inch deep, containing bio-soil peat cubes,
which is the peat source for the plants or flowers; a plastic container
(rectangular-shaped); and seed packets containing a variety of flowering and
foliage seeds.
The products come with simple instructions which describe a basic
four-step process for growing the "Living Card." If the instructions are
followed, the Living Cards are guaranteed to germinate within three to five
days and to continue to grow for approximately six months. Seed stamps are
date-stamped with a three-year shelf-life; peat cubes actually improve with
age and have no shelf life.
The Company purchases the materials and supplies used in its products,
including plastics products, packaging, seed envelopes and seeds, peat moss
cubes and miscellaneous items, from various suppliers. Except for the
Company's supplier of peat cubes, located in Hasselfors, Switzerland, and its
supplier of seeds, located in Cambridge, New York, all of these suppliers are
located in the Salt Lake City area. In addition, the Company uses the
services of a Salt Lake City based firm for assembly, warehousing and shipping
of the Company's products. The Company does not currently have, and does not
expect to have, any long-term purchase contracts with any of its suppliers or
providers. Alternative sources exist for each of the materials used in the
Company's products, and for such assembly, warehousing and shipping services.
However, the Company cannot give any assurance that supply or service
relationships with alternative sources
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can be established or that such relationships would provide timely and
sufficient quantity or quality of materials or services. In addition, the
Company may incur additional costs and business delays and interruptions, if
an existing relationship with a supplier were to terminate, for whatever
reason, and sourcing supplies and materials from alternative sources became
necessary.
Distributor Network
-------------------
Since inception, the Company has entered into a distributor arrangement
with a number of firms in the greeting card business. The Company has
recently entered into a marketing arrangement with National Sales and
Marketing, Inc., a national sales and marketing organization which specializes
in the lawn and garden sector, providing for the marketing of the Company's
products in the United States and Canada. In addition, the Company has
established distribution with Central Garden, one of the largest lawn and
garden distributor in the United States. These firms place the Company's
products in grocery chains, gift stores and other retail operations. Although
the Company has generated some initial sales, such sales have been small and
management considers it too early to assess the results of the marketing and
sales efforts by these firms, or to assess the appeal of the Company's
products. The distributor arrangement with each of these distributors
provides for commission of 5% of the wholesale invoice price, excluding
freight.
The Company is undertaking efforts to establish a more extensive broker
network to market Living Cards throughout the United States. In entering into
broker arrangements, the Company attempts to select brokers with experience
and contacts in the greeting card industry. Firms with substantial
experience in the greeting card industry have been identified as prospective
brokers for the Company's products. The Company plans to offer each of these
firms renewable 30-day contracts, to allow for quick response if sales do not
meet expectations.
Retail Markets
--------------
In addition to the broker network described above, the Company has
targeted several different channels through which its products can be sold. A
few of the markets the Company is attempting to develop are described below:
Grocery Stores. Management believes that grocery stores may offer the
most successful approach because of their high traffic volume and numerous
product display locations. Several areas in the grocery store are believed to
be suitable for placement of the products, including the front-end
merchandising area (next to the cash register) for impulse purchases; the
traditional greeting card section; the "power-panel" merchandising sections at
the end of shopping aisles; seasonal/promotional sections; and the general
merchandise sections--perhaps next to gift or gardening sections.
Convenience Stores. Convenience stores may prove to be attractive
marketing venues for three principal reasons. First, the industry is
constantly looking for new and unique products
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with high profit margins. Secondly, the convenience store consumer is
oftentimes an impulse buyer. Thirdly, there are over 90,000 convenience
stores in the United States.
Gift Stores/Specialty Stores. The Company believes its products fit into
this "niche" market. Some examples of this market include American Greeting
Card stores, Michael's, copy store outlets, and the like.
Direct Sales. Each Living Card box has a toll-free number customers may
use for direct orders. Phone orders will be handled by customer service
during business hours and/or by Alert Communications, an answering service
with which the Company has contracted, on a 24 hour basis. When orders are
received, customer information is entered into the Company's database and
orders are mailed within five (5) business days. The Company eventually plans
to use the database records for catalog mailings and new product
introductions. In addition, the Company is currently designing a Company
website, for sales on the internet.
Fundraising Activities. Numerous organizations seek unique items for
their fundraising activities. Management believes the Company's products are
particularly suitable to this market, because of their unique nature,
affordability, and the ability to adapt the products to the needs of a
particular organization.
The Company also markets its products through trade shows.
Future Marketing Plans
----------------------
The Company is exploring a number of additional marketing strategies
which it will implement in the future, a few of which are described below:
Modified Plastic Molds. The Company may acquire or develop a number of
different plastic molds for a variety of container shapes, to reflect specific
holidays or events or common greeting card themes (e.g., pumpkins for
Halloween; hearts for Valentine's Day, etc.). Additionally, modified plastic
containers can be used as "start-up" gardens, after which plants can be
transplanted into existing gardens.
Education. The Company is reviewing a number of different strategies to
offer the products into the educational market. The Company's products may be
used to introduce young children to plant growth and/or gardening.
Corporate Opportunities. Living Card products may be designed to serve
as promotional material for corporations or large enterprises, designing the
plastic container to display company logos, colors and/or specific messages or
themes.
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Gardening. Living Card products may be used to enhance home gardens.
Living Cards may be modified to accommodate larger plants such as tomatoes,
and sold with garden-specific seeds.
International sales. Greeting cards are popular throughout the world,
and international markets offer considerable opportunity for future sales.
Due to the Company's limited resources, the Company has not been able,
and will be unable, to pursue many of these markets simultaneously without
substantial additional capital.
Pricing and Profit
------------------
The Company's products are uniformly priced, which management believes is
the most effective way to sell low-cost consumer products. In pricing
products uniformly, management believes consumers will choose between products
rather than prices, which will translate into greater purchasing ease. The
Company attempts to price its products so as to achieve a gross product margin
of 40% or more.
Competition
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The business in which the Company competes is intensely competitive.
The Company competes with large companies in the industry, such as Hallmark
Cards and American Greetings, which have established reputations, name
recognition and market share, and the ability to update and expand product
lines. Most, if not all, of the companies with which the Company competes,
have significantly greater management, marketing, and creative and financial
resources.
Management believes that the larger, established greeting card companies
do not enjoy the same advantage in the "niche" markets in the industry, due to
their traditional approach to the market. While the Company realizes that it
is in a significant disadvantage in the marketplace due to its limited
resources and experience, the Company believes its ability to compete is
enhanced by its unique product line.
Customers
---------
As indicated, the Company sells its products through a number of broker
representatives. The Company is not, therefore, dependent on a few major
customers.
Trademarks
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The Company has trademarked the "Amazing Pop-Up Garden." The Company
does not hold any other trademarks or patents, nor is it a party to any
licensing, royalty, concession or franchising agreement or labor contract.
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Governmental Regulation
-----------------------
The Company is not in need of any governmental approvals for the sale of
its principal products.
The Company does not believe that any existing or probable governmental
regulations has, or will have, any material effect on the Company's business.
Research and Development
------------------------
Since inception, the Company estimates that it has spent approximately
$60,000 on product research and development activities. None of such costs
have been borne by the Company's customers.
Offices and Employees
---------------------
The Company does not have any full or part time employees other than its
officers and directors. The Company employs additional clerical staff and
other help on an "as needed" basis.
The Company presently utilizes approximately 1,000 square feet of office
space and related equipment and resources, including computers, printers,
typewriters, desk, conference table and cabinets, owned by its
Secretary/Treasurer. The Company believes that this office space and related
equipment is adequate for its foreseeable needs. The Company currently pays
$500 per month for the use of the office space, and approximately $220 per
month for related office resources, which is believed to be reasonable based
on comparable rates in the Salt Lake City area.
ITEM 2. PROPERTIES
The Company does not hold or have an interest in any properties. The
Company currently rents approximately 1,000 square feet of office space, and
related resources, from Blair Lund, Secretary/Treasurer and a director.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings, and
no such proceedings by or, to the best of its knowledge, against the Company
have been threatened.
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ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report, or since the inception of the Company.
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
There is no currently no trading market for the Registrant's common
stock. The Registrant is presently seeking to have its securities included on
the OTC Bulletin Board. There can be no assurance as to when, or whether,
this will occur, or that a market in the Company's common stock will develop
in the future.
Since inception, no dividends have been paid on the Company's common
stock. The Company intends to retain any earnings for use in its business
activities, so it is not expected that any dividends on the common stock will
be declared in the foreseeable future.
As of the date of filing this report, there were approximately 63
holders of record of the Company's common stock.
On May 20, 1998, in connection with the organization of the Company, the
Company issued a total of 6,000,000 shares of common stock, or 3,000,000
shares each to John F. Lund and Blair Lund, officers and directors, in
consideration of the contribution to the Company by these individuals, of all
of the rights to the Living Card products, and $10,000 in cash. No
commissions or discounts were paid or given in connection with the issuance of
these shares of common stock. These securities were sold in reliance upon the
exemption from the registration and delivery requirements of the Securities
Act of 1933 provided in Section 4(2) of the Securities Act, and applicable
exemptions thereunder. The two persons who purchased shares of common stock
of the Company, were officers, directors and founders of the Company; were
sophisticated and experienced investors, and had access to, and were in
possession of, all pertinent information regarding the Company. At the time
of purchase of such common stock, each of such individuals executed an
investment letter acknowledging that he knew he was acquiring "restricted
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securities" as defined in Rule 144 under the Securities Act; that such shares
cannot be transferred or sold without appropriate registration or an exemption
therefrom.
In the beginning of July, 1999, the Company completed a public offering
of 2,000,000 shares of common stock, par value $0.001 per share, at an
offering price of $.10 per share, or a total offering of $200,000 (the
"offering"). The Company's offering was conducted pursuant to a registration
statement on Form SB-1 ("registration statement"), S.E.C. File No. 333-63063,
which was declared effective by the U.S. Securities & Exchange Commission
("SEC") on April 22, 1999. The offering commenced shortly following the
effective date, and the Company received subscriptions for the entire offering
of 2,000,000 shares of common stock by the end of June, 1999. The offering
was closed in the beginning of July, 1999; a total of $115,000 in proceeds
were received by the Company prior to the fiscal year ended June 30, 1999.
The offering was offered and sold by the Company's officers and
directors, and the Company did not use the services of any underwriter firm or
broker-dealer firm in the offering, and no expenses were incurred for
underwriting discounts and commissions, finders' fees or other expenses to
underwriters. The common stock offered and sold in the offering is not
convertible into any other securities of the Company. The Company incurred
offering expenses in connection with the issuance and distribution of the
securities registered in the offering of approximately $30,754, resulting in
net proceeds of approximately $169,250. None of such offering expenses were
direct or indirect payments to officers or directors, or their associates.
From the effective date of the Company's registration statement until the
fiscal year ended June 30, 1999, the Company has utilized the net proceeds of
the offering for the repayment of the sum of $65,000 in indebtedness to John
Lund, an officer; for general and administrative expenses in the amount of
approximately $5,000; for marketing and promotional expenses in the amount of
approximately $15,000; for management compensation in the amount of
approximately $4,500; and for the purchase of product materials in a nominal
amount. None of such expenses, except management compensation, were direct
or indirect payments to officers or directors, or their associates. The
Company does not believe that the use of proceeds described above represents a
material change in the use of proceeds described in the Company's prospectus
included as part of the registration statement.
ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
PLAN OF OPERATIONS
The Company plans to devote its efforts in the next twelve months, to
continuing to establish a sales network for its products, marketing and
promoting its products for the purpose of further establishing the Company's
products in the marketplace, and maintaining, to the extent the Company's
funds allow, the production of its products to meet anticipated demand. Over
the
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past few months, the Company has established a distributor relationship with a
number of distributors involved in brokering products in this industry.
Other prospective distributors have been identified and management is
undertaking initial discussions with such firms. The Company plans to enter
into additional distributor arrangements with carefully selected brokers in
the industry, in different regions of the country. At the same time, the
Company will continue with efforts to directly market its products to other
retail markets. To the extent the Company's funds allow, the Company will
design and develop new living card products, to meet different special events
or niche markets.
The Company's funds are quite limited, and the Company may not be able to
meet its cash requirements over the next year unless it can achieve profitable
operations, of which there can be no assurance. If the Company is unable to
meet its cash requirements over the next several months, it may be required to
seek additional debt or equity financing. There can be no assurance the
Company will be successful in these efforts.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, the Company had total current assets of $51,785,
consisting of very limited cash ($9,634), accounts receivable of $3,636 and
inventory of $38,515. Total liabilities at June 30, 1999, were $47,846,
consisting of accounts payable of $27,846 and a note payable to an officer
(John Lund, President) of $20,000.
The Company's financial statements as of June 30, 1999, reflect a total
of $115,000 from the Company's public offering completed in the beginning of
July, 1999. Additional gross proceeds of $85,000 were received by the
Company from the public offering after June 30, 1999. Of such amount, the
Company paid an additional $20,000 to John Lund, President, to repay certain
indebtedness described in the Company's prospectus, leaving a total of
approximately $65,000 in capital from the offering. Consequently, the
Company has limited capital to pursue its operating plan over the next several
months.
RESULTS OF OPERATIONS
The Company had nominal revenues of $4,120 during the fiscal year ended
June 30, 1999. Expenses during the fiscal year totaled $148,260, resulting in
a net loss of $146,816. The Company had losses of $11,820 from inception on
May 8, 1998 through the fiscal year ended June 30, 1998. The operating
results during the first full fiscal year may be attributed in large part to
(a) a lack of sales revenues prior to the last few months of the fiscal year
end, due to efforts to complete the development and begin marketing of the
Company's products; and (b) substantial expenses incurred in the start-up
phase of the Company's business. However, there can be no assurance that the
Company will not continue to sustain losses in the next few months.
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ITEM 7.
FINANCIAL STATEMENTS
The following financial statements of the Company appear at the end of
this report, beginning with page F-1:
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TITLE PAGE NO.
Independent Accountants' Report of Jones, Jensen & Company,
Certified Public Accountants F-1
Balance Sheets as of June 30, 1999 F-2
Statement of Operations for the year ended June 30, 1999
and from inception on May 8, 1998 F-3
Statement of Stockholders' Equity from inception on May 8, 1998
through June 30, 1999 F-4
Statement of Cash Flows for the year ended June 30, 1999 and
from inception on May 8, 1998 F-5
Notes to Financial Statement F-6
ITEM 8.
CHANGES IN AND DISAGREEMENTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants since the
Company's organization.
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PART III
ITEM 9.
DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
NAMES AND TERMS OF OFFICE
The table below sets forth the name, age, and position of each executive
officer and director of the Company.
Name Age Position and Office Held Since
------------- ----- -------------------------- ---------
John F. Lund 42 President and Director May 1998
R. Blair Lund 72 Secretary/Treasurer and Director May 1998
Each of the above individuals, became an officer and director of the
Company in connection with its organization. The term of office of each
officer and director is one year and until his successor is elected and
qualified.
Set forth below is biographical information for each of the Company's
officers and directors. No person other than the Company's officers and
directors will perform any management functions for the Company.
John F. Lund has been involved in developing the products for The Living
Card Company for the past two years. He founded Vertical Gardens, a unique
garden products firm located in Salt Lake City, Utah of which he served as
president from 1993 to 1996. While with Vertical Gardens, Mr. Lund was
responsible for design and product development; marketing; and all accounting
and financial matters. For a period of approximately eleven years prior to
his position with Vertical Gardens, Mr. Lund was employed by BSD Medical
Corporation, a medical electronics firm, as purchasing manager. From 1978 to
1982, Mr. Lund was employed as regional manager of Evans Specialty Company, a
specialty hardware and fastener firm, where he was responsible for managing
the company's regional office and warehouse, including overseeing inventory
management and control, training, accounting, scheduling, marketing, and
public and customer relations. From 1977 to 1978, Mr. Lund was the owner and
operator of Amex Systems Corporation, a building products company. Through
his various employment positions over the years, Mr. Lund has developed a
broad range of experience in product development, marketing, management,
procurement, and finance. Mr. Lund attended the University of Utah from 1975
through 1978, where he took courses in business management, marketing and
finance before leaving prior to receiving a degree, to pursue private business
concerns.
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R. Blair Lund is the father of John F. Lund. For the past several years,
Mr. Lund has been involved in a number of private business ventures. Since
1992, he has served as Secretary/Treasurer of Material Processing, Inc., a
publicly held corporation engaged in soil sterilization and environmental
clean up activities. For a period of approximately 26 years through 1978, Mr.
Lund was involved in the consumer finance industry. He was an officer,
director and founder of Industrial Credit, Inc., a Utah thrift and loan and
finance company. From 1976 to 1978, he served as an officer and director of
Western States Thrift and Loan, a Utah thrift and loan. Mr. Lund has been
self-employed over the past several years as a consultant for several small
manufacturing firms. From approximately 1972 to 1974, he served as president
of the Utah Consumer Finance Association. From 1947 to 1951, Mr. Lund
attended the University of Utah and the University of Colorado, Boulder, where
he took courses in banking and finance.
Except for the Company's officers and directors, there are no promoters
or control persons of the Company.
ITEM 10. EXECUTIVE COMPENSATION
REMUNERATION DURING FISCAL YEAR
Set forth below is a summary of all compensation received by officers and
directors during the fiscal year:
CASH COMPENSATION TABLE
NAME OF INDIVIDUAL CAPACITY IN WHICH CASH
OR NUMBER IN GROUP SERVED COMPENSATION
- ------------------------- ------------------ -------------
John F. Lund President, Director $36,000 in cash
R. Blair Lund Secretary/Treasurer and
Director $ 4,000 in cash
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ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the name and address, as of the date of
the filing of this report, the approximate number of shares of common stock
owned of record or beneficially by each person who owned of record, or was
known by the Company to own beneficially, more than 5% of the common stock,
and the name and shareholdings of each officer and director, and all officers
and directors as a group:
Amount and Nature of Ownership
-------------------------------
Sole Voting Shared Voting
Name of Person and Investment and Investment Percent of
or Group Power(1) Power Class
----------------- -------------- ---------------- ----------
Principal Shareholders:
- ----------------------
John F. Lund 3,000,000 -0- 37.5
R. Blair Lund (2) 3,000,000 -0- 37.5
Officers and Directors:
- ----------------------
John F. Lund -----------------------See above------------------------
R. Blair Lund -----------------------See above------------------------
All Officers and Directors
As a Group (2 Persons): 6,000,000 -0- 75.0
- ----------------------
(1) All shares are held beneficially and of record, and each record
shareholder has sole voting, investment, and dispositive power.
(2) R. Blair Lund is the father of John Lund.
There are no arrangements which may result in a change in control of the
Registrant.
ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the organization of the Company, John Lund, President
and a director, and Blair Lund, Secretary and a director, contributed all of
the rights to the Living Card products,
16
<PAGE>
and paid an aggregate of $10,000 cash, in exchange for the issuance of a total
of 3,000,000 shares each of the common stock of the Company. In November,
1998, John Lund and Blair Lund contributed an additional $10,000 in equity
capital to the Company.
From the date of organization of the Company, John F. Lund, President,
loaned to the Company a total of $85,000, to fund Company operations pending
the receipt of funding from the Company's offering. A substantial portion of
these funds was utilized by the Company to purchase materials and packaging
and materials for the Company's products, and for general and administrative
expenses. Since the completion of the public offering, a total of $85,000 of
such indebtedness has been repaid to Mr. Lund, without interest. A total of
$65,000 was repaid to Mr. Lund prior to the year ended June 30, 1999; the
balance was repaid in July, 1999. In addition to the sums described above,
the Company's officers and directors contributed an additional $58,323 to the
Company prior to the completion of the offering, which has been treated as
additional paid in capital.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
Copies of the following documents are included as exhibits to this report
pursuant to Item 601 of Regulation S-B.
Exhibit No. SEC Ref. Title of Document Page.
2.01 * 2 Articles of Incorporation, as amended
2.02 * 2 By-Laws
27 ** 27 Financial Data Schedules
* Previously filed with the Securities and Exchange Commission on
September 8, 1998, as part of the Company's initial filing on Form SB-1
** The Financial Data Schedule is presented only in the electronic filing
with the Securities and Exchange Commission.
Reports on Form 8-K
During the fiscal year ended June 30, 1999, the Company filed no reports
on Form 8-K.
17
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the Registrant has caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized.
REGISTRANT:
THE LIVING CARD COMPANY, INC.
Date: November 8, 1999 By /s/ John F. Lund
-------------------------------------------
John F. Lund, Principal Executive
Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
THE LIVING CARD COMPANY, INC.
Date: November 8, 1999 By /s/ John F. Lund
----------------------------------------
John F. Lund
President, Principal Executive Officer
Principal Financial Officer
THE LIVING CARD COMPANY, INC.
Date: November 8, 1999 By /s/ R. Blair Lund
-------------------------------------------
R. Blair Lund
Secretary/Treasurer and Director
18
<PAGE>
JONES, JENSEN & COMPANY, LLC
Certified Public Accountants and Consultants
50 South Main Street, Suite 1450
Salt Lake City, Utah 84144
Telephone (801) 328-4408
Facsimile (801) 328-4461
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Living Card Company, Inc.
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheet of Living Card Company, Inc. (a
development stage company) as of June 30, 1999 and the related statements of
operations, stockholders' equity and cash flows for the year ended June 30,
1999, and from inception on May 8, 1998 through June 30, 1998 and 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Living Card Company, Inc. (a
development stage company) as of June 30, 1999 and the results of its
operations and its cash flows for the year ended June 30, 1999, and from
inception on May 8, 1998 through June 30, 1998 and 1999 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 6 to the
financial statements, the Company is a development stage company with no
significant operating results to date, which raises substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 6. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
October 12, 1999
F-1
<PAGE>
LIVING CARD COMPANY, INC.
(A Development Stage Company)
Balance Sheet
ASSETS
June 30,
1999
-------------
CURRENT ASSETS
Cash $ 9,634
Accounts receivable - net (Note 2) 3,636
Inventory 38,515
-------------
Total Current Assets 51,785
-------------
TOTAL ASSETS $ 51,785
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 27,846
Accounts payable - related party (Note 3) 20,000
-------------
Total Current Liabilities 47,846
-------------
STOCKHOLDERS' EQUITY
Preferred stock: $0.01 par value, 5,000,000
shares authorized -no shares issued and outstanding -
Common stock: $0.001 par value, 20,000,000 share
authorized; 8,000,000 shares issued and outstanding 8,000
Additional paid-in capital 239,575
Stock subscription receivable (Note 4) (85,000)
Deficit accumulated during the development stage (158,636)
-------------
Total Stockholders' Equity 3,939
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 51,785
=============
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
LIVING CARD COMPANY, INC.
(A Development Stage Company)
Statements of Operations
From
Inception on
May 8, 1998
For the Through
Year Ended June 30,
June 30, -----------------------------
1999 1998 1999
------------- ------------- -------------
REVENUES $ 4,120 $ - $ 4,120
COST OF SALES 2,828 - 2,828
------------- ------------- -------------
GROSS MARGIN 1,292 - 1,292
------------- ------------- -------------
EXPENSES
Bad debt expense 5,949 - 5,949
Selling, general and
administrative 142,311 11,820 154,131
------------- ------------- -------------
Total Expenses 148,260 11,820 160,080
------------- ------------- -------------
OPERATING LOSS (146,968) (11,820) (158,788)
------------- ------------- -------------
OTHER INCOME
Interest income 152 - 152
------------- ------------- -------------
Total Other Income 152 - 152
------------- ------------- -------------
NET LOSS $ (146,816) $ (11,820) $ (158,636)
============= ============= =============
BASIC LOSS PER SHARE $ (0.02) $ (0.00)
============= =============
BASIC WEIGHTED AVERAGE SHARES 6,564,373 6,000,000
============= =============
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
LIVING CARD COMPANY, INC.
(A Development Stage Company)
Statements of Stockholders' Equity
From Inception on May 8, 1998 through June 30, 1999
<TABLE>
<CAPTION
Deficit
Accumulated
Additional Stock During the
Common Stock Paid In Subscription Development
Shares Amounts Capital Receivable Stage
------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at inception on
May 8, 1998 - $ - $ - $ - $ -
Issuance of 6,000,000 shares
of common stock for cash at
approximately $0.001 per share 6,000,000 6,000 (1,000) - -
Contributed capital - - 5,006 - -
Net loss for the year ended
June 30, 1998 - - - - (11,820)
------------ ---------- ------------- ------------ ------------
Balance, June 30, 1998 6,000,000 6,000 4,006 - (11,820)
Issuance of 2,000,000 shares
of common stock for cash at
$0.10 per share 2,000,000 2,000 198,000 (85,000) -
Stock offering costs - - (30,754) - -
Contributed capital - - 68,323 - -
Net loss for the year ended
June 30, 1999 - - - - (146,816)
------------ ---------- ------------- ------------ ------------
Balance, June 30, 1999 8,000,000 $ 8,000 $ 239,575 $ (85,000) $ (158,636)
============ ========== ============= ============ ============
The accompanying notes are an integral part of these financial statements.
F-4
</TABLE>
<PAGE>
LIVING CARD COMPANY, INC.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION
From
Inception on
May 8, 1998
For the Through
Year Ended June 30,
June 30, -----------------------------
1999 1998 1999
------------- ------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (146,816) $ (11,820) $ (158,636)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Allowance for bad debt 5,949 - 5,949
Increase in accounts payable and
accounts payable - related party 44,446 3,400 47,846
(Increase) in accounts receivable (9,585) - (9,585)
(Increase) in inventory (38,515) - (38,515)
------------- ------------- --------------
Net Cash Used by Operating
Activities (144,521) (8,420) (152,941)
------------- ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES - - -
------------- ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on note payable-related party (90,000) - (90,000)
Note payable - related party 65,000 25,000 90,000
Common stock issued for cash 115,000 5,000 120,000
Additional capital contributed 68,323 5,006 73,329
Stock offering costs (30,754) - (30,754)
------------- ------------- --------------
Net Cash Provided by Financing
Activities 127,569 35,006 162,575
------------- ------------- --------------
NET (DECREASE) INCREASE IN CASH (16,952) 26,586 9,634
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 26,586 - -
------------- ------------- --------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 9,634 $ 26,586 $ 9,634
============= ============= ===============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest paid $ - $ - $ -
Income taxes paid $ - $ - $ -
The accompanying notes are an integral part of these financial statements.
F-5
</TABLE>
<PAGE>
LIVING CARD COMPANY, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999
NOTE 1 - NATURE OF ORGANIZATION
The financial statements presented are those of Living Card Company, Inc.
(a development stage company) (The Company). The Company was organized under
the laws of the State of Nevada on May 8, 1998. The Company was organized to
manufacture, merchandise, sell and distribute at wholesale and retail, a
specialized line of greeting cards and other related products.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The financial statements are prepared using the accrual method of
accounting. The Company has elected a June 30, year end.
b. Provision for Taxes
At June 30, 1999, the Company had net operating loss carryforwards of
approximately $150,000 that may be offset against future taxable income from
the year 1999 through 2014. No tax benefit has been reported in the financial
statements because the Company believes that there is a 50% chance or greater
the net operating loss carryforwards will expire unused. Therefore, the
potential tax benefits of the loss carryforwards are offset by a valuation
allowance of the same amount.
c. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
e. Basic Loss Per Share
The computation of basic loss per share of common stock is based on the
weighted average number of shares outstanding during the period of the
financial statements.
F-6
<PAGE>
LIVING CARD COMPANY, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Accounts Receivable
Accounts receivable are shown net of an allowance for doubtful accounts
of $5,949 as of June 30, 1999.
g. Inventory
The inventory is carried at its lower of cost or market value using the
average cost method. At June 30, 1999, inventory was as follows:
June 30,
1999
-----------------
Raw materials and supplies $ 13,460
Finished goods 25,055
-----------------
Total $ 38,515
=================
NOTE 3 - RELATED PARTY TRANSACTIONS
During the year ended June 30, 1999, an officer of the Company loaned the
Company $85,000 of which $65,000 was paid back during the year leaving a
$20,000 balance which bears no interest and is due on demand.
NOTE 4 - STOCK SUBSCRIPTION RECEIVABLE
During the year ended June 30, 1999, the Company issued 2,000,000 shares
of common stock at $0.10 per share for cash, of which $115,000 was received
prior to June 30, 1999. The remaining $85,000 was received subsequent to June
30, 1999 and is being shown as a stock subscription receivable as of June 30,
1999.
NOTE 5 - PREFERRED STOCK
Shares of Preferred Stock may be issued in one or more series as may from
time to time be determined by the board of directors. Each series shall be
distinctly designated. All shares of any one series of the Preferred Stock
shall be alike in every particular, except that there may be different dates
from which dividends thereon, if any, shall be cumulative, if made cumulative.
The powers, preferences, participating, optional and other rights of each such
series and the qualifications, limitations, or restrictions thereof, if any,
may differ from those of any and all other series at any time outstanding.
F-7
<PAGE>
LIVING CARD COMPANY, INC.
(A Development Stage company)
Notes to the Financial Statements
June 30, 1999
NOTE 6 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant operations to date,
nor does it have an established source of revenues sufficient to allow it to
continue as a going concern. It is the intent of management to use a variety
of marketing strategies in order to compete in the greeting card business. In
the interim, shareholders of the Company have committed to meeting its minimal
operating expenses.
F-8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 9,634
<SECURITIES> 0
<RECEIVABLES> 3,636
<ALLOWANCES> 0
<INVENTORY> 38,515
<CURRENT-ASSETS> 51,785
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 51,785
<CURRENT-LIABILITIES> 47,846
<BONDS> 0
0
0
<COMMON> 8,000
<OTHER-SE> (4,061)
<TOTAL-LIABILITY-AND-EQUITY> 51,785
<SALES> 4,120
<TOTAL-REVENUES> 4,272
<CGS> 2,828
<TOTAL-COSTS> 2,828
<OTHER-EXPENSES> 148,260
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (146,816)
<INCOME-TAX> 0
<INCOME-CONTINUING> (146,816)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (146,816)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
