SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
April 20, 2000
--------------
Date of Report
(Date of Earliest Event Reported)
AMERICAN INFLATABLES, INC.
--------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-26943 95-4702570
--------------- ----------- --------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
947 NEWHALL, COSTA MESA, CALIFORNIA 92627
-----------------------------------------
(Address of principal executive offices)
(949)-515-1776
--------------
(Registrant's telephone number)
GLOBALOCK CORPORATION
860 VIA DE LA PAZ, SUITE E-1
PACIFIC PALISADES, CA 90272
----------------------------
(Former name and former address)
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<PAGE 02>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) Pursuant to a MERGER AGREEMENT AND PLAN OF REORGANIZATION ("Agreement")
GLOBALOCK CORPORATION, a Delaware corporation ("Acquisition"), CAN/AM MARKETING
GROUP, LLC, a California limited liability company ("Client") and the persons
Listed, hereof (collectively the "Shareholders"), being the owners of record of
all of the issued and outstanding membership interests of Client.
The Agreement was adopted by the unanimous consent of the Board of Directors of
the Registrant and approved by the unanimous consent of the shareholders of the
Registrant on December 30, 1999. The Agreement was adopted by the unanimous
consent of the Board of Directors of Client on December 30, 1999 and approved
by the unanimous consent of the Shareholders on December 30, 1999.
Prior to the Agreement, the Registrant had 1,000,000 shares of common stock
outstanding. Pursuant to the Agreement, the Registrant exchanged 3,498,000
shares of its common stock for 3,498,000 membership interests of Client. After
the effect of the Agreement, the Registrant had a total of 4,498,000 shares of
its common stock outstanding.
The sole source of consideration used by the Shareholders to acquire their
respective interest in the Registrant was the exchange of their membership
interests for common stock of the Acquisition. The Agreement was structured to
provide the Shareholders with a capital gain deferral under applicable
California taxes laws, rules and regulations.
On the effective date of the Agreement, the officers and two directors of
GLOBALOCK CORPORATION resigned and new officers and directors of the Registrant
were appointed. Effective as of the date of the Agreement, the Registrant
changed its name to "American Inflatables, Inc."
GLOBALOCK CORPORATION was formed to provide a method for a foreign or domestic
private company to become a reporting company whose securities would be
qualified for trading in the United States secondary market. GLOBALOCK
CORPORATION had no operations, revenues, material assets or liabilities.
The foregoing description is qualified in its entirety by reference to the
Company's Form 8-K filed with the Securities and Exchange Commission on
January 13, 2000 (the "Prior 8-K") and to the Agreement which was attached as
Exhibit 2.1 to the Prior 8-K.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
No events to report.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
No events to report.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Reported on Form 8-K filed April 7, 2000.
ITEM 5. OTHER EVENTS
No events to report.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
No events to report.
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<PAGE 03>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements and pro forma financial information are
being provided in accordance with the instructions to this item.
(a) Financial Statements of Business Acquired.
Independent Auditors Report.
Balance sheet of CAN/AM Marketing Group, LLC. as of December 27, 1999.
Statements of operations and changes in members' deficit of CAN/AM Marketing
Group, LLC for the period ending December 27, 1999 and year ended
December 31, 1998.
Statements of cash flows of CAN/AM Marketing Group, LLC. for the pre merger
period ending December 27, 1999 and year ended December 31, 1998.
(b) Financial Statements for American Inflatables, Inc.
Independent Auditors Report.
Balance sheet of American Inflatables, Inc. at December 31, 1999.
Statements of operations of American Inflatables, Inc. for the year ended
December 31, 1999.
Statements of cash flows of American Inflatables, Inc. for the year ended
December 31, 1999.
Statements of changes in stockholders' deficit for the post merger period
December 27, 1999 through December 31, 1999.
(c) Pro Forma Financial Information.
Unaudited pro forma balance sheet as of December 31, 1999 and accompanying
explanatory notes.
Unaudited pro forma statement of operations for the year ended December 31,
1999 and accompanying explanatory notes.
(d) Exhibits.
There is attached hereto the following exhibits:
Exhibit
No. Description
- ----- ---------------------------------------------------------------------
2.1* Merger Agreement and Plan of Reorganization among GLOBALOCK
CORPORATION, CAN/AM MARKETING GROUP, LLC, and all of the membership
interest-holders of CAN/AM MARKETING GROUP LLC.
23.1 Consent of Independent Auditors
99.1* Press Release issued by GLOBALOCK CORPORATION on January 3, 2000,
99.2* Press Release issued by GLOBALOCK CORPORATION on December 29, 1999,
99.3* Press Release issued by GLOBALOCK CORPORATION on December 28, 1999,
* Incorporated by reference to the Company's Form 8-K filed with the Securities
and Exchange Commission on January 13, 2000.
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<PAGE 04>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
American Inflatables, Inc.
By /s/ Gregg Mulholland
Gregg Mulholland
President, Chief Executive Officer
Date: April 20, 2000
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<PAGE 05>
EXHIBIT INDEX
Independent Auditor's Report
----------------------------
Members
Can-Am Marketing Group LLC
dba American Inflatables
947 Newhall Street
Costa Mesa, CA 92627
We have audited the accompanying balance sheet of Can-Am Marketing Group LLC as
of December 27, 1999, and the related statements of operations, changes in
members equity, and cash flows for the pre merger period, January 1, 1999
through December 27, 1999 and the year ended December 31, 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Can-Am Marketing Group LLC as
of December 31, 1999, and the results of its operations and its cash flows for
the pre merger period, January 1, 1999 through December 27, 1999, and the year
ended December 31, 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 I to the
financial statements, the Company has suffered recurring losses from operations
and a net working capital deficiency that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note I. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The proforma financial statements are
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has not been subjected to the
auditing procedures applied in the audit of the basic financial statements, and
accordingly we express no opinion on it.
Siegel & Smith
April 10, 2000
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<PAGE 06>
CAN/AM MARKETING GROUP, LLC
BALANCE SHEET
PRE MERGER DECEMBER 27, 1999
------------------------------------
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash ..................................................... $ 900
Inventory................................................. 59,600
Prepaid expenses and other current assets................. 53,300
--------
Total current assets.............................. 113,800
Fixed assets
Display and promotional blimps, net....................... 22,300
Computers, furniture and office equipment, net............ 34,000
Leasehold improvements, net............................... 51,600
--------
Total fixed assets................................ 107,900
Other assets:
Deposits.................................................. 7,000
--------
Total assets...................................... $228,700
========
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable............................................. $323,000
Notes payable investors................................... 259,000
Accounts payable.......................................... 113,300
Accrued payroll liabilities............................... 289,500
Accrued liabilities....................................... 48,700
--------
Total current liabilities......................... 1,033,500
Member's equity (deficit)................................... (804,800)
Total liabilities and members' equity (deficit)... $228,700
========
</TABLE>
See accompanying notes to financial statements
- -------------------------------------------------------------------------------
<PAGE 07>
CAM/AM MARKETING GROUP, LLC
STATEMENTS OF OPERATIONS AND CHANGES IN MEMBERS' DEFICIT
FOR THE PRE MERGER PERIOD ENDED DECEMBER 27, 1999
AND YEAR ENDED DECEMBER 31, 1998
------------------------------------
<TABLE>
<S> <C> <C>
1999 1998
---------- ---------
Revenues............................................ $1,034,100 $ 450,400
Cost of goods sold............................. 405,000 352,800
---------- ---------
Gross profit........................................ 629,100 97,600
---------- ---------
Selling and tradeshow expenses
Sales commissions.............................. 62,000 60,300
Trade show expense............................. 138,000 29,300
Trade show travel and entertainment............ 71,500 800
Other selling and marketing expenses........... 85,100 47,000
---------- ---------
Total .................................... 356,600 137,400
---------- ---------
Administrative expenses
Depreciation and amortization.................. 20,300 8,000
Legal and accounting........................... 102,800 5,000
Office expense................................. 80,300 50,500
Other administrative expenses.................. 72,300 21,500
Salaries and payroll expenses.................. 361,700 65,500
---------- ---------
Total..................................... 637,400 150,500
---------- ---------
Net loss from operations.............. (364,900) (190,300)
Other Expenses
Interest expense............................... 39,400 7,100
Other losses................................... 4,300 11,800
---------- ---------
Total..................................... 43,700 18,900
---------- ---------
Net loss.............................. $ (408,600) $(209,200)
Beginning members' deficit..................... (333,500) (61,800)
Member draws................................... (62,700) (62,500)
----------- ---------
Members' deficit............................ $ (804,800) $(333,500)
=========== =========
</TABLE>
See accompanying notes to financial statements
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<PAGE 08>
CAN/AM MARKETING GROUP LLC
STATEMENTS OF CASH FLOWS
FOR THE PRE MERGER PERIOD ENDING DECEMBER 27, 1999
AND YEAR ENDED DECEMBER 31, 1998
------------------------------------
<TABLE>
Period Ended Year Ended
December 27, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net loss.......................................... $(408,600) $(209,200)
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation................................... 14,100 4,200
Amortization.............................. 6,200 3,800
Changes in:
Inventory................................. (55,200) (4,400)
Prepaid expenses.......................... (46,000) (7,300)
Accounts payable.......................... 107,200 9,200
Accrued payroll liabilities............... 232,000 21,200
Accrued liabilities....................... 11,900 2,500
Deposits.................................. (400) (5,000)
--------- ---------
Net cash used in operating activities............... (138,800) (185,000)
Cash flows from investing activities
Promotional blimps constructed............ (24,400) (3,000)
Purchase of office equipment and computers (10,000) (17,100)
Purchase of manufacturing equipment....... (11,400) (10,400)
Leasehold improvements.................... (800) (60,700)
--------- ---------
Net cash used by investing activities............... (46,600) (91,200)
Cash flows from financing activities
Notes payable............................. 275,000 340,300
Member draws.............................. (62,700) (62,500)
Debt reduction............................ (33,300) 0
---------- ---------
Net cash provided by financing activities........... 179,000 277,800
Net increase in cash (decrease) .......... (6,400) 1,600
Cash, beginning of the year.................... 7,300 5,700
--------- ---------
Cash, December 27 and December 31.............. $ 900 $ 7,300
========= =========
Supplemental Information:
Interest Paid....................................... $ 0 $ 0
Taxes Paid.......................................... $ 0 $ 0
</TABLE>
See accompanying notes to financial statements
- -------------------------------------------------------------------------------
<PAGE 09>
Independent Auditor's Report
----------------------------
Board of Directors and Stockholders
American Inflatables, Inc.
947 Newhall Street
Costa Mesa, CA 92627
We have audited the accompanying balance sheet of American Inflatables, Inc. as
of December 31, 1999, and the related statements of operations, stockholders'
equity, and cash flows for the post merger period December 27, 1999 through
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Inflatables, Inc. as
of December 31, 1999, and the results of its operations and its cash flows for
the post merger period, December 27 1999 through December 31, 1999 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note I to the financial
statements, the Company has suffered recurring losses from operations an has a
net working capital deficiency that 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 I. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The proforma financial statements are
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has not been subjected to the
auditing procedures applied in the audit of the basic financial statements, and
accordingly we express no opinion on it.
Siegel & Smith
Del Mar, California
April 10, 2000
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<PAGE 10>
AMERICAN INFLATABLES, INC.
BALANCE SHEET
<TABLE>
DECEMBER 31, 1999
-----------------
<S> <C>
ASSETS
Current assets:
Cash ..................................................... $ 900
Inventory................................................. 59,600
Prepaid expenses and other current assets................. 53,300
----------
Total current assets.............................. 113,800
Fixed assets
Display and promotional blimps, net....................... 22,300
Computers, furniture and office equipment, net............ 34,000
Leasehold improvements, net............................... 51,600
----------
Total fixed assets................................ 107,900
Other assets:
Deposits.................................................. 7,000
Goodwill, net............................................. 818,400
----------
Total other assets................................ 825,400
Total assets...................................... $1,047,100
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable............................................. $ 323,000
Accounts payable.......................................... 113,300
Accrued payroll liabilities............................... 289,500
Accrued liabilities....................................... 48,700
----------
Total current liabilities......................... $ 774,500
Long term liabilities
Stockholders' equity
Common stock.............................................. $ 45,400
Additional paid in capital................................ 254,600
Accumulated deficit....................................... (27,400)
----------
Total stockholders' equity........................ 272,600
----------
Total liabilities and stockholders' equity........ $1,047,100
</TABLE>
See accompanying notes to financial statements
- -------------------------------------------------------------------------------
<PAGE 11>
AMERICAN INFLATABLES, INC
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
Post merger
December 27- Year Ended
December 31, 1999
1999 unaudited
-------- --------
<S> <C> <C>
Revenues........................................... $ 0 $ 0
Cost of goods sold............................ 0 0
-------- --------
Gross profit....................................... 0 0
-------- --------
Administrative expenses
Depreciation and amortization................. 0 0
Legal and accounting.......................... 0 14,300
Office expense................................ 0 0
Other administrative expenses................. 0 2,900
Salaries and payroll expenses................. 0 0
-------- --------
Total.................................... 0 17,200
-------- --------
Net loss from operations............. 0 (17,200)
Income tax (benefit)
Income tax expense (benefit).................. 0 (2,600)
Valuation allowance(benefit).................. 0 2,600
-------- --------
Total.................................... 0 0
-------- --------
Net loss $ 0 $(17,200)
======== ========
Loss per share................................ (0.01)
Weighted average shares....................... 1,251,648
</TABLE>
See accompanying notes to financial statements
- -------------------------------------------------------------------------------
<PAGE 12>
AMERICAN INFLATABLES, INC.
STATEMENTS of CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
Post merger
December 27- Year Ended
December 31, 1999
1999 unaudited
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities
Net loss....................................... $ 0 $ (17,200)
-------- ---------
Net Cash Used in Operating Activities............... 0 (17,200)
Cash Flows From Financing activities
Sale of common stock...................... 900 13,800
Assumption of debt........................ 0 4,300
-------- ---------
Net cash provided by financing activities........... 0 18,100
Net Increase in cash...................... 900 900
Cash, beginning of the year.................... 0 0
-------- ---------
Cash, December 27 and December 31.............. $ 900 $ 900
======== =========
</TABLE>
Supplemental Non Cash Investing and Financing Activities:
The Company acquired all the assets and liabilities of Can/Am Marketing
Group, LLC for 2,910,000 shares of the Company's Common Stock
Supplemental Information:
Interest Paid....................................... $ 0 $ 0
Taxes Paid.......................................... $ 0 $ 0
See accompanying notes to financial statements
- -------------------------------------------------------------------------------
<PAGE 13>
AMERICAN INFLATABLES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE POST MERGER PERIOD DECEMBER 27, 1999 THROUGH DECEMBER 31, 1999
<TABLE>
Common Stock Additional
------------------ Paid in Accumulated
Date Description Shares Dollars Capital Deficit Total
- ----------------- --------------- --------- ------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Beginning 1,019,921 $10,200 $ 800 $ (10,200) $ 800
Balance
December 27, 1999 Shares issued
to LLC Member 3,000,000 30,000 0 0 30,000
December 27, 1999 Convertible
debt 518,000 5,200 253,800 0 259,000
December 31, 1998 Net loss 0 0 0 (17,200) (17,200)
--------- ------- ---------- ----------- -------
Balance
December 31, 1999 4,537,921 $45,400 $ 254,600 $ (27,400) $272,600
========= ======= ========= ========== ========
</TABLE>
See accompanying notes to financial statements
- -------------------------------------------------------------------------------
<PAGE 14>
CAN/AM LLC / AMERICAN INFLATABLES, INC.
PROFORMA BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
ASSETS
Adjust- Proforma
Can/Am GlobaLock ments Balance Sheet
-------- --------- -------- -------------
<S> <C> <C> <C> <C>
Current assets:
Cash .......................................... $ 900 $ 0 $ 0 $ 900
Inventory...................................... 59,600 0 0 59,600
Prepaid expenses and other current assets...... 53,300 0 0 53,300
--------- ------- -------- ----------
Total current assets................... 113,800 0 0 113,800
Fixed Assets
Display and promotional blimps, net............ 22,300 0 0 22,300
Computers, furniture and office equipment net.. 34,000 0 0 34,000
Leasehold improvements, net.................... 51,600 0 0 51,600
--------- ------- -------- ----------
Total fixed assets..................... 107,900 0 0 107,900
Other Assets:
Deposits....................................... 7,000 0 0 7,000
Goodwill, net.................................. 0 0 818,400 818,400
--------- ------- -------- ----------
Total other assets..................... 7,000 0 818,400 825,400
--------- ------- -------- ----------
Total Assets.................................. $ 228,700 $ 0 $818,400 $1,047,100
========= ======= ======== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable.................................. $ 323,000 $11,900 $(11,900) $ 323,000
Notes payable investors........................ 259,000 0 (259,000) 0
Accounts payable............................... 113,300 4,500 (4,500) 113,300
Accrued payroll liabilities.................... 289,500 0 0 289,500
Accrued liabilities............................ 48,700 0 0 48,700
--------- ------- -------- ----------
Total current liabilities.............. 1,033,500 16,400 (275,400) 774,500
Long Term Liabilities
Members' deficit................................. (804,800) 0 804,800 0
Stockholders' equity (deficit)
Common stock................................... 0 10,200 35,200 45,400
Additional paid in capital..................... 0 800 253,800 254,600
Accumulated deficit............................ 0 (27,400) 0 (27,400)
--------- ------- -------- ----------
Total stockholders' equity (deficit)... 0 (16,400) 289,000 272,600
--------- ------- -------- ----------
Total liabilities and
Stockholders'(deficit)equity................. $ 228,700 $ 0 $818,400 $1,047,100
========= ======= ======== ==========
</TABLE>
See accompanying notes to financial statements
- -------------------------------------------------------------------------------
<PAGE 15>
CAM/AM, LLC / AMERICAN INFLATABLES, INC.
PROFORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
Adjust-
Can/Am GlobaLock ments Proforma
-------- --------- -------- -------------
<S> <C> <C> <C> <C>
Sales........................................... $1,034,100 $ 0 $ 0 $ 1,034,100
--------- ------- -------- ----------
Cost of goods sold.............................. 405,000 0 0 405,000
--------- ------- -------- ----------
Gross profit.................................... 629,100 0 0 629,100
Selling and tradeshow expenses
Sales commissions.......................... 62,000 0 0 62,000
Trade show expense......................... 138,000 0 0 138,000
Trade show travel and entertainment........ 71,500 0 0 71,500
Other selling and marketing expenses....... 85,100 0 0 85,100
--------- ------- -------- ----------
Total ................................ 356,600 0 0 356,600
Administrative expenses
Depreciation and amortization.............. 20,300 0 0 20,300
Legal and accounting....................... 102,800 14,300 0 117,100
Office expense............................. 80,300 0 0 80,300
Other administrative expenses.............. 72,300 2,900 0 75,200
Salaries and payroll expenses.............. 361,700 0 0 361,700
--------- ------- -------- ----------
Total................................. 637,400 (17,200) 0 654,600
--------- ------- -------- ----------
Net Loss from operations.......... (364,900) 0 0 (382,100)
Other expenses
Interest expense........................... 39,400 0 0 39,400
Other losses............................... 4,300 0 0 4,300
--------- ------- -------- ----------
Total................................. 43,700 0 0 43,700
Income tax (benefit)
Income tax expense (benefit)............... 0 (2,600) (61,300) (61,300)
Valuation allowance........................ 0 2,600 61,300 61,300
--------- ------- -------- ----------
Total................................. 0 0 0 0
Net loss.......................... $ (408,600) $(17,200) $ 0 $ (425,800)
========= ======= ======== ==========
</TABLE>
See accompanying notes to financial statements
- -------------------------------------------------------------------------------
<PAGE 16>
Notes to Financial Statements
Note A. ORGANIZATION AND BASIS OF PRESENTATION
American Inflatables, Inc.,(the "Company")(a Delaware Corporation) provides,
manufactures and markets alternative advertising products such as, inflatable
blimps and other custom inflatable products.
Effective December 27, 1999 (the Acquisition Date) the Company acquired the
alternative advertising medium business from Can/Am Marketing Group, LLC in an
exchange of common stock of the Company for assets of Can/Am Marketing Group,
LLC. The closing for this transaction occurred on December 27, 1999. The
acquisition was accounted for under the purchase method of accounting.
Accordingly, the acquired assets and liabilities were recorded at fair market
value, deemed to be the net book value carried by Can/Am. The difference
between fair market value and purchase price was charged to goodwill.
Note B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include all cash balances
and highly liquid investments having original maturities of three months or
less.
INVENTORY: Finished goods and raw materials are valued at the lower of cost
(first in first out) or market. Work-in-process, consisting of labor,
materials, and overhead on partially completed projects, are recorded at cost
but not in excess of net realizable value.
PROPERTY, PLANT, AND EQUIPMENT: Property, plant, and equipment is stated at
cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, which generally range from three years
for computer software to seven years for equipment. Leasehold improvements and
Goodwill are amortized on a straight-line method over ten years.
REVENUE AND EXPENSE RECOGNITION: Revenue from product sales are generated
primarily from the manufacturing and selling of advertising products, which
consist of inflatable blimps and other custom inflatables. The period of time
from initial order to final shipment of the product typically ranges from seven
to ten days. Revenue is recognized when the product is shipped by the Company
to the client. Expenses are recorded when incurred.
ADVERTISING: The Company follows the policy of charging the costs of
advertising to expense as incurred. The Company's significant advertising
expenses are
trade show costs. The Company depreciates the tradeshow blimps over 60 months.
INCOME TAXES: The newly merged Company accounts for income taxes under the
provisions of Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." Can/Am Marketing Group, LLC was treated as a
partnership for federal and state income tax purposes, prior to the acquisition
date income or losses from Can/Am passes to the members.
ESTIMATES: The preparation of these financial statements in conformity with
generally accepted accounting principals requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities.
Actual results could differ from those estimates.
Note C. INVENTORY
Inventories as of December 27, 1999 and December 31, 1999 by major
classification, were as follows:
1999
-------
Finished Goods.......................... $25,700
Work-in-Process......................... 5,400
Raw Materials........................... 28,500
-------
$59,600
=======
Inventory is valued using the first in first out (FIFO) method.
Note D. PREPAID EXPENSES
The Company markets its products by attending trade shows. To secure strategic
locations and favorable rates a deposit is required to be placed in excess of
nine months prior to the show. Accordingly the Company has $49,503 in deposits
as of December 27, 1999 and December 31, 1999. These amounts are expensed in
the period of the trade show.
Note E. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment as of December 27, 1999 and December 31, 1999
consisted of the following:
1999
-------
Machinery and equipment.....................$ 20,200
Leasehold improvements...................... 61,500
Computer and software....................... 17,300
Furniture and fixtures...................... 8,500
Trade show blimps........................... 28,700
-------
136,200
Less accumulated depreciation................ 28,300
-------
$107,900
=======
Depreciation and amortization expense for the period ended December 27, 1999
and year end 1999 was $20,290.
- -------------------------------------------------------------------------------
<PAGE 17>
Note F. NOTES PAYABLE
Notes payable as of December 27, 1999 and December 31, 1999 consisted of:
Short Term Note......................... $ 23,000
Convertible Notes....................... 300,000
Membership Subscriptions................ 259,000
----------
$ 582,000
===========
The convertible notes in the amount of $50,000 in 1998 and $250,000 during 1999
provide for a term loan and include interest payable at 12%. These loans are
secured by shares owned by an officer of the Company. The Company is required
to either make payment for principal and interest or make payment in the form
of common stock of the Company once the Company becomes a publicly traded
company. The lenders have the option to convert the debt to common shares at
$1.00 per share. The total accrued interest at December 27, 1999 and
December 31, 1999 was $23,000. No conversions have been made as of
December 31, 1999.
Individual investors have purchased unsecured membership subscriptions totaling
$259,000 in Can/Am, in return they will were issued common shares at $ .50 per
share. No interest was paid on these subscriptions.
As of December 31, 1999 the Company owed Scott Rettberg $23,000 which is
unsecured and bears no interest. This loan was a result of the purchase of his
interest in Can/Am.
Note G. RELATED PARTY TRANSACTIONS
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in additional business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the resolution
of such conflicts.
The Company's officer has received funds on an unsecured basis from the
Company. These borrowings occurred during the period that the Company was a
limited liability company (LLC). Upon termination of the Company's LLC
operation and organization these advances were reclassified as draws and netted
against member equity.
Scott Rettberg, a former member of Can/Am, agreed to sell his Can/Am interest
in May 1998. The agreement offered Mr. Rettberg 50,000 shares of common stock
when the Company becomes a publicly traded company in addition to a cash
payment of $39,600 paid in 24 monthly installments. Subsequent to the balance
sheet date the 50,000 shares were issued.
Note H. WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional shares
of common stock.
Note I. GOING CONCERN
The Company's financial statements are prepared using the 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 had not commenced its planned principal
operations. Prior to the merger, Can/Am sustained significant losses and has
negative working capital. Without the realization of additional capital, it may
be unlikely for the Company to continue as a going concern.
Note J. COMMITMENTS & CONTINGENCIES
The financial statements reflect accruals management believes sufficient to the
mentioned pending legal proceedings.
The Company's sales to the automobile industry exceed 50% of the Company's
total sales. An economic downturn to the auto industry could seriously impact
Company sales.
Note K. LEASES
The Company leases a combination of offices and production facility in Costa
Mesa, California totaling 10,000 square feet. The lease is accounted for as an
operating lease, under the terms of a one-year lease with ten one-year
consecutive renewal options.
Note L. STOCK
The Company has authorized 20,000,000 shares of $0.01 par value common stock.
As of December 31, 1999 there were 4,537,921 shares issued and outstanding.
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<PAGE 18>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference with respect to the consolidated
financial statements of Internet International Communications, Ltd. for the
year ended December 31, 1999 which is included in the Current Report
(Form 8-K/A) dated April 10, 2000 filed with the Securities and Exchange
Commission.
/s/ Siegel & Smith, CPA
Del Mar, California
April 19, 2000
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