Filed: March 19, 1999 S.E.C. File No. 333-63063
_____________________________________________________________________________
U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form SB-1
AMENDMENT NO. 2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE LIVING CARD COMPANY, INC.
_________________________________________________
(Name of small business issuer in its charter)
Nevada NEVADA 87-058319
______________________ __________________________ _____________________
(State or jurisdiction (Primary Standard Industrial (I.R.S Identification
of incorporation or Classification Code Number)
organization)
1174 East 2700 South, #16, Salt Lake City, Utah 84106; (801) 485-0430
_______________________________________________________________________
(Address and telephone number of principal executive offices)
Same as above
__________________________________________________________________
(Address of principal place of business or intended principal
place of business)
James C. Lewis, 10 West 100 South, Suite 600 Salt Lake City, 84101
(801)530-0447
______________________________________________________________________
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: as soon as practicable
following effectiveness of the Registration Statement.
If any of the securities being registered on this Form are to be offered
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] .
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] .
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [ ] .
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
--------------------------------
Title of
Each Proposed Proposed
Class of Dollar Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being to be Price Per Offering Registration
Registered Registered Unit Price Fee
- ------------ ---------- ----------- ---------- ---------------
Common Stock $200,000 $.10 $200,000 $100*
* Minimum fee
<PAGE>
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933, as amended, or until the
registration statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
Disclosure alternative used (check one): Alternative 1 [ ]; Alternative 2
[X]
The Exhibit Index is on page 36 .
Please send a copy of communications to:
James C. Lewis, Esq.
Lewis Law Offices
600 Crandall Building
10 West 100 South
Salt Lake City, Utah 84101
(801) 530-0447
<PAGE>
THE LIVING CARD COMPANY, INC.
1174 East 2700 South, #16, Salt Lake City, Utah 84106
(801) 485-0430
2,000,000 Shares of Common Stock
Price per security (share): $0.10 Per Share
Maximum Number of Securities Offered: 2,000,000 shares
Minimum Number of Securities Offered: 1,400,000 shares
Living Card Company, Inc. (the "Company") is offering a total of
2,000,000 shares of common stock, par value $0.001 per share, at an offering
price of $.10 per share. (See "DESCRIPTION OF SECURITIES.")
INVESTMENT IN SMALL BUSINESSES INVOLVES A HIGH DEGREE OF RISK, AND
INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD
TO LOSE THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" FOR THE RISK FACTORS THAT
MANAGEMENT BELIEVES PRESENT THE MOST SUBSTANTIAL RISKS TO AN INVESTOR IN THIS
OFFERING.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING MERITS AND
RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED OR APPROVED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE,
THESE AUTHORITIES HAVE NOT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE U.S. SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS
OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON
THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR SELLING LITERATURE.
Officers, directors and their affiliates may purchase shares of common
stock in the offering in an aggregate amount of not more than 20% of all
offered shares. Since shares will be offered and sold by the officers and
directors, it is likely that officers, directors and their affiliates will be
able to purchase shares in the offering if they so desire.
____________________________________________________________________________
Offering Price Proceeds
to Public Commissions(1) to Company(2)
_____________________________________________________________________________
Per Share $0.10 $0.00 $0.10
Total(3)
Minimum $140,000 $0.00 $140,000
Maximum $200,000 $0.00 $200,000
The Company anticipates sales to the public will commence on or about____,
1999.
The date of this Prospectus is____________, 1999.
1
<PAGE>
(1) The Company plans to offer the Common Stock in this offering through
its officers and directors, who will receive no compensation for such
activities. (See "PLAN OF DISTRIBUTION.")
(2) Before deducting expenses of the offering payable by the Company
estimated at $30,000.
(3) The offering is being conducted on a "1,400,000 share minimum,
2,000,000 share maximum" basis. In the event that the minimum of 1,400,000
shares of Common Stock having a gross subscription price of $140,000 is not
sold within four months of the effective date of this prospectus, all proceeds
raised will be promptly returned to investors, without paying interest and
without deducting any sales commissions or expenses of the offering. All
proceeds from the sale of the shares will be placed in escrow with Brighton
Bank, 311 South State Street, Salt Lake City, Utah, 84111, no later than noon
of the next business day following receipt. Subscribers will not have the use
of their funds, will not earn interest on funds in escrow, and will not be
able to obtain return of funds placed in escrow unless and until the minimum
offering period expires. (See "PLAN OF DISTRIBUTION.") In the event the
minimum number of shares is sold within the offering period, the offering will
continue until five months following the date of this prospectus, all offered
shares are sold, or the offering is terminated by the Company, whichever
occurs first.
(3) The issuer is not a reporting company under the Securities Exchange Act
of 1934, as amended. As a result of this offering, the Company will become
subject to the informational requirements of the Securities Exchange Act of
1934 (the "Exchange Act") for a period of at least one fiscal year. In
addition, as of the fiscal year ending December 31, 1998, the Company may be
required to register the shares of common stock offered hereunder, under the
Exchange Act, and continue to file quarterly and annual reports.
The Company intends to furnish to its stockholders with annual reports
containing financial statements audited and reported upon by its independent
accounting firm, and such other periodic reports as the Company may determine
to be appropriate or as may be required by law.
Prior to this offering there has been no market for any securities of the
Company, and there is no assurance that any market will exist after the
offering. The public offering price has been arbitrarily determined by the
Company and bears no relationship to the assets or book value of the Company
or any other recognized criteria of value. (See "RISK FACTORS" and "PLAN OF
DISTRIBUTION.")
ALL SUBSCRIBERS' CHECKS SHOULD BE MADE PAYABLE TO "BRIGHTON BANK--
LIVING CARD COMPANY, INC., ESCROW ACCOUNT."
_____________________________________________________________________________
UNTIL , 1999 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
The Shares are offered subject to prior sale and withdrawal or
cancellation of the offering, without notice. Offers to purchase and sales by
the Company are subject to: (a) acceptance by the Company; (b) the sale of the
minimum number of Shares specified herein; (c) the release and delivery to the
Company of the proceeds of this offering; (d) the delivery of the securities;
and (e) the right of the Company to reject any and all offers to purchase.
Changes in the offering which occur after the date hereof, if any, will
necessitate the filing with the Securities and Exchange Commission (the
"Commission") of an amendment to the registration statement of which this
prospectus forms a part (the "Registration Statement") and review and
declaration of effectiveness by the Commission of such amendment. There can
be no assurance that any such amendment will become effective. The Company
does not presently have any plans to change the terms of offering after the
date of effectiveness.
2
<PAGE>
NO OFFICER OR DIRECTOR OF THE COMPANY, OR OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN
THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES TO ANY PERSON IN ANY JURISDICTION WHERE SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL.
___________________________________________________________________________
INTRODUCTION
___________________________________________________________________________
The Living Card Company, Inc. (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. Since the date of
incorporation, John F. Lund, President, has loaned the Company an additional
$85,000 to fund the Company's initial operations, which will be
repaid from proceeds of the offering. (See "USE OF PROCEEDS").
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 plans to compete in the greeting card industry, by attempting to
establish a niche market for its unique products. The Company will offer its
products through the establishment of a broker network throughout the United
States, and through direct sales to various retail markets and outlets. The
Company has initially established a relationship with three such
distributors, who have commenced efforts to distribute the Company's products
in grocery stores, gift stores and other retail outlets. There can be no
assurance the Company will be successful in these efforts. (See"BUSINESS.")
The net proceeds from this offering will be approximately $167,000
if the maximum offering is sold, and approximately $107,000 if only the
minimum offering is sold. Such net proceeds will be used by the Company to
repay indebtedness to the Company's president, to fund product purchases, to
cover general and administrative expenses, and to market and promote the
Company's products. The proceeds from this offering may not be sufficient
to adequately cover the necessary start-up costs of the Company. (See "USE OF
PROCEEDS").
This offering involves significant risks to investors, including those
generally associated with a new venture without any operating history or
history of profitable operations; substantial dilution to investors; the fact
that there is no public market for any of the Company's securities; the
extremely limited capital resources of the Company; the specific risks
attendant the greeting card industry; and other factors. (See "RISK
FACTORS").
This offering involves substantial and immediate dilution in the book
value of the Common Stock from the public offering price per share. (See
"DILUTION").
The Company's offices are located at 1174 East 2700 South, #16, Salt Lake
City, Utah 84106, where its telephone number is (801) 485-0430.
3
<PAGE>
____________________________________________________________________________
RISK FACTORS
_____________________________________________________________________________
The purchase of the securities offered hereby involves a high degree of
risk. Each prospective investor should consider, in addition to the negative
implications of all material set forth herein, the following specific risks,
particularly in relation to his own financial circumstances and his ability to
suffer the loss of his entire investment.
RISK FACTORS RELATING TO THE COMPANY'S BUSINESS
- -----------------------------------------------
New Business; Extremely Limited Operating History
-------------------------------------------------
The Company was organized in May, 1998, and has only been in
operation for a few months . To date, the Company's activities have been
limited to acquiring the rights to the Living Card products from its officers
and directors, establishing relationships with suppliers, establishing
initial distributors, undertaking initial production of its products, and
commencing its initial marketings and sales efforts. The Company is in
the development stage in that it has not received any significant
revenues from its planned principal activities. (See "FINANCIAL
STATEMENTS.") The Company has not been in business long enough to enable
an investor to make an informed judgment as to its future performance. It can
be anticipated that the Company will operate at a loss for a period of at
least several months, until the Company has established a broker network for
the marketing of its products. Therefore, the Company faces all of the risks
inherent in the formation and operation of a new business, and there can be no
assurance that the proposed business of the Company will be developed
successfully or that the Company will be able to operate profitably.
Need for Additional Financing
-----------------------------
The ability of the Company to implement its business activities is
dependent on obtaining funding through this offering. The net proceeds from
this offering will only be sufficient to fund the Company's operations for a
period of six months, if the entire offering is sold, and four months, if only
the minimum offering is sold. While the Company believes the funds from the
offering will be sufficient to fund initial inventory, to cover certain
general and administrative expenses and marketing costs, and to repay a
portion or all of its debt to its President, for a period of a few months, the
proceeds will be insufficient to cover expanded marketing efforts or to fund
any of these costs thereafter. While management believes the net proceeds
from this offering will be sufficient for the Company to implement its
business plan, the Company will be in need of additional funds thereafter,
unless the Company achieves a positive cash flow from the sale of Living Card
products within a few months from the date of this Prospectus. There can be
no assurance that such profitability will be achieved, and unforeseen
circumstances could occur which could compel the Company to seek additional
funds, particularly if only the minimum offering is sold. Even if the Company
does achieve a positive cash flow within a few months from the date of this
Prospectus, of which there is no assurance, the Company will have very limited
funds available for expanded operations. No assurance can be given that
additional financing will be available if needed, or if available, that it can
be obtained on terms favorable to the Company. The terms of any such
additional financing may result in additional dilution to the Company's
shareholders. In addition, it may be anticipated that the decision to conduct
any future financings will be essentially at the discretion of the board of
directors and the Company's shareholders will not have the right to vote on or
approve any such transactions. (See "USE OF PROCEEDS").
Proceeds of Offering To Be Used in Substantial Part to Repay Debt to Officer
----------------------------------------------------------------------------
The Company's President, John Lund, has loaned to the Company a total of
$85,000 as of the date of this Prospectus, in addition to capital
contributions of $20,000 made to the Company by Mr. Lund and Blair
Lund, Secretary/Treasurer. If the entire offering is sold, the
Company and Mr. Lund have agreed that this indebtedness will be repaid,
without interest, from the proceeds of this offering. If only the minimum
offering is sold, the sum of
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<PAGE>
$55,000 from the net proceeds will be used for the repayment of such
indebtedness. (See "USE OF PROCEEDS").
Dependence on Management and Key Employee
-----------------------------------------
The Company will be particularly dependent on John F. Lund, President,
and Blair Lund, Secretary/Treasurer, in the development and management of the
business of the Company. John Lund will devote substantially all of his time
to the affairs of the Company. Blair Lund will devote a substantial portion
of his time to the Company's business, but has other business interests which
will require a portion of his time. While these individuals have a varied
business background, neither one of them has extensive experience in the
particular business the Company is undertaking. In addition to these
individuals, the Company's success will depend, in large part, on the efforts
of Craig M. Weston, vice president of marketing, in developing and
implementing the Company's marketing plan. The Company has not obtained
keyman insurance on the lives of any of these individuals, and does not intend
to do so in the foreseeable future. The loss of the services of any one of
these individuals could have a substantial detrimental impact on the Company.
(See "MANAGEMENT").
No Assurance of Market Acceptance of Product Line
-------------------------------------------------
The Company has not conducted any formal independent research or market
study to ascertain whether, and to what extent, its products will be accepted
by consumers. The Company's business is being undertaken solely on
management's evaluation that the Company has a very unique product which will
be attractive to consumers in the greeting card market. There can be no
assurance that the Company's products will be well received in the
marketplace, or that the Company will be able to create, through its marketing
efforts, a demand for its products. (See "BUSINESS").
New Product Introduction
------------------------
The Company's success is dependent upon its ability to design and deliver
new products, and to successfully introduce the Company's products into the
marketplace. Demand and market acceptance of new products are subject to
substantial uncertainty. Achieving market acceptance for the Company's
products may require substantial marketing and other efforts and the
expenditure of significant funds to create product appeal and acceptance. As
indicated throughout this Prospectus, the Company has very limited funding for
such purposes. There can be no assurance the Company will be successful in
these efforts. The failure of any of the Company's products to gain market
acceptance could adversely affect the image of the Company and demand for
other products.
Competition
-----------
Competition in the greeting card industry is intense. The Company will
be competing with traditional greeting companies such as Hallmark Cards and
American Greetings, which are extremely large and financially healthy
companies, have a substantial market share and brand name recognition, and
easy access to marketing outlets and capital and capital markets. Many of
these companies are able to frequently update and expand product lines and
introduce new products, and to diversify product offerings. Because of the
uniqueness and relative permanency of its products, as compared to traditional
greeting cards, the Company believes there is a good possibility that it will
be able to initially capture the new "niche" market for garden-style greeting
cards. However, there can be no assurance that other companies with
substantially greater financial, creative and marketing resources, and proven
histories, will not effectively compete in this market. (See "BUSINESS:
Competition").
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Dependence on Suppliers
------------------------
The Company will utilize certain raw materials and supplies, including
plastics products, packaging, seed envelopes and seeds, peat moss cubes and
miscellaneous items provided by various suppliers. In addition, the Company
will rely on a Salt Lake City-based firm for its assembly, warehousing and
shipping. The Company does not expect to have any long-term purchase
contracts with any of its suppliers. Alternative sources exist for each of
the materials used in the Company's products, and for such assembly,
warehousing and shipping services. Nonetheless, the Company cannot give any
assurance that supply or service relationships with alternative sources can be
established or that such relationships could provide timely and sufficient
quantity or quality of materials, or quality of service . In
addition, the Company may incur additional costs and business delays and
interruptions, in sourcing supplies and materials from alternative sources.
(See "BUSINESS: Suppliers").
Dependence on Distributors/Brokers
----------------------------------
The Company's principal plan for distributing its Living Card products,
is through the establishment of a network of brokers or distributors
throughout the United States, which are involved in, or associated with, the
greeting card business. The Company has entered into agreements with three
(3) distributors covering the Utah, Florida, Oklahoma, Texas and New Mexico
areas, who have made initial distributions of the Company's product to various
retail operations. Although the Company has identified and had contact
with a number of brokerage firms in various market regions throughout the
country, and conducted initial discussions with many of these firms regarding
a distributor relationship, no other formal brokerage agreements or
arrangements have been entered into as of the date of this Prospectus. The
Company's ability to effectively market and distribute its products will
depend, in large part, on the Company's ability to establish an effective and
experienced network of brokers. There can be no assurance the Company will be
successful in these efforts, or, if successful, that the brokers will be
successful in distributing the Company's products. (See "BUSINESS:
Marketing").
GENERAL RISKS RELATING TO INVESTMENT
- ------------------------------------
"Best Efforts" Offering
------------------------
The Shares of Common Stock are offered on a "best efforts" basis, and no
individual, firm, or corporation has agreed to purchase any of the offered
Shares. No assurance can be given that any or all of the Units will be sold.
Provisions have been made to deposit in escrow the funds received from the
purchase of Shares, and in the event $140,000 is not received within four
months of the effective date of this prospectus, proceeds so collected will be
promptly refunded to investors without paying interest and without deducting
sales commissions or expenses. During this escrow period, subscribers will
not have use of or derive benefits from their escrowed funds. (See "PLAN OF
DISTRIBUTION.")
No Public Market for the Company's Securities
---------------------------------------------
At the present time, there is no public market for the Company's
securities. There can be no assurance that a public market for the Company's
Common Stock will develop following the offering. As a result, purchasers of
the Common Stock offered hereby may not be able to liquidate their investment
readily, if at all. (See "PLAN OF DISTRIBUTION.")
No Underwriter
--------------
The Company has not engaged the services of an underwriter with respect
to this offering and, as a result, the due diligence review of the Company and
its affairs which would customarily be performed by an underwriter and its
legal counsel has not been performed with respect to the Company or this
offering. In addition, the
6
<PAGE>
management of the offering by the Company rather than by an underwriter is
likely to increase the risk that no market for the Company's securities will
develop following the offering. (See "PLAN OF DISTRIBUTION".)
Dependence on Successful Completion of Offering
-----------------------------------------------
The Company is dependent on successful completion of this offering to
implement its proposed business plan. Furthermore, if the offering is
unsuccessful, it is likely that present shareholders of the Company will lose
their entire investment since the company will have little or no working
capital after paying certain expenses associated with this offering.
Disproportionate Risks
----------------------
On sale of all Shares offered hereby (assuming allocation of the public
offering price solely to the Common Stock), present shareholders would own 75%
of the then outstanding shares of the Company, for which they would have paid
$20,000, and contributed products designed and developed by
management, or approximately 9.1% of the then invested capital of the Company
(not including the intangible value of the products contributed to the
Company), and the persons purchasing Shares of Common Stock in this offering
would then own 25% of the then outstanding shares, for which they will have
paid $200,000 or approximately 90.9% of the then invested capital. If only
the minimum number of Shares is sold, existing shareholders would own
approximately 81.1% of the stock outstanding for which they would have paid
approximately 12.5% of the total capital invested, as compared to public
shareholders who would own approximately 18.9% of the stock outstanding for
which they would have paid $140,000 or approximately 87.5% of the total
capital invested. Consequently, purchasers in this offering will bear a
disproportionately greater risk investing in the Company than its present
shareholders. (See "COMPARATIVE DATA.")
Substantial and Immediate Dilution to Public
--------------------------------------------
Persons purchasing Shares in this offering will suffer a substantial and
immediate dilution to the net tangible book value of their shares below the
public offering price. Giving effect to the sale of all offered Shares, the
Company would have a net tangible book value of approximately of $0.015 per
share so that persons purchasing Shares in the offering would suffer an
immediate dilution of $0.085 per share or 85% from the offering price of $.10
per Share. Giving effect to the sale of the minimum number of Shares, the net
tangible book value of the Company would be approximately $0.006 per
share or a similar dilution to the public investors of $.094 per share
or 92% of the public offering price. (See "DILUTION.")
Lack of Revenues and Dividends
------------------------------
The Company has had no earnings and cannot predict when, if ever, it
will realize any material revenue or realize a profit from any operations it
may subsequently undertake. The Company has paid no dividends and does not
propose to do so in the foreseeable future.
Arbitrary Offering Price
-------------------------
The offering price of the Shares of Common Stock does not bear any
relationship to the assets, book value, or net worth of the Company or any
other generally accepted criteria of value, and should not be considered to be
an indication of the actual value of the Company. The offering price of the
Shares has been arbitrarily determined by the Company. (See "PLAN OF
DISTRIBUTION.")
7
<PAGE>
Broker-Dealer Sales of Company's Securities
-------------------------------------------
The securities in this offering are subject to "penny stock" regulations
promulgated by the Securities & Exchange Commission which may have an adverse
impact on the ability of purchasers in this offering to sell shares in the
secondary market. Rule 15g-9 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which will apply to the Company's securities,
imposes additional sales practice requirements on broker-dealers who sell
"penny stocks" to persons other than established customers, including the
requirement that such broker-dealer firms make an individualized
suitability determination for a purchaser and receive the purchaser's written
agreement prior to the transaction. In addition, the Securities Enforcement
Remedies and Penny Stock Reform Act of 1990, imposes additional disclosure
requirements on a broker prior to effecting a transaction in a "penny stock,"
including the requirement that the broker-dealer deliver to the prospective
customer, a standardized risk disclosure document, which discloses information
regarding penny stocks and the risks inherent in the penny stock market.
Moreover, Rules 15g-4 and 15g-5 of the Exchange Act impose a number of
additional requirements on broker-dealers effecting transactions in penny
stocks, including the requirements that: a broker-dealer provide a customer
with current bid and offer quotations for the penny stock prior to effecting
any transaction; the broker-dealer disclose the aggregate amount of any
compensation received by it and its salespeople in any penny stock
transaction; and the broker provide monthly account statements showing the
market value of each penny stock held in the customer's account.
Consequently, these rules may have an adverse impact on the market liquidity
of the Company's common stock, and may negatively affect the ability of
broker-dealers to sell the Company's securities and the ability of purchasers
in the offering to sell the common stock in the secondary market.
Possible Sale of Common Stock Pursuant to Rule 144
--------------------------------------------------
All of the Company's 6,000,000 shares of Common Stock presently
outstanding are "restricted securities" within the meaning of the Securities
Act of 1933. As such, in the event a public market for the Common Stock
develops in the future, a portion of such stock may be sold as early as May,
1999, in reliance on Rule 144 adopted under the Securities Act, if certain
specific requirements are met. Investors should be aware that sales under
Rule 144 may have a depressive effect on the price of the Company's stock in
any market which may develop. (See "DESCRIPTION OF SECURITIES.")
_____________________________________________________________________________
DILUTION
_____________________________________________________________________________
As of December 31 , 1998, the net tangible book value (total
tangible assets less total liabilities) of the Company was ($54,279) ,
or a deficit of approximately $0.01 per share. The following table
sets forth the dilution to persons purchasing Shares in this offering without
taking into account any changes in the net tangible book value of the Company
after December 31 , 1998, except the sale of the minimum and maximum
number of Shares offered at the public offering price and receipt of the net
proceeds therefrom.
Assuming Minimum Assuming Maximum
Shares Sold Shares Sold
------------------- --------------------
Public offering price
per share(1) $.100 $.100
Net tangible book value
before offering(2) ($0.01) ($0.01)
Increase attributable to
purchase of Shares by
new investors $0.016 $0.025
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<PAGE>
Pro forma net tangible book
value after offering(2)(3)(4) $0.006 $0.015
Dilution per share to new
investors $0.094 $0.085
Percent Dilution to new
investors 94% 85%
_______________________________________
(1) Offering price per share before deduction of offering expenses and
commissions.
(2) Determined by dividing the number of shares of Common Stock outstanding
into the net tangible book value of the Company.
(3) After deduction of offering expenses estimated at $33,000 .
(4) These figures do not take into account any events after December
31, 1998, including the loan by the Company's President of
additional funds to the Company, and the contribution by the President and
Secretary of an additional $10,000 in equity. A substantial portion of
such borrowed funds have been used by the Company for the purchase of
materials and inventory. (See "BUSINESS" and "INTEREST OF MANAGEMENT AND
OTHERS IN CERTAIN TRANSACTIONS").
____________________________________________________________________________
COMPARATIVE DATA
_____________________________________________________________________________
The following chart illustrates percentage ownership in the Company held
by the present shareholders and by the public investors in this offering and
sets forth a comparison of the amounts paid by the present shareholders and by
the public investors.
Total Total Average
Shares Purchased Consideration(1) Price Per
Number % Amount % Share*
--------- ---- -------- ---- ----------
Present Shareholders
- --------------------
Minimum Offering 6,000,000 81.1 $ 20,000 12.50 $ .0017
Maximum Offering 6,000,000 75.0 $ 20,000 9.09 .0017
New Investors
- -------------
Minimum Offering 1,400,000 18.9 $ 140,000 87.50 .100
Maximum Offering 2,000,000 25.0 $ 200,000 90.91 .100
* The price per share of the present shareholders considers only the
cash contribution by such shareholders, and does not take into account other
contributions by such shareholders, including the contribution of the products
of the Company, and services contributed.
9
<PAGE>
____________________________________________________________________________
USE OF PROCEEDS
____________________________________________________________________________
The net proceeds to be received by the Company from the sale of all
2,000,000 shares of common stock are estimated at approximately $167,000
, if the entire offering is sold, after deducting expenses of this
offering. If only the minimum offering is sold, the Company will receive net
proceeds of approximately $107,000 , after deduction of such offering
expenses.
The Company proposes to use the net proceeds from this offering in the
following general amounts and order of priority:
<TABLE>
<CAPTION>
Assuming Assuming
Minimum Maximum
Shares Shares
Item Sold(1) Sold(1)
------- ------------------------- -----------------------
Amount Percent Amount Percent
------------ ------------- ---------- ------------
<S> <C> <C> <C> <C>
1. General and administrative expenses,
telephone, reproduction, and general
office costs (2)(3) $ 8,000 7.5 $ 15,000 8.9
2. Repayment of Indebtedness to Officer
and Director(4) 55,000 51.4 85,000 50.9
3. Marketing and Promotional Costs(5) 12,000 11.2 17,000 10.2
4. Management Compensation (6) 15,000 14.0 25,000 15.0
5. Materials, Supplies-Product Costs (7) 17,000 19.9 25,000 15.0
---------- ------------- --------- ------------
TOTAL $ 107,000 100.0% $167,000 100.0%
_______________________________
</TABLE>
(1) The foregoing expenditures represent estimates based on the Company's
present intentions for the Company's first six months of operations. None of
the items set forth in the above table is a firm commitment by the Company.
(2) The Company contemplates that these costs will increase proportionately
if more than the minimum offering is sold, in order to cover additional
general and administrative costs necessary as a result of expanded operations.
(3) The Company's current overhead is limited to telephone, telefax,
reproduction, mailing and other miscellaneous expenses.
(4) The Company's President, John F. Lund, has loaned to the Company the
sum of $85,000, which has been used to fund the Company's start-up
operations, and to purchase materials for Living Card products. If the
maximum offering is sold, he will be repaid in full, without interest, from
the net proceeds of the offering. If only the minimum offering is sold, Mr.
Lund has agreed to accept a $55,000 payment from the net proceeds, and
to be repaid on the balance, without interest, at such time as the Company has
sufficient
10
<PAGE>
funds from operations or from another future financing. (See "INTEREST OF
MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS").
(5) Represents amounts for travel to establish a distributor network; the
preparation and production of promotional materials; and other general
marketing and promotional activities. (See "BUSINESS: Marketing").
(6) See "DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES AND
PARTIES: Remuneration of Officers and Directors").
(7) Represents amounts to be utilized to purchase materials for products.
Does not include amounts previously expended by the Company for materials.
The net proceeds from this offering will fund the Company's operations for
period of only six (6) months. If only the minimum offering is sold, the net
proceeds may fund the Company for an even shorter period. Therefore, within
a few months from the completion of the offering, the Company will either need
to be operating profitably so as to fund its operations from cash flow, or be
required to seek additional debt or equity capital. In addition, financial
circumstances could occur which could compel the Company to seek additional
funds even sooner. Moreover, the Company will need additional capital should
it decide to significantly expand operations. There is no assurance that
additional funds will be available when needed, or if available, on terms
favorable to the Company.
The Company does not intend to become an investment company under the
Investment Company Act of 1940 and, therefore, may be limited in the temporary
investments it can make with the proceeds of this offering. To the extent
that the net proceeds of this offering are not utilized immediately, they will
be invested in money market accounts, savings deposits, short-term obligations
of the United States government, or other temporary interest bearing
investments in commercial financial institutions.
_____________________________________________________________________________
BUSINESS
_____________________________________________________________________________
GENERAL
- --------
The Living Card Company (the "Company") is a Nevada Corporation organized
for the purpose of specializing 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 is conducting this 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.
The Company has completed the development of its initial product line,
and has 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 will provide the
Company with packaging, warehousing and distribution services. As of the date
of this prospectus, the Company has entered into a distribution relationship
11
<PAGE>
with three brokers in the industry, covering the states of Utah, Florida,
Texas, New Mexico and Oklahoma. These firms have begun efforts to place the
Company's products in grocery stores, gift stores and other retail operations.
Over the next few weeks, the Company will seek to establish a distributor
network with additional brokerage firms involved in the greeting card industry
throughout the country. 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. To date, the
Company has not generated any significant revenue. There can be no assurance
the Company will be successful in any of these efforts.
The Company is a newly organized corporation, and has no history of
operations.
PLAN OF OPERATIONS
- ------------------
The Company has completed the development of its initial product line, and
has produced an inventory of its products. The Company plans to devote its
efforts in the next twelve months, to establishing a sales network, marketing
and promoting its products for the purpose of 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 past few weeks, the Company has established a distributor relationship
with three distributors involved in brokering products in this industry.
Other prospective distributors have been identified and management is
undertaking initial discussions with such firms. As soon as reasonably
practicable following this offering, 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.
If the maximum offering is completed, the Company believes it will have
sufficient funding to satisfy the Company's cash requirements for the next six
(6) months. If only the minimum offering is sold, the Company's funds
will be very limited, and the Company may need to seek additional debt or
equity capital to meet its cash requirements, unless net revenue from sales of
products generates sufficient capital. There can be no absolutely no
assurance that revenue from operations will provide the Company with funds
sufficient to meet the Company's cash requirements.
INDUSTRY AND MARKET OVERVIEW
- ----------------------------
According to The Greeting Card Association in its most recent industry
research, the greeting card industry currently generates approximately
$7,000,000,000 in annual sales, and has been expanding at the rate of
approximately 6% per year for the past eight years. The Company
believes that "niche" markets within the industry have driven much of this
growth, as many consumers appear to want alternatives to the traditional
disposable card. The Company and its management believe that because of the
consumers' desire for unique alternatives, the Company may be able to enjoy at
least a temporary competitive advantage by offering what they believe to be
the first producers of garden-style cards - the Living Card.
Although the Company has not conducted any formal market studies or
analyses of the greeting card industry in undertaking its business, management
believes a few trends are apparent. First, the type and range of greeting
cards have expanded considerably over the past several years as new
technologies have created new methods of presenting greeting card information.
Consequently, management believes that alternatives to traditional greeting
cards have, in large part, driven the industry's growth in recent years, and
card producers have sought smaller, untapped niche markets for profit
potential. Secondly, the greeting card industry in general has enjoyed nearly
twenty consecutive years of growth, notwithstanding a number of business
cycles during such period, and it appears that it will continue to grow. The
greeting card industry does not appear to be impacted as significantly by
general economic conditions as many other industries, due to the relatively
modest cost of greeting
12
<PAGE>
cards, the opportunity in the industry to diversify in range and non-
seasonality, and other factors. Thirdly, greeting cards have both pre-planned
and impulse purchases, thereby creating numerous unique marketing
opportunities.
Due to the factors described above, management believes that the
greeting card industry offers potential for both the large-scale card
producers, and the smaller, niche market producers like the Company. The
Company believes it has an opportunity to address both the traditional
seasonal and holiday markets with an emphasis on the uniqueness of its
products, and to expand into alternative, non-seasonal niche markets.
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). 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:
1. The Original Pop-Up Garden
2. My Very First Garden
3. Mom's Magic Herb Garden
4. Mom's Magic Tea Garden
5. Happy Birthday
6. Thinking of You
7. Get Well Soon
8. 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 can be established or that such
relationships would provide
13
<PAGE>
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.
MARKETING
- ---------
According to statistics from the Greeting Card Association, in 1996 about
7,400,000,000 greeting cards were purchased by Americans, resulting in
approximately $6,850,000,000 in sales. While cards may range in price from
$0.50 to $10, the average price is around $2. About half of all cards sold
are seasonal purchases, and the remaining one-half are everyday cards which
include both alternative and non-occasion cards. Approximately 85% to 90% of
card purchases are made by women, with the typical purchaser being a middle-
aged woman. However, these customer demographics have been changing in recent
years to reflect a greater proportion of other groups.
While the Company has not conducted its own market study or research
pertaining to the greeting card industry, management believes a number of
trends exist which potentially create an opportunity for the Company in the
"niche" market in which it will compete. Based on historical data over the
past twenty years, the overall greeting card market will continue to grow, and
will be driven to some extent by the "alternative card" market - or the
consumer's need for something different than the traditional greeting card.
Management believes that the market for non-seasonal or non-event greeting
cards will continue to grow, as more product alternatives become readily
available for "impulse" purchases, and as a larger segment of the consumer
market (i.e., males, the younger population) captures a larger market share.
While the Company anticipates that the greeting card market will continue
its recent rate of steady growth, although there is no guarantee of this
continuing growth. Historically card producers have expanded into two main
areas, by focusing on traditional holiday themes, and by expanding into niche
markets. Market analyses suggest that much of the recent growth in card sales
has been in the niche areas. The Company plans to exploit both these areas in
offering a unique and more permanent greeting card.
Greeting cards can be both pre-planned and impulse purchases. Typical
pre-planned purchases are for Christmas, Mother's Day, Father's Day, Easter
and St. Valentine's Day, among others. However, there is also a strong market
for "get well" and condolence cards, etc., which by their very nature cannot
be pre-planned. The Company hopes to offer an attractive alternative to the
disposable cards with its product by appealing to both the pre-planned and
impulse purchasers with differently themed cards.
Distributor Network
Over the past few months, the Company has entered into a distributor
arrangement with three firms, which have commenced efforts on behalf of the
Company to distribute the Company's products in Utah, Florida, Oklahoma, Texas
and New Mexico. Over the past few weeks, these firms have been in the
process of placing 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 efforts by these distributors, 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 has identified, and had contact
with, a number of additional distribution firms, and will seek to enter into
additional distribution arrangements after this offering is completed.
The Company plans to establish an extensive broker network to market
Living Cards throughout the United States. The Company plans to carefully
select brokers with experience and contacts in the greeting card industry.
Management believes this marketing approach offers a number of advantages in
launching the Company's product line. First, because brokerage firms will
already have working relationships with retailers with retailers throughout
their markets, Living Card products may be quickly and relatively
inexpensively introduced to current accounts
14
<PAGE>
while new accounts are cultivated. Secondly, each brokerage account will be
selected by the Company to have an in-house merchandising department allowing
it to monitor Living Card product sales in each retail outlet, thus providing
sales information, allowing the Company to assess broker and product success,
and enabling the Company to more accurately control production and inventory
and respond to customer preferences and demand. Thirdly, by utilizing brokers
and distributors to market Company products, the Company will have less
overhead and utilize less management and marketing resources, and will be
better able to focus on production, product development and quality control.
Finally, management believes that the use of a broker network affords the
Company considerable flexibility in its marketing strategy, because the
Company will be able to engage firms on renewable 30-day contracts based on
performance.
The Company has identified six initial market regions in the western
United States which will be the initial market areas the Company offers its
products. Firms with substantial experience in the greeting card industry
have been identified as prospective brokers for the Company's products, and
discussions are underway with a number of these firms. The Company plans to
offer each of these firms renewable 30-day contracts, to allow for quick
response if sales do not meet expectations.
There can be no assurance that the Company will be successful in its
efforts to establish a network or broker representatives, as described.
Moreover, even if a network is established, there can be no assurance that the
brokers involved will be motivated or successful in selling the Company's
products.
Retail Markets
In addition to the broker network described above, the Company plans to
target several different channels through which its products can be sold. A
few of the markets the Company intends 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 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.
-- 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.
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.
-- 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.
There is no assurance whatever that the Company will be successful in
entering into any of the markets described above. Due to the Company's
extremely limited resources, the Company will not be able to pursue many of
these markets simultaneously without substantial additional capital.
Pricing and Profit
The Company's products will be 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 will attempt to price its products so as to achieve a gross product
margin of 40% or more.
COMPETITION
- -----------
The business in which the Company will compete is intensely competitive.
The Company will be competing 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 will
compete, 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 it will be able to compete in
the industry because of the uniqueness of its product line.
16
<PAGE>
EMPLOYEES
- ---------
The Company presently employs its officers and directors, and certain
clerical staff on an "as needed" basis. As the Company's business grows, the
Company anticipates that it will need to employ additional salaried clerical
staff, and sales personnel, who will be paid based on sales.
OFFICES
- -------
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. As soon as Company revenue
allows, which is expected to be within three months following the offering,
the Company will pay a reasonable rental rate, estimated at between $400 to
$500 per month.
_____________________________________________________________________________
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
_____________________________________________________________________________
The following table sets forth, as of the date of this prospectus, the
aggregate number of shares of Common Stock of the Company owned of record or
beneficially by each person who owned of record, or is known by the Company to
own beneficially, more than 5% of the Company's Common Stock, and the name and
shareholdings of each officer and director and all officers and directors as a
group:
Percent
---------------------
Name and Address of 5% Number of After Offering (2)
Shareholders, Officers Shares Before ----------------------
and Directors Owned(1) Offering Minimum Maximum
- ----------------------- --------- --------- ----------- -----------
PRINCIPAL SHAREHOLDERS:
John F. Lund 3,000,000 50.0 40.5 37.5
R. Blair Lund 3,000,000 50.0 40.5 37.5
OFFICERS AND DIRECTORS:
John F. Lund --------- See above --------
R. Blair Lund --------- See above --------
All officers and directors
as a group (2 persons) 6,000,000 100.0 81.0 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.
17
<PAGE>
_____________________________________________________________________________
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES AND PARTIES
____________________________________________________________________________
OFFICERS AND DIRECTORS
- ----------------------
The following table sets forth the names, age, and position of each
director and executive officer of the Company.
Name Age Position and Office Held
-------------- ----- --------------------------
John F. Lund 41 President and Director
R. Blair Lund 71 Secretary/Treasurer and Director
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.
BIOGRAPHICAL INFORMATION
- ------------------------
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 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.
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.
18
<PAGE>
REMUNERATION OF OFFICERS AND DIRECTORS
- --------------------------------------
There are no employment agreements between the Company and any member of
management, and it is not anticipated that any employment agreements will be
entered into during at least the first year of operations following the
offering. During the first twelve months of operations following the
offering, the Company will pay to John F. Lund and R. Blair Lund, salaries of
$3,000 and $1,500 per month, respectively. Blair Lund has agreed, however, to
forego a salary during the first six months following the offering, in the
event only the minimum offering is sold.
There are no agreements or arrangement, express or implied, between any
officer or director and the Company, regarding any other form of compensation,
including stock options, warrants, employment incentives, or the like.
SIGNIFICANT EMPLOYEE
- --------------------
Except for its officers and directors, the Company's only significant
employee is Craig Weston, vice president of marketing. Management believes
Mr. Weston's efforts will be significant in the development of the Company's
marketing plans.
Craig M. Weston has focused most of his professional career in marketing
and sales. From August 1997 until he began employment with the Company in
June, 1998, Mr. Weston was employed by Excellent Foods, Inc., a food
distributor, as national sales manager. In this position, Mr. Weston was
responsible for all aspects of sales for the Foodservice/Convenience store
market segments, including division pricing and profitability. From 1996
until his position with Excellent Foods, Inc., he served as national sales
manager for Modern Health Strategies, a supplier of health supplements, where
assisted in product development and implementation, and helped to
establish a marketing plan, and new markets, for the company in convenience
stores, retail outlets and other markets. From 1993 to 1996, Mr. Weston was
employed by Harmony Foods, as national sales manager of foodservice/C-Store
division. In this position, Mr. Weston originated and helped launch a
convenience store program, created a training program for brokers and sales
staff, and helped recruit and manage five regional sales managers and
support personnel.
SIGNIFICANT PARTIES
- -------------------
Set forth below are the names and business and residential addresses, as
applicable, for the following "significant parties" as required under Item 2
of Form SB-1:
(1) Officers and Directors - John F. Lund
a) Business Address:
1174 East 2700 South, #16
Salt Lake City, Utah 84106
b) Residence Address:
7326 NuTree Drive
Salt Lake City, Utah 84121
R. Blair Lund
a) Business Address:
1174 East 2700 South, #16
Salt Lake City, Utah 84106
b) Residence Address:
2199 Pheasant Way
Salt Lake City, Utah 84121
(2) Record owners and beneficial owners of 5 percent or more of any
class of the Company's securities: See "SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN SECURITYHOLDERS."
(3) Promoters - None, except for officers and directors.
(4) Affiliates of the Company - None, except for officers and
directors.
(5) Counsel to the issuer - James C. Lewis, Lewis Law Offices, 600
Crandall Building, 10 West 100 South, Salt Lake City, Utah, 84101.
____________________________________________________________________________
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
_____________________________________________________________________________
PURCHASE OF STOCK AT ORGANIZATION AND CAPITAL CONTRIBUTIONS
- -------------------------------------------------------------
In connection with organizing the Company, John Lund, President and a
director, and Blair Lund, Secretary and a director, and the father of John
Lund, contributed all of the rights to the Living Card products, and paid an
aggregate of $10,000 in cash, in exchange for the issuance of a total of
3,000,000 shares each of the Common Stock of the Company. These transactions
were not the result of arms length negotiation.
All of the shares of Common Stock presently issued and outstanding are
"restricted securities" as that term is defined under the Securities Act and,
as such, may not be sold in the absence of registration under the Securities
Act or the availability of an exemption therefrom. Under current law, such
shares could not be sold for a period of at least one year from the date on
which they are purchased, and then only under limited circumstances. (See
"DESCRIPTION OF SECURITIES.")
In November, 1998, John Lund and Blair Lund contributed an additional
$10,000 in equity capital to the Company. This contribution has been treated
as additional paid in capital and will not be repaid from the offering.
LOANS FROM PRESIDENT
- --------------------
From the date of organization of the Company, John F. Lund, President,
has loaned to the Company a total of $85,000 in cash, to fund Company
operations. A substantial portion of these funds have been used to purchase
materials and packaging for Living Card products. The Company will repay this
indebtedness, without interest, to Mr. Lund if the entire offering is sold.
If less than the entire offering is sold, Mr. Lund will be paid from available
funds, and the balance of the indebtedness to him will be repaid, without
interest, at such time as the Company has funds available from operations or
an additional financing in the future.
20
<PAGE>
_____________________________________________________________________________
DESCRIPTION OF SECURITIES
_____________________________________________________________________________
GENERAL
- --------
The Company is authorized to issue 25,000,000 shares, consisting of
20,000,000 shares of Common Stock, par value $0.001 per share, of which
6,000,000 shares are issued and outstanding, and 5,000,000 shares of preferred
stock, par value $0.01 (the "Preferred Stock"), of which no shares have been
issued.
COMMON STOCK
- ------------
Holders of Common Stock are entitled to one vote per share on each matter
submitted to a vote at any meeting of shareholders. Shares of Common Stock do
not carry cumulative voting rights and, therefore, holders of a majority of
the outstanding shares of Common Stock will be able to elect the entire board
of directors, and, if they do so, minority shareholders would not be able to
elect any members to the board of directors. The Company's board of directors
has authority, without action by the Company's shareholders, to issue all or
any portion of the authorized but unissued shares of Common Stock, which would
reduce the percentage ownership in the Company of its shareholders and which
may dilute the book value of the Common Stock.
Shareholders of the Company have no pre-emptive rights to acquire
additional shares of Common Stock. The Common Stock is not subject to
redemption and carries no subscription or conversion rights. In the event of
liquidation of the Company, the shares of Common Stock are entitled to share
equally in corporate assets after satisfaction of all liabilities. The shares
of Common Stock, when issued, will be fully paid and non-assessable.
Holders of Common Stock are entitled to receive such dividends as the
board of directors may from time to time declare out of funds legally
available for the payment of dividends. The Company has not paid dividends on
its Common Stock and does not anticipate that it will pay dividends in the
foreseeable future.
PREFERRED STOCK
- ----------------
The Company's board of directors has authority, without action by the
shareholders, to issue all or any portion of the authorized but unissued
Preferred Stock in one or more series and to determine the voting rights,
preferences as to dividends and liquidation, conversion rights, and other
rights of such series. The Preferred Stock, if and when issued, may carry
rights superior to those of the Common Stock.
The Company does not have any plans to issue any shares of Preferred
Stock . However, the Company considers it desirable to have a class or
more of Preferred Stock to provide it with greater flexibility in the
future in the event that the Company elects to undertake an additional
financing, and in meeting corporate needs which may arise. If opportunities
arise that would make it desirable to issue Preferred Stock through either
public offerings or private placements, the provision for these classes of
stock in the Company's certificate of incorporation would avoid the possible
delay and expense of a shareholder's meeting, except as may be required by law
or regulatory authorities. Issuance of the Preferred Stock would result,
however, in a series of securities outstanding that may have certain
preferences with respect to dividends, liquidation, redemption, and other
matters over the Common Stock which would result in dilution of the income per
share and net book value of the Common Stock. Issuance of additional Common
Stock pursuant to any conversion right which may be attached to the Preferred
Stock may also result in the dilution of the net income per share and net book
value of the Common Stock. The specific terms of any series of Preferred
Stock will depend primarily on market conditions, terms of a proposed
acquisition or financing, and other factors existing at the time of issuance.
Therefore, it is not possible at this time to determine the respects in which
a particular series of Preferred Stock will be superior to the Company's
Common Stock. The board of directors does not have any specific plan for the
issuance of Preferred Stock at the present time and does
21
<PAGE>
not intend to issue any such stock on terms which it deems are not in the best
interests of the Company and its shareholders.
RESALE OF OUTSTANDING SHARES
- -----------------------------
All 6,000,000 shares of the Common Stock presently issued and outstanding
are "restricted securities" as that term is defined in Rule 144 adopted under
the Securities Act. Rule 144 provides, in essence, that as long as there is
publicly available current information about the Company, a person holding
restricted securities for a period of at least one year may sell in each 90-
day period, provided he is not part of a group acting in concert, an amount
equal to the greater of the average weekly trading volume of the stock during
the four calendar weeks preceding the sale or 1% of the Company's outstanding
Common Stock. Consequently, in May, 1999, shares of Common Stock currently
issued and outstanding will have been held for one year within the meaning of
Rule 144 and may be eligible for resale in accordance with such volume
restrictions. In addition, in May, 2000, all 6,000,000 shares now issued and
outstanding will be eligible for resale without regard to such restrictions if
the holders of such shares are not then affiliates of the Company and have not
been so for three months prior to such sale. The Company and management
contemplate that John Lund and Blair Lund, officers and directors and holders
of the outstanding shares of the Company, will continue to be affiliates of
the Company over the next several years, and will be, therefore, subject to
the restrictions described above. Sales under Rule 144 or otherwise may, in
the future, have a depressive effect on the price of the Company's Common
Stock in any market which may develop.
TRANSFER AND WARRANT AGENT
- ---------------------------
The transfer agent for the Company's securities is Interwest Transfer
Company, Inc., 1981 East Murray-Holladay Road, Holladay, Utah 84117.
____________________________________________________________________________
PLAN OF DISTRIBUTION
____________________________________________________________________________
The Company is offering its Common Stock to the public on a "best
efforts, 1,400,000 Share Minimum 2,000,000 Share Maximum" basis. There
can be no assurance that any of the Shares will be sold. If the Company fails
to sell at least 1,400,000 Shares within the offering period (four months
from the date of this prospectus), the offering will be terminated and
subscription payments will be promptly refunded in full to subscribers,
without paying interest or deducting expenses. If the minimum number of
Shares is sold within the specified period, the offering will continue until
five months following the date of this prospectus, all offered Shares are
sold, or terminated by the Company, whichever occurs first.
All subscription payments should be made payable to "Brighton Bank--
Living Card Company, Inc. Escrow Account." The Company will deposit
subscription payments no later than noon of the next business day following
receipt in the escrow account maintained by Brighton Bank, 311 South State
Street, Salt Lake City, Utah 84111, as escrow agent, pending the sale of at
least 1,400,000 Shares within the specified period. Such subscription
payments will only be released from the escrow account if the minimum number
of Shares is sold or for the purpose of refunding subscription payments to the
subscribers. Subscribers will not have the use or right to return of such
funds during the escrow period, which may last as long as four months.
The Shares of Common Stock in this offering will be offered and sold by
the officers and directors of the Company who will receive no compensation
therefor, except reimbursement of expenses actually incurred in connection
with such activities. The Company has no plans, proposals, arrangements or
understandings with any potential sales agent with respect to participating in
the distribution of the Company's Securities. If the Company later decides to
seek the participation of any potential sales agent, the registration
statement of which this prospectus is a part, will be appropriately amended to
identify such persons.
22
<PAGE>
There are no formal arrangements between the issuer and its officers and
directors pursuant to which Shares in the offering will be reserved for sale
to person(s) designated by such officers and directors or their affiliates.
However, officers and directors of the Company, and their affiliates, may
purchase Shares in the offering in an aggregate amount of not more than 20% of
all offered Shares. Since Shares may be offered and sold by officers and
directors, it is likely that officers, directors, or their affiliates desiring
to purchase shares in the offering will be able to do so.
Since the Company is not utilizing the services of an underwriter for the
offer and sale of the shares in this offering, the independent "due
diligence" review of the Company, and its affairs and financial condition
which is usually performed by the underwriter has not been performed with
respect to the Company or this offering. In addition, since the offering is
not being underwritten by a broker-dealer which would ordinarily be expected
to publish quotations for and make a market in the offered securities
following the offering, no assurance can be given that any market for the
Company's securities will develop following the offering or, that if such a
market should develop, it will be maintained. The Company has not had any
discussions with any broker-dealer firms regarding the possibility of making a
market in the Company's securities following the offering.
Prior to this offering, there has been no established market for the
securities of the Company. Until __________, 1999 (90 days after the date of
this prospectus) all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions. The initial public offering price of the
Shares has been arbitrarily determined by the Company and bear no relationship
to the book value of the Company, earnings, or any other recognized criteria
of value.
____________________________________________________________________________
LEGAL PROCEEDINGS
___________________________________________________________________________
The Company is not a party to any pending legal proceedings, or
governmental agency proceedings, and no such action by or, to the best of its
knowledge, against the Company has been threatened.
_____________________________________________________________________________
EXPERTS
_____________________________________________________________________________
The Company has not engaged any expert or attorney on a contingent basis,
nor is any expert or attorney to receive a direct or indirect interest in the
Company. In addition, no expert or attorney is, or was, a promoter,
underwriter, voting trustee, director, officer, or employee of the Company.
Lewis Law Offices, 10 West 100 South, #600, Salt Lake City, Utah 84101,
counsel to the Company, will render an opinion that the Common Stock being
offered hereby, when issued, will be fully paid and non-assessable under the
Nevada Revised Statutes.
The financial statements included in this Prospectus, to the extent and
for the periods indicated in its report, has been included herein and in the
Registration Statement in reliance on the report of Jones, Jensen &
Associates, the Company's independent certified public accountants, given on
the authority of such firm as experts in accounting and auditing.
23
<PAGE>
_____________________________________________________________________________
INDEMNIFICATION OF OFFICERS AND DIRECTORS
_____________________________________________________________________________
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act) may be permitted to directors, officers,
and controlling persons of the Company pursuant to the foregoing provisions,
or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
____________________________________________________________________________
FURTHER INFORMATION
____________________________________________________________________________
The Company has filed with the Securities and Exchange Commission
("Commission"), a Registration Statement on Form SB-1, SEC File No. 333-63063,
under the Securities Act with respect to the securities offered by this
prospectus. This prospectus omits certain information contained in the
Registration Statement. For further information, reference is made to the
Registration Statement and to the exhibits and other schedules filed
therewith. Statements contained in this prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and where
such contract or other document is an exhibit to the Registration Statement,
each such statement is deemed to be qualified and amplified in all respects by
the provisions of the exhibit. Copies of the complete Registration Statement,
including exhibits may be examined at the office of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, or
copies may be obtained from this office on payment of the usual fees for
reproduction. In addition, the Commission maintains a web site (address:
http.//www.sec.gov), that contains reports, proxy and information statements
and other information regarding issuers, including the Company, that file
electronically with the Commission.
24
<PAGE>
_____________________________________
TABLE OF CONTENTS
_____________________________________
[outside back cover]
SECTION PAGE
- ------------ ----
INTRODUCTION 3
RISK FACTORS 4 THE LIVING CARD COMPANY
DILUTION 8
COMPARATIVE DATA 9
USE OF PROCEEDS 10
BUSINESS 11
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN SECURITYHOLDERS 17
DIRECTORS, EXECUTIVE OFFICERS AND
SIGNIFICANT EMPLOYEES AND PARTIES 18
INTEREST OF MANAGEMENT AND
OTHERS IN CERTAIN TRANSACTIONS 20 2,000,000 Shares
DESCRIPTION OF SECURITIES 21
PLAN OF DISTRIBUTION 22
LEGAL PROCEEDINGS 23
EXPERTS 23
INDEMNIFICATION OF OFFICERS
AND DIRECTORS 24
FURTHER INFORMATION 24
No person has been authorized in
connection with this offering to
give any information or to make
any representations other than as
contained in this prospectus and,
if given or made, such informa-
tion or representation must not
be relied on as having been auth-
orized by the Company. This pro-
spectus does not constitute an
offer to sell or the solicitation
of an offer to buy any securities
covered by this prospectus in any
state or other jurisdiction to
any person to whom it is unlawful
to make such offer or solicita-
tion in such state or jurisdiction. ___________________, 1999
Until ___________, 1999 (90 days after the date of this prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
25
<PAGE>
____________________________________________________________________________
PART F/S
____________________________________________________________________________
<Letterhead of
Jones, Jensen & Company, LLC
Certified Public Accountants and Consultants>
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, 1998 and the related statements of
operations, stockholders' equity (deficit) and cash flows from inception on
May 8, 1998 through June 30, 1998. 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 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, 1998 and the results of its
operations and its cash flows from inception on May 8, 1998 through June 30,
1998 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 3 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 3. The financial statements do not
include any adjustments that might result from the outcome of the uncertainty.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
July 15, 1998
50 South Main Street
Suite 1450
Salt Lake City, Utah 84144
Telephone (801) 328-4408
Facsimile (801) 328-4461
26
<PAGE>
<Letterhead of
Jones, Jensen & Company, LLC
Certified Public Accountants and Consultants>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Living Card Company, Inc.
(A Development Stage Company)
Salt Lake City, Utah
The accompanying balance sheet as of December 31, 1998 and the related
statements of operations, stockholders' equity (deficit), and cash flows for
the three months and six months ended December 31, 1998 and from inception on
May 8, 1998 through December 31, 1998 were not audited by us and, accordingly,
we do not express an opinion on them.
The accompanying balance sheet as of June 30, 1998 was audited by us and we
expressed an unqualified opinion on it in our report dated July 15, 1998.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
March 11, 1999
50 South Main Street
Suite 1450
Salt Lake City, Utah 84144
Telephone (801) 328-4408
Facsimile (801) 328-4461
27
<PAGE>
LIVING CARD COMPANY, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
------
December 31, June 30,
1998 1998
-------------- ---------------
(Unaudited)
CURRENT ASSETS
Cash $ 311 $ 26,586
Accounts receivable 1,680 -
Inventory 40,527 -
-------------- ---------------
Total Current Assets 42,518 26,586
-------------- ---------------
TOTAL ASSETS $ 42,518 $ 26,586
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 21,797 $ 3,400
Note payable - related party (Note 4) 80,000 25,000
-------------- ---------------
Total Current Liabilities 101,797 28,400
-------------- ---------------
STOCKHOLDERS' EQUITY (DEFICIT)
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 shares authorized; 6,000,000
shares issued and outstanding 6,000 6,000
Additional paid-in capital 14,006 4,006
Deficit accumulated during the development
stage (79,285) (11,820)
-------------- ---------------
Total Stockholders' Equity
(Deficit) (59,279) (1,814)
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 42,518 $ 26,586
============== ==============
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
LIVING CARD COMPANY, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
For the For the Inception on
Six Months Three Months May 8,
Ended Ended 1998 Through
December 31, December 31, December 31,
1998 1998 1998
-------------- --------------- ----------------
REVENUES $ 38,929 $ 27,934 $ 38,929
EXPENSES 107,505 49,439 119,325
-------------- --------------- ----------------
NET LOSS $ (68,576) $ (21,505) $ (80,396)
============== =============== ================
BASIC LOSS PER SHARE OF
COMMON STOCK $ (0.00) $ (0.00) $ (0.00)
============== =============== ================
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
LIVING CARD COMPANY, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
From Inception on May 8, 1998 through December 31, 1998
Deficit
Accumulated
Common Stock Additional During the
-------------------- Paid-in Development
Shares Amount Capital Stage
----------- ------- ---------- ------------
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 from inception on
May 8, 1998 through
June 30, 1998 - - - (11,820)
------------ ------- ---------- -------------
Balance, June 30, 1998 6,000,000 6,000 4,006 (11,820)
Contributed capital (unaudited) - - 10,000 -
Net loss from July 1, 1998
through December 31, 1998
(unaudited) - - - (68,576)
------------ ------- ---------- -------------
Balance, December 31, 1998
(unaudited) 6,000,000 $ 6,000 $ 14,006 $ (80,396)
============ ======= ========== =============
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
LIVING CARD COMPANY, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
For the For the Inception on
Six Months Three Months May 8,
Ended Ended 1998 Through
December 31, December 31, December 31,
1998 1998 1998
------------- -------------- -------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (68,576) $ (21,505) $ (79,285)
Adjustments to reconcile
net loss in operating
activities:
Increase in accounts payable 18,397 (695) 21,797
(Increase) in accounts receivable (1,680) 7,801 (1,680)
(Increase) in inventory (39,416) (1,111) (40,527)
------------- -------------- -------------
Net Cash Used by Operating
Activities (91,275) (15,510) (99,695)
------------- -------------- -------------
CASH FLOWS FROM INVESTING
ACTIVITIES - - -
------------- -------------- -------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Note payable 60,000 - 85,000
Payment on note payable -
related party (5,000) - (5,000)
Common stock issued for cash - - 5,000
Additional capital contributed 10,000 10,000 15,006
------------ --------------- -------------
Net Cash Provided by
Financing Activities 65,000 10,000 100,006
------------ --------------- -------------
NET INCREASE (DECREASE) IN CASH (26,275) (5,510) 311
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 26,586 5,821 -
------------ --------------- -------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 311 $ 311 $ 311
============ =============== =============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest paid $ - $ - $ -
Income taxes paid $ - $ - $ -
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
LIVING CARD COMPANY, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998 (Unaudited) and June 30, 1998
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 December 31, 1998, the Company had net operating loss carryforwards
of approximately $80,000 that may be offset against future taxable income from
the year 1998 through 2013. 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. Unaudited Financial Statements
The accompanying unaudited financial statements include all of the
adjustments which, in the opinion of management, are necessary for a fair
presentation. Such adjustments are of a normal recurring nature.
32
<PAGE>
LIVING CARD COMPANY, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998 (Unaudited) and June 30, 1998
NOTE 3 - 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 note 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 the Company to complete an
offering of its common stock, see Note 6.
NOTE 4 - NOTE PAYABLE
The Company signed a note to a related party during 1998. The note is payable
on demand and carries no interest, it is unsecured. Interest will be imputed
at 10% per annum.
NOTE 5 - PREFERRED STOCK
Shares of Preferred Stock may be issued from time to time 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.
NOTE 6 - PROPOSED STOCK OFFERING
The Company is proposing to file a form SB-1 by which it will offer to the
public $100,000 to $150,000 worth of its common stock. The terms of the
offering are to be determined. The costs incurred in connection with the
offering will be capitalized and charged to the proceeds of the offering upon
its successful completion.
33
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
___________________________________________________________________________
ITEM 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS
__________________________________________________________________________
Section 78.7502 of the Nevada Revised Statutes provides in relevant part
as follows:
1. A corporation 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,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action, suit or proceeding if he acted
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation and that, with respect to any
criminal action or proceeding, he had reasonable cause to believe that his
conduct was unlawful.
2. A corporation 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
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorneys' fees actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which
such a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense
of any claim, issue or matter therein, the corporation shall indemnify him
against expenses, including attorneys' fees, actually and reasonably incurred
by him in connection with the defense.
The Company's articles of incorporation do not contain a specific
indemnification provision for its officers, directors and employees. However,
Article V of the Company's articles of incorporation provides that an officer
and director of the Company does not have any personal liability to the
Corporation or its shareholders for breach of fiduciary duty as a director or
officer, except for damages for breach of fiduciary duty resulting from (a)
acts or omissions which involve intentional misconduct, fraud, or a knowing
violation of law; or (b) the payment of
34
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dividends in violation of section 78.300 of the Nevada Revised Statutes as
amended from time to time. Accordingly, the Company intends to limit the
liability of its officers and directors to the full extent allowed under
Nevada corporate law.
Insofar as indemnification by the Company for liabilities arising under
the Securities Act may be permitted to officers and directors of the Company
the Company is aware that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by an officer or director in the
successful defense of any action, suit, or proceeding) is asserted by such
officer or director in connection with the securities being registered hereby,
the Company will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue. (See "ITEM 26. UNDERTAKINGS.")
_____________________________________________________________________________
ITEM 2. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
____________________________________________________________________________
The following table sets forth an itemized estimate of expenses to be
incurred in connection with the sale and distribution of the securities being
registered, other than discounts and commissions:
1. SEC filing fee $ 100
2. Auditing fees* 2,000
3. Legal fees*>/R> 20,000
4. Blue Sky fees and expenses (including
3,000
counsel fees)*
5. Transfer agent's fees* 1,900
6. Printing, including registration statement 4,000
and prospectus*
7. Miscellaneous costs and expenses* ** 2,000
---------------
TOTAL $ 33,000
___________________________________________
*Except for the SEC filing fees, all of the foregoing items are
estimates.
**Includes fees for electronic (Edgar) filings
35
<PAGE>
___________________________________________________________________________
ITEM 3. UNDERTAKINGS
___________________________________________________________________________
POST-EFFECTIVE AMENDMENTS [Regulation S-B, Item 512(a)]
- -------------------------------------------------------
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
35
<PAGE>
(ii) To reflect in the prospectus any fact or events arising after
the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement, including
(but not limited to) addition or deletion of a managing underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
INDEMNIFICATION [Regulation S-B, Item 512(b)]
- ---------------------------------------------
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
____________________________________________________________________________
ITEM 4. UNREGISTERED SECURITIES ISSUED OR SOLD WITHIN ONE YEAR
_____________________________________________________________________________
The Company sold 6,000,000 shares of its Common Stock to John Lund and
Blair Lund, officers and directors in connection with organization of the
Company. The Common Stock was sold for cash at an aggregate price of $10,000,
and no commissions or discounts were paid or given in connection therewith.
See prospectus under the caption, "INTRODUCTION" and "CERTAIN TRANSACTIONS:
Purchase of Stock at Organization," which is incorporated herein by
reference.
The Common Stock was issued in the transactions described above in
reliance on the exemption from registration and the prospectus delivery
requirements of the Securities Act provided in Section 4(2) thereof and
applicable exemptions thereunder. The two persons who purchased Common Stock
of the Company in these transactions were officers and directors, and are
sophisticated and experienced investors. The Company's Secretary/Treasurer is
an accredited investor within the meaning of the Securities Act. Both
purchasers were aware at the time of their purchase of all material
information concerning the Company's proposed business and financial affairs
at the time of the transactions and were, in fact, in possession of all
pertinent information regarding the Company. These two individuals were
instrumental in organizing the Company and creating all such information.
Both of these individuals executed an investment letter in connection with his
purchase of shares of the Company, whereby each of them acknowledged that he
was obtaining "restricted securities" as defined in Rule 144 under the
Securities Act; that such shares cannot be transferred without appropriate
registration or exemption therefrom; that they must bear the economic risk of
the investment for an indefinite period of time; that they would not sell the
securities without registration or exemption therefrom; and that the Company
would restrict the transfer of the
36
<PAGE>
securities in accordance with such representations. Each person agreed that any
certificate representing such shares would be stamped with the usual legend
restricting the transfer of such shares. Each certificate representing such
shares bears a legend prohibiting the sale of such shares pursuant to Rule 144
until one year after the purchase of such shares and full payment therefor.
___________________________________________________________________________
ITEM 5. INDEX TO EXHIBITS
___________________________________________________________________________
Copies of the following documents are included as exhibits to this
Registration Statement pursuant to Item Part III of Form I-A and Item 6 of
Part II.
Exhibit SEC
No. Reference No. Title of Document Location
- --------- ------------- ------------------------ -----------------------
2 2 Articles and Bylaws
--------------------
2.01 2 Articles of Incorporation Initial Filing
2.02 2 Bylaws Initial Filing
4 4 Subscription Agreement Initial Filing
-----------------------
6 6 Material Contracts
------------------
6.01 6 Distribution Agreement Amendment No. 1
(Impact Sales)
6.02 6 Distribution Agreement Amendment No. 1
(James Hartley)
6.03 6 Distribution Agreement Amendment No. 1
(Greere & Associates)
9 9 Escrow Agreement Amendment No. 1
-----------------
11 11 Opinion Regarding Legality
--------------------------
11.01 11 Opinion and Consent of
Counsel Re: Legality Amendment No. 1
of Shares
23 23 Consents
---------
Consent of Jones,
Jensen & Co. This Filing
37
<PAGE>
_____________________________________________________________________________
ITEM 6. DESCRIPTION OF EXHIBITS
___________________________________________________________________________
Exhibit No. Description of Exhibit
- --------------- -------------------------
2.01 Articles of Incorporation
2.02 Bylaws
4 Subscription Agreement
6.01 Distribution Agreement
(Impact Sales)
6.02 Distribution Agreement
(James Hartley)
6.03 Distribution Agreement
(Greere & Associates)
9 Escrow Agreement
11.01 Opinion and Consent of Counsel
Re Legality of Shares
23 Consent of Jones, Jensen & Co.
38
<PAGE>
__________________________________________________________________________
SIGNATURES
____________________________________________________________________________
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-1 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
City of Salt Lake, State of Utah, on March 18, 1999.
REGISTRANT:
By: /s/John F. Lund
-------------------------
John F. Lund, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and on the dates stated.
/s/John F. Lund
--------------------------
John F. Lund, President,
Principal Executive
Officer, Director
Date: 03/18/99
/s/ R. Blair Lund
----------------------------
R. Blair Lund,
Secretary/Treasurer, Principal
Financial and Accounting
Officer and Director
Date: 03/18/99
39
<PAGE>
Date Filed: March 19, 1999 SEC File No. ###-##-####
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM SB-1 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE LIVING CARD COMPANY
Exhibit 23
<Letterhead of
Jones, Jensen & Company, LLC
Certified Public Accountants and Consultants>
CONSENT OF INDEPENDENT AUDITORS
--------------------------------
Board of Directors
Living Card Company, Inc.
Salt Lake City, Utah
We hereby consent to the use in this Registration Statement of Living Card
Company, Inc. on Form SB-1, of our audit report dated July 15, 1998 and our
unaudited report dated March 11, 1999, which are part of this Registration
Statement, and to all references to our firm included in this Registration
Statement.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
March 18, 1999
50 South Main Street
Suite 1450
Salt Lake City, Utah 84144
Telephone (801) 328-4408
Facsimile (801) 328-4461
