U. S. Securities and Exchange Commission
Washington, D.C. 20549
AMENDMENT 1
to
FORM 10-SB
Platinum and Gold, Inc.
---------------------------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada 65-0729332
---------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12724 N.W. 11th Court
Sunrise, Florida 33323
---------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (800) 525-8495
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class to be registered
None None
----------------------------------- -----------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value
----------------------------------------
(Title of class)
Copies of Communications Sent to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696
Fax: (561) 659-5371
<PAGE>
Item 1: Description of Business:
(a) Business Development
Platinum and Gold, Inc. (the "Company" or "P&G") is incorporated in the
State of Nevada. The Company was originally incorporated as Integra Ventures,
Inc. on February 19, 1997 ("Integra"). The Company is not presently trading on
an exchange, but has applied to have its Common Stock quoted on the Over the
Counter Bulletin Board. Its executive offices are presently located at 12724
N.W. 11th Court, Sunrise, FL 33323. Its telephone number is (800) 525-8495 and
its facsimile number is (954) 845-0656.
The Company is filing this amendment to its Form 10-SB on a voluntary basis
so that the public will have access to the required periodic reports on P&G's
current status and financial condition. The Company will file periodic reports
in the event its obligation to file such reports is suspended under the
Securities and Exchange Act of 1934 (the "Exchange Act".)
Initially the Company was engaged in the medical supply business. In
November 1998, at the time it acquired Platinum and Gold Recording & Publishing
Company, a Florida corporation formed in June 1997 ("PGRP") as a wholly-owned
subsidiary, its purpose changed to P&G's initial purpose of discovering,
developing, recording and marketing new talent in the entertainment industry.
PGRP's founding philosophy arose from the diversified experience of its
management in the music, video, film and related industries. See Part I, Item 1.
"Description of the Business - (b) Business of Issuer."
In February 1997, prior to its acquisition of PGRP, the Company sold
1,720,000 shares of its unrestricted common stock to 70 individuals for $17,200.
For such offering, the Company relied upon Section 3(b) of the Act and Rule 504
and Section 517.061(11) of the Florida code, Section 90.530(11) of the Nevada
code, Section 48-2-103(b)(4) of the Tennessee code and Section 5[581- 5]I(c) of
the Texas code. No state exemption was necessary for the sales made to Canadian
or French investors. See Part II, Item 4. "Recent Sales of Unregistered
Securities."
In July 1997, prior to its acquisition of PGRP, the Company conducted a 1
for 4 reverse split of its Common Stock. This transaction was effected by the
Company's Board of Directors in accordance with the Company's Articles of
Incorporation and Bylaws and also in accordance with Nevada law. See Part II,
Item 1, a). "Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters, Market Information."; and Part II, Item 4. "Recent
Sales of Unregistered Securities."
In July 1997, prior to its acquisition of PGRP, the Company entered into a
share exchange agreement with First Aid Direct, Inc., a Florida corporation
("FAD"), and its shareholders which had been formed in February 1997. The
exchange was made whereby the Company issued 2,970,000 shares of its restricted
common stock to the shareholders of FAD for all of the issued and outstanding
stock of FAD. This offering was conducted pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Act") and Rule 506 of Regulations D
promulgated thereunder ("Rule 506") and Section 517.061(11) of the Florida Code.
2
<PAGE>
See Part I, Item 7. "Certain Relationships and Related Transactions"; and Part
II, Item 4. "Recent Sales of Unregistered Securities."
In August 1998, prior to its acquisition of PGRP, the Company entered
into a Recision and Cancellation Agreement with FAD and its shareholders,
thereby returning the parties to their original positions prior to the share
exchange conducted in July 1997 ab initio. Thus, FAD exchanged 2,970,000 shares
of common stock of the Company for 100% of the issued and outstanding stock of
FAD and FAD was no longer a wholly-owned subsidiary of the Company. See Part I,
Item 7. "Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
In October 1998, prior to its acquisition of PGRP, the Company
conducted a 4 for 1 forward split of its common stock. This transaction was
effected by the Company's Board of Directors in accordance with the Company's
Articles of Incorporation and Bylaws and also in accordance with Nevada law. See
Part II, Item 1, a). "Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters, Market Information."; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
In October 1998, prior to its acquisition by the Company, PGRP entered
into an agreement with Randy Bernsen to be a Director of PGRP. The term was
until the next annual meeting of the shareholders and directors. As
compensation, Randy Bernsen was promised 10,000 shares of the restricted common
stock of the Company upon the share exchange to be conducted in November 1998.
The shares were issued in January 1999 pursuant to Section 4(2) of the Act, Rule
506 and Section 517.061(11) of the Florida code. See Part I, Item 1. "Employees
and Consultants"; Part I, Item 4. "Security Ownership of Certain Beneficial
Owners and Management"; Part I, Item 5. "Directors, Executive Officer, Promoters
and Control Persons"; Part I, Item 7. "Certain Relationships and Related
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
In November 1998, prior to its acquisition by the Company, PGRP entered
into an agreement with Glenda Grainger to be a Director of PGRP. As
compensation, Glenda Grainger was promised 10,000 shares of the restricted
common stock of the Company upon the share exchange to be conducted in November
1998. The shares were issued in January 1999 pursuant to Section 4(2) of the
Act, Rule 506 and Section 517.061(11) of the Florida code. See Part I, Item 1.
"Employees and Consultants"; Part I, Item 4. "Security Ownership of Certain
Beneficial Owners and Management"; Part I, Item 5. "Directors, Executive
Officer, Promoters and Control Persons"; Part I, Item 7. "Certain Relationships
and Related Transactions"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
In November 1998, the Company entered into a share exchange agreement
with PGRP, and its shareholders which had been formed in June 1997. The exchange
was made whereby the Company issued 10,000,000 shares of its Common Stock to the
shareholders of PGRP for all of the issued and outstanding stock of PGRP. As
part of the exchange, Ms. Peters (the Company's current Chairman, President and
Treasurer) and Ms. Cavell (the Company's current Vice-President, Secretary and
3
<PAGE>
Director) each received 2,000,000 shares of the Company's Common Stock. This
offering was conducted pursuant to Section 4(2) of the Act and Rule 506 and
Section 517.061(11) of the Florida Code. See Part I, Item 2. "Management's
Discussion and Analysis or Plan of Operation - Discussion and Analysis - Results
of Operations - Full Fiscal Years - December 31, 1999 and December 31, 1998 -
Stockholders Equity."; Part I, Item 7. "Certain Relationships and Related
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
In January 1999, the Company issued 10,000 shares of its restricted
Common Stock to Margaret Ann Ronayne in connection with her agreement to serve
on the Company's Board of Directors and a Representation Agreement entered into
in December 1998. The shares were issued pursuant to Section 4(2) of the Act,
Rule 506 and Section 517.061(11) of the Florida code. See Part I, Item 1.
"Employees and Consultants"; Part I, Item 4. "Security Ownership of Certain
Beneficial Owners and Management"; Part I, Item 5. "Directors, Executive
Officer, Promoters and Control Persons"; Part I, Item 7. "Certain Relationships
and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
In January 1999, the Company conducted an offering of its unrestricted
Common Stock pursuant to section 3(b) of the Act and Rule 504. No shares were
sold thereunder. See Part II, Item 4. "Recent Sales of Unregistered Securities."
In April 1999, the Company sold 1,000 shares of its unrestricted Common
Stock to one (1) investor for $850. For such offering, the Company relied upon
Section 3(b) of the Act, Rule 504 and Section 90.530(11) of the Nevada code. See
Part II, Item 4. "Recent Sales of Unregistered Securities."
In July 1999, the Company initiated an offering of its Convertible
Notes. The Notes have a term of one (1) year, bear interest at a rate of nine
percent (9%) and are automatically convertible to shares of the Company's Common
Stock in one (1) year (if they are not converted earlier) at a price of $1.00
per share plus interest, which interest is also payable in shares of the
Company's Common Stock. To date, one (1) note has been sold in the principal
amount of $200,000 in December 1999. The offering is ongoing. For such offering,
the Company relied upon Section 3(b) of the Act, Rule 504 and Section
517.061(11) of the Florida Code. See Part I, Item 2. "Management's Discussion
and Analysis or Plan of Operation - Discussion and Analysis - Results of
Operations - Full Fiscal Years - December 31, 1999 and December 31, 1998 -
Financial Condition, Liquidity and Capital Resources"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
In September 1999, the Company executed a Promissory Note in favor of
Carol Neal, the Company's past Chairman, President and Treasurer in the amount
of $24,600. The Note was in exchange for monies lent by Ms. Neal to the Company
for working capital. The Note is payable on demand and bears no interest. Ms.
Neal passed away in December 1999. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida Code.
See Part I, Item 2. "Management's Discussion and Analysis or Plan of Operation -
Operating Expenses - Interest and Other Income (Expense), Net"; Part I, Item 7,
"Certain Relationships and Related Transactions"; and Part II, Item 4, "Recent
Sales of Unregistered Securities".
4
<PAGE>
In November 1999, the Company entered into a consulting contract with
Joyce Research Group, Inc. to provide financial public relations services to the
Company. As payment for these services, the Company committed to pay $225,000 or
to issue shares of its "free-trading" Common Stock within a six (6) month
period. An initial payment of $50,000 was made in December 1999. See Part I,
Item 1. "Employees and Consultants"; and Part I, Item 7. "Certain Relationships
and Related Transactions."
In November and December 1999, the Company entered into consulting
contracts with three (3) individuals to provide financial, public and investor
relations services to the Company. As payment for such services, the Company
issued 800,000 shares of its Common Stock and paid $20,000 For such offering,
the Company relied upon Section 3(b) of the Act, Rule 701, Pub. L. 104- 290, 110
Stat. 3416 (October 11, 1996) commonly known as the National Securities Markets
Improvement Act of 1996 ("NSMIA"), Section 517.061(11) of the Florida Code and
Section 10-5- 9(13) of the Georgia Code. See Part I, Item 1. "Employees and
Consultants"; Part I, Item 7. "Certain Relationships and Related Transactions";
and Part II, Item 4. "Recent Sales of Unregistered Securities."
In February 2000, PGRP, the Company's wholly owned subsidiary, entered
into an agreement with B&D Productions ("B&D") to promote and sell two (2)
full-length albums titled "Stolen Goods" and "A Woman For All Seasons" through
direct marketing efforts. The albums were recorded in 1996 and 1998 respectively
and are available in both CD and cassette formats. The Company is obligated to
pay B&D $1.00 for each album sold. The contract expires May 30, 2001 and
replaces a former contract between the Company and Betty Dickson.
B&D is also seeking to become affiliated with a record label. A record
company contract would provide B&D with the means to distribute its albums
nationally and internationally, to tour in concert and to possibly record with
other jazz greats and legends, with the whom the record label has some
affiliation. As a term of the contract, P&G is entitled to receive 20% of the
proceeds of any future contract between B&D and such record label.
In February 2000, the Company contracted with Rugby-America to produce
a thirty (30) second and a sixty (60) second television commercial for direct
response sales of Betty Dickson's compact disks. Production was completed in mid
February.
In March 2000, the Company contracted for call center services with
Robbins Telecommunications, Inc. to handle and process orders which result from
direct sales efforts. A minimum monthly fee is incurred by the Company for this
service and termination requires thirty (30) days notice by the Company.
In March 2000, the Company engaged the services of Net Effect, Inc. to
design, host and maintain the Company's website. The Company has prepaid for
hosting through and including March 2001.
5
<PAGE>
In April 2000, PGRP entered into a licensing agreement with Houston,
whereby PGRP will use its best efforts to market and sell Houston's album
entitled "Nothing but Piano, Echoes of Broadway" featuring Houston. PGRP is to
bear all expenses including advertising, materials such as compact disks and
cassettes and recording fees. Houston will receive $1.00 for each album sold
through PGRP's efforts. Additionally, PGRP will attempt to negotiate a record
label contract for Houston, for which PGRP will be paid a finder's fee in the
amount of twenty percent (20%) of the value of the contract. The contract
expires on May 30, 2001.
In April 2000, PGRP and Terry Ritchie entered into a licensing
agreement with Mary Jane Cunningham ("Cunningham"), whereby PGRP will use its
best efforts to market and sell Cunningham's album entitled "From Country to
Classic." PGRP is to bear all expenses including advertising, materials such as
compact disks and cassettes and recording fees. Cunningham will receive $1.00
for each album sold through PGRP's efforts. Additionally, PGRP will attempt to
negotiate a record label contract for Cunningham, for which PGRP will be paid a
finder's fee in the amount of twenty percent (20%) of the value of the contract.
The contract is for a period of one (1) year. See Part I, Item 1. "Description
of Business - (b) Business of Issuer - Mary Jane Cunningham."
See (b) "Business of Issuer" immediately below for a description of the
Company's business.
(b) Business of Issuer.
General
The Company was formed in February 1997 and had little or no operations
until November, 1998, when it acquired PGRP. P&G is an entertainment company
involved in the music and film business. Its principal activity is to discover
gifted new artists and to pair those persons with experienced teams of
entertainers in the same or similar fields. The teams will serve as mentors to
the new artists and will help to further develop their skills. Ultimately, the
Company (with the artist) will produce a finished work based on original
material created by the artist, the Company or both or will re-record a previous
hit. Artists contract directly with the Company. This eliminates the expense of
agents and middle men and translates to a substantial savings for both the
Company and the artist.
Music Recording and Publishing
In the music industry, P&G plans to record its artists both with
original material and with previously released hit songs. Most works will most
likely be aimed at a pop audience, as the Company feels that this segment of the
industry is the most appropriate for the artists P&G currently scouts, is
possibly the most profitable and may be the easiest to enter with a new artist.
P&G will manufacture the recorded material into compact disc ("CD")
singles and albums and cassette singles and albums and then will distribute to
the public via satellite, cable and national TV networks through 1-800
buy-direct response telephone numbers, as well as over the Internet.
6
<PAGE>
If Only and Touch Me
The Company has already recorded the music for its first two (2)
singles, "If Only" and "Touch Me". The Company is searching for a talented lead
vocalist to record a "voiceover". The singles were recorded in Nashville, TN,
with the help of John Mattick who has worked with such groups as Alabama, Sawyer
Brown, and the Righteous Brothers. He has arranged and produced for Dirty
Dancing, Michael Jackson, Johnny Lee, Andy Reiss, and Reba McIntire. Andy Reiss
plays electric guitar and has also played for Reba McIntire. Dave Fowler plays
bass and has played for Lori Morgan and Dottie West. Rick Lonow plays drums and
has played with Bellami Brothers. Etta Britt is a back-up singer on the single
and has performed with Englebert Humperdink. Larry Hanson plays acoustic guitar
and has played for both Alabama and Righteous Brothers. Chris Hinson who works
with percussion and engineering has worked closely with Clarence Clemmons and DJ
Jazzy Jeff, arranging, writing and performing original music. The singles were
test-marketed in Nashville in 1998 and tested extremely well. The "I wanna buy"
margin was approximately 95%.
Betty Dickson
In February 2000, PGRP, the Company's wholly owned subsidiary, entered
into an agreement with B&D to promote and sell two (2) full-length albums titled
"Stolen Goods" and "A Woman For All Seasons" through direct marketing efforts.
The albums were recorded in 1996 and 1998 respectively and are available in both
CD and cassette formats. The Company is obligated to pay B&D $1.00 for each
album sold. The contract expires May 30, 2001 and replaces a former contract
between the Company and Betty Dickson.
B&D is also seeking to become affiliated with a record label. A record
company contract would provide B&D with the means to distribute its albums
nationally and internationally, to tour in concert and to possibly record with
other jazz greats and legends, with the whom the record label has some
affiliation. As a term of the contract, P&G is entitled to receive 20% of the
proceeds of any future contract between B&D and such record label.
In February 2000, the Company contracted with Rugby-America to produce
a thirty (30) second and a sixty (60) second television commercial for direct
response sales of Betty Dickson's compact disks. Production was completed in mid
February.
Ms. Dickson has recorded four (4) full-length albums to date titled
"Can't Get Out of This Mood" in 1993, "Many, Many Kisses" in 1995, "Stolen
Goods" in 1996 and "A Woman For All Seasons" in 1998. She is currently preparing
material for her next album which is currently untitled and for which no release
date is available.
Ms. Dickson resides in Florida, where she often performs in local
hotels and nightclubs, as well as in jazz music festivals and concerts.
Additionally, she tours nationally and has appeared in a "Legends of Jazz" show
aboard the SS Norway. She works regularly with the Eddie Higgins Trio performing
for the Ft. Lauderdale Jazz Society and at other local events.
7
<PAGE>
Steve Jordan
The Company has signed a letter of intent with artist Steve Jordan to
enter into a contract for the purpose of recording a single CD and cassette to
be sold through direct response television advertising and through Internet
sales. Mr. Jordan is currently completing work on his first album and plays in
the 1940's and 1950's contemporary big band genre. He appeals to a wide range of
ages and musical tastes, from gospel to big band.
Mr. Jordan began singing to audiences at the age of three (3) and has
been singing publicly ever since. He studied at the Rhode Island Conservatory of
Music and sang with the famous Al Kay Orchestra until Al Kay passed away. Mr.
Jordan sang gospel with a group called Jubilee Band in the mid 1980's and has
looked forward to sharing his work with others through production of an album
ever since.
Barbara Chadwick
The Company signed a producers contract with artist Barbara Chadwick in
September 1999 to record a single CD and cassette at New River Recording Studios
in Ft. Lauderdale, Florida which is to be Ms. Chadwick's first album. P&G is to
bear all costs in the production of the album, while Ms. Chadwick will retain
all rights to the work produced. P&G shall market the album through direct
response television advertisement as well as over the Internet. P&G shall pay
Ms. Chadwick a $0.12 royalty on all sales of the album through direct response
television.
The Company will also serve as Ms. Chadwick's agent and will endeavor
to introduce Ms. Chadwick to a major record company. In the event such a
contract is signed, the Company is entitled to 35% of the value of such
contract.
Ms. Chadwick sings both blues and contemporary jazz and performs in
clubs and hotels along the east coast of the United States concentrating
primarily in New Jersey and Florida.
Beverly Fortin
The Company signed a producers contract with artist Beverly Fortin in
September 1999 to record a single CD and cassette at New River Recording Studios
in Ft. Lauderdale, Florida which is to be Ms. Fortin's first album. P&G is to
bear all costs in the production of the album, while Ms. Fortin will retain all
rights to the work produced. P&G shall market the album through direct response
television advertisement as well as over the Internet. P&G shall pay Ms. Fortin
a $0.12 royalty on all sales of the album through direct response television.
The Company will also serve as Ms. Fortin's agent and will endeavor to
introduce Ms. Fortin to a major record company. In the event such a contract is
signed, the Company is entitled to 35% of the value of such contract.
8
<PAGE>
Ms. Fortin sings pop music occasionally at local events and has served
as a backup singer to nationally known artists such as Brenda K. Star, Mariah
Carey, Debbie Jacobs, Pamela Stanley, Jessica Williams, Vickie Sue Robinson and
Gloria Estefan and the Miami Sound Machine. She owns a restaurant in Pompano
Beach, Florida and several other local nightclubs.
Mary Jane Cunningham
In April 2000, PGRP and Terry Ritchie entered into a licensing
agreement with Cunningham, whereby PGRP will use its best efforts to market and
sell Cunningham's album entitled "From Country to Classic." PGRP is to bear all
expenses including advertising, materials such as compact disks and cassettes
and recording fees. Cunningham will receive $1.00 for each album sold through
PGRP's efforts. Additionally, PGRP will attempt to negotiate a record label
contract for Cunningham, for which PGRP will be paid a finder's fee in the
amount of twenty percent (20%) of the value of the contract. The contract is for
a period of one (1) year.
Cunningham is a singer, songwriter, pianist, producer, director and a
recording artist.
Television
P&G also plans to explore the possibility of a talk show based in
Florida. In 1980, the three (3) commercial networks' combined broadcast was less
than 100 hours of programming a week. Today there are six (6) commercial
broadcast networks and over 150 cable channels plus satellite needing to fill up
24 hours of every day with programs. This translates to over 20,000 hours of
time which programmers must fill.
A half-hour prime time series can cost over $1 million per episode to
produce. These shows are too expensive for many small stations, and in any
event, can only run at peak hours. News magazines and talk shows are therefore
high on the networks' wish lists. These shows are less expensive to produce and
appeal to a large segment of the viewership. Variety shows containing new talent
are rarely produced and aired although they have remained comparatively
inexpensive to produce. Television stations often shy away from the task of
recruiting new talent for fear of over-diversifying from a television to a
television and music company.
The Company feels that it could either contract with a television
station to provide talent for a television station sponsored variety show, or
could fill an entire time slot by producing a variety show of its own. By
introducing its talent in this medium, the Company hopes to boost record sales.
Films and Videos
The Company may also expand into the area of the production of movies
made strictly for the home video, pay-per-view and cable television and
satellite audiences.
9
<PAGE>
Motion Picture Licensing and Distribution
The Company may also expand its business to include licensing, sales
and distribution of certain rights to independently produced feature films in a
wide variety of genres. The Company's goal would be to become increasingly
active in acquiring both domestic and foreign distribution rights, booking
motion pictures with theatrical exhibitors, arranging for the manufacture of
release prints from the film negative and promoting the motion pictures with
advertising and publicity campaigns.
The Company has already begun to act as a foreign sales agent,
licensing distribution rights in markets outside the United States to
independently produced films which are fully financed and owned by others, in
exchange for a sales agency fee. In addition to the production of motion
pictures and distribution in the United States, substantial revenues are
possible from international exploitation of the Company's motion pictures.
International revenues of motion picture distributors from filmed entertainment
grew from $4.7 billion in 1989 to $8.7 billion in 1996. This growth has been
attributed to worldwide acceptance of and the demand for motion pictures
produced in the US, the privatization of foreign television industries, growth
in the number of foreign households with video cassette players and growth in
the number of foreign television screens.
The Company actively participates at all three (3) major film markets
(the American Film Market, the Cannes Film Festival and MIFED), as well as the
major television (NATPE, MIP, MIPCOM) and video (VSDA) markets. The Company may
also, from time to time, engage independent representatives to assist the
Company in acquiring and/or licensing motion picture rights.
With respect to international territories, the Company licenses
distribution rights in various mediums (such as theatrical, video, pay
television, free television, satellite and other rights) to foreign
sub-distributors on either an individual rights basis or grouped in various
combinations of rights (which sometimes includes rights in all media). These
rights are licensed by the Company to numerous sub-distributors in international
territories or regions either on a picture-by-picture basis or, in certain
circumstances, with respect to a number of motion pictures pursuant to output
arrangements. Currently, the most appealing international territories for the
Company are Australia, the Benelux countries, Brazil, Canada, France, Germany,
Italy, Japan, Scandinavia, Spain and the United Kingdom.
The terms of the Company's license agreements with foreign
sub-distributors vary depending upon the territory and media involved and
whether the agreement relates to a single motion picture or multiple motion
pictures. Most of the Company's license agreements will provide that the Company
will receive a minimum guarantee from the foreign sub-distributor with all or a
majority of such minimum guarantee paid prior to, or upon delivery of the film
to the distributor for release in the particular territory. The remainder of any
unpaid minimum guarantee is generally payable at specified intervals after
delivery of the film to the sub-distributor. The minimum guarantee is recouped
by the sub-distributor out of the revenues generated from exploitation of the
picture in such territory. The foreign sub-distributor retains a negotiated
distribution fee (generally measured as a percentage of the gross revenues
generated from its distribution of the motion picture), recoups its distribution
expenses and the minimum guarantee and ultimately (after recoupment by the
10
<PAGE>
distribution expenses) remits to the Company the remainder of any receipts in
excess of the distributor's ongoing distribution fee.
The Company must rely on the foreign sub-distributor's ability to
successfully exploit the film in order to receive any proceeds in excess of the
minimum guarantee. In certain situations, the Company does not receive a minimum
guarantee from the foreign sub-distributor and instead negotiates terms which
usually result, in effect, in an allocation of gross revenues between the sub-
distributor and the Company. Typically the terms of such an arrangement provide
for the sub- distributor to retain an ongoing distribution fee (calculated as a
percentage of gross receipts of the sub-distributor in the territory), recoup
its expenses and pay remaining receipts in excess of the ongoing distribution
fee to the Company. Alternatively, such as often with respect to video rights,
the terms may provide for a royalty to be paid to the Company calculated as a
percentage of the gross receipts of the sub-distributor from exploitation of the
video rights (without deduction for the sub-distributor's distribution
expenses).
Groups of motion pictures are often packaged and licensed as a group
for exhibition on video and television over a period that extends beyond five
years from the initial domestic theatrical release of a particular film. Motion
pictures are also licensed and "packaged" by producers and distributors for
television broadcast in international markets by government owned or privately
owned television studios and networks. Pay television is less developed outside
the U.S., but is experiencing significant international growth. The prominent
foreign pay television services include channel Premiere, STAR TV, British Sky
Broadcasting and the international operations of several U.S. cable services
including HBO, the Disney Channel and Turner Broadcasting.
Business Strategy
The Company's business strategy, which is dependent upon its continuing
to have sufficient cash flow from operations and/or obtaining sufficient
additional financing with which to enhance the commercialization of existing and
future products, is to develop the talents of new artists and to either
reproduce an existing work or to record original material for global
distribution. The Company's revenues to date are minimal and are based upon the
licensing arrangements it has entered into as a foreign sales agent. The
Company's revenues are dependent on the volume of sales from its products and
services it provides.
Revenues from sales and services are recognized in the period in which
sales are made or services are provided. The Company's gross profit margin will
be determined in part by its ability to estimate and control direct costs of
manufacturing and production costs and its ability to incorporate such costs in
the price charged to customers and clients.
The Company's objective is to become a dominant provider of
entertainment products, initially in the music industry and eventually including
music, video, television products as well as to become an agent for others. To
achieve this objective, and assuming that sufficient funds are available, the
Company intends to: (i) develop international distribution channels and
co-marketing alliances for the Company's products and services; (ii) continue to
11
<PAGE>
sign new artists and to develop their skills and ready them for production;
(iii) to explore new possibilities in television and the internet; and (iv) to
begin retail sales of its products through Direct Sales efforts.
Management believes that the Company is poised to lead in the ever
developing entertainment industry. Management expects, in the event the Company
continues to achieve product acceptance, to increase its market penetration
through acquisition of additional artists, joint venture opportunities with
established market leaders and expansion of its personnel. However, such
expansion presents certain challenges and risks and there can be no assurance
that the Company, even if it were successful in acquiring other bases of
business development, would be successful in profitably penetrating these
potential markets.
Marketing and Distribution
Marketing
The following discussion of the entertainment industry, as it relates
to the Company's objectives, is of course pertinent only if the Company is
successful in maintaining sufficient cash flow from operations and/or obtaining
sufficient debt and/or equity financing to commercialize its existing products,
to add additional key personnel where needed, and to supplement new product
development. In addition, the Company must be able to generate significant
profits from operations and/or additional financing to continue expanding the
business and/or to fund the anticipated growth, assuming the Company's proposed
expanded business is successful. There can be no assurance such financing can be
obtained or that the Company's proposed expanded business will be successful.
According to the National Association of Recording Merchandisers
("NARM"), the music industry is a $8.79 Billion a year enterprise, with 32.6% of
sales being made through the use of credit cards. The Company was recently
approved to accept major credit cards and will implement their use on direct
sales efforts immediately.
Although according to the Recording Industry Association of America
("RIAA") the Internet accounted for only 0.3% of the total music sales in the
U.S. in 1997, the RIAA sees the Internet as, "an opportunity to expose music to
a wider audience than ever before." The Internet is an inexpensive medium which
also allows a company with less resources such as independents and start-ups to
compete for sales with larger more established companies.
In the wake of a dramatic increase in Internet sales, the record club
industry has reported steady declines between the years of 1994 and 1997. While
record club purchases accounted for a total of 15.1% of total music sales, in
1997 record club sales accounted for only 11.6% of total music sales. Mail order
sales, which seem to have paralleled record club sales, have reached a seven (7)
year market share low of 2.7% (RIAA).
A significant factor in the above distribution forum changes has been
the introduction of new mediums for audio listening. In 1997, full-length CD's
dominated the market with a 70.2% market share. A far second was full-length
12
<PAGE>
cassettes with only an 18.2% share. Vinyl sales however, rose from 0.3% in 1993
(the date of CD introduction) to 0.7% in 1997. This rise was mostly attributed
to collectors, disk jockeys and rap music (RIAA).
According to the RIAA, unit shipments of all formats to direct and
special markets grew 11% from 124.7 million in mid-'98 to 138.4 million in
mid-'99. This is especially of interest to the Company, who plans to focus in
these areas. The dollar value of shipments to direct and special markets also
grew 4.7% from $732.5 million in mid-'98 to $767.2 million in mid-'99.
Consumer profiles compiled by NARM are also of interest to P&G, as much
of the Company's music will appeal to an older audience. 1997 statistics show
that persons 45 years of age and older are the second largest purchasers of
music products, second only to ages 15-19.
Distribution
The Company's initial plan of distribution is to market and sell the
product through direct sales efforts. Primarily the Company will focus on
infomercials to sell its products. Print media, direct mail and short form 120
and 60-second commercials may follow the infomercial.
In addition to the infomercial, the Company may eventually institute a
direct mail and sales campaign for the Company's products which the Company
believes will generate sales from consumers throughout the United States. In
addition, the Company has an ongoing program to participate in trade shows and
festivals, promotional events and retail mall shows. These events have
historically generated sales and significant exposure in the industry.
The growth and improvement of direct response marketing and sales via
infomercials, home shopping networks and commercials has had a positive impact
on the retail sales industry and specifically on the music industry. Companies
such as BMG and Columbia House have been especially successful. Additionally,
retailers are increasingly utilizing alternative forms of retailing; such as,
television shopping and infomercials and merchandising albums with other
entertainment items.
The Company intends to save considerable expense by acting as its own
fulfillment center. Thus, all telephone sales, packaging and shipping will be
handled exclusively by the Company. The Company expects that it will have
sufficient resources and capital necessary to expand to meet these obligations.
A shortage of capital could have a material adverse effect on the Company's
ability to handle its fulfillment obligations in-house.
The Company expects to sell its products in retail stores when profit
margins show signs of weakening through direct sales efforts. The retail market
is expected to support the product for several years thereafter.
The Company's intends to eventually joint venture with major recording
labels which have the support structure necessary to record and publish an album
on a much larger scale. By joint-venturing for manufacturing, distribution and
13
<PAGE>
finance of albums, P&G hopes to be able to launch new artists quickly and
efficiently, dedicating adequate funds to promote the artist and the work to
achieve maximum exposure.
Distribution on the Internet
The Company is also already selling its products over the Internet. It
advertises albums for sale directly through the Company website. Customers are
able to browse the site, listen to sample wav. files and soon will be able to
purchase albums directly from the Company over the Internet in a secure
environment. The Company intends to pay for advertising space on frequently
visited sites such as browsers upon receipt of sufficient capital from either
revenues or debt or equity financing.
Also, the on-line delivery of music and video is inevitable and the
death of the modern music and video stores is imminent. P&G plans to establish
websites to promote and distribute its materials, as well as the materials of
others. Online sales are considerably less expensive to promote.
Status of Publicly Announced Products and Services
The singles "If Only" and "Touch Me" were originally to be recorded
with Michela as the lead vocalist. The Company released information to the
public in various mediums publicizing the expected release. The singles were
test-marketed in Nashville in 1998 and tested extremely well. The "I wanna buy"
margin was approximately 95%. The Company has since elected not to use Michela
as the lead vocalist for these two (2) singles and is currently searching for a
suitable singer to replace Michela.
Additionally, the Betty Dickson albums A Woman For All Seasons and
Stolen Goods are currently available through the Company's website located at
http://www.platinum-gold.com.
No other P&G products or services have been publicly announced and are
either in the production or planning phase.
Competition
The Company faces competition from large, well-established companies
with considerably greater financial, marketing, sales and technical resources
than those available to the Company. Additionally, many of the Company's present
and potential competitors have research and development capabilities that may
allow such competitors to develop new and improved products which may compete
with the Company's products. The Company's products could be rendered obsolete
or made uneconomical by the development of new products, technological advances
affecting the cost of production, or marketing or pricing actions by one or more
of the Company's competitors. The Company's business, financial condition or
results of operations could be materially adversely affected by one or more of
such developments. There can be no assurance that the Company will be able to
compete successfully against current or future competitors or that competition
will not have an material adverse effect on the Company's business, financial
condition or results of operations.
14
<PAGE>
Competition - Music Recording and Publishing
Competition is intense within the music industry, in general, and also
in the agency or booking aspect of the industry in which the Company may conduct
its operations in the future. The Company's opportunity to obtain clients with
the potential for achieving popular and commercial success may be limited by its
financial resources and other assets. It is anticipated that the music industry
may be subject to changes in the general state of the economy, shifts in the
demographic structure, changes in the buying habits of the public, the
availability of alternative forms of entertainment and the increased cost of
doing business. Further, there may be significant technological advances in the
future and the Company may not have adequate creative management and resources
to enable it to take advantage of such advances. Many of the companies and other
organizations with which the Company will be in competition have far greater
financial resources, greater experience and larger staffs than the Company.
Additionally, many of such organizations have proven operating histories, which
the Company lacks. The Company expects to face strong competition from both such
well-established companies and independent companies like itself.
Competition - Films
In the event the Company enters the motion picture industry, the
Company's movies will compete with traditional feature films and television
programming produced by major movie studios, including Disney, Warner Bros.
Inc., Twentieth Century Fox Film Corporation, Paramount Pictures, Sony Pictures,
Inc., Lucasfilm, Universal City Studios, Inc. and MGM/UA, as well as numerous
other independent motion picture and television production companies. The
Company's broadcast and home video products will compete with the films of these
movie studios for audience acceptance and exhibition over broadcast/cable and
home video channels. In addition, the Company will compete with movie studios
for the acquisition of literary properties, production financing, the services
of performing artists, and the services of other creative and technical
personnel. Most of the movie studios with which the Company will compete have
significantly greater name recognition and significantly greater financial,
technical, creative, marketing, and other resources than does the Company. Due
to their substantially greater resources, these movie studios likely will be
able to enter into more favorable distribution arrangements and to promote their
films and television programming more successfully than the Company.
Competition - Videos
In the event the Company enters into the video production industry, the
Company's videos will compete with the feature films produced by the major movie
studios listed above as well as numerous independent production companies, some
of whom produce movies exclusively for release on videocassette. Most of the
movie studios with which the Company will compete have significantly greater
name recognition and significantly greater financial, technical, creative,
marketing, and other resources than does the Company. Due to their substantially
greater resources, these movie studios likely will be able to enter into more
favorable distribution arrangements and to promote their films and television
programming more successfully than the Company.
15
<PAGE>
Competition - Distribution on the Internet
The market for online commerce is extremely competitive, and the
Company believes competition, particularly in connection with online music
sales, will continue to grow and intensify. The Company's most visible
competitors may include CustomDisc.com, CDuctive, and amplified.com. Although
the Company's primary focus will be on sales of Company artists, rather than the
music of other artists, P&G may ultimately compete with existing online websites
that provide sales of pre-recorded music on the Internet. Online competitors
include CDnow, Inc., Amazon.com, Inc., barnesandnoble.com inc., Columbia House
and BMG Music Service. CDnow purchased SuperSonic Boom, a custom compilation
provider, in June 1998.
Sources and Availability of Raw Materials
The materials needed to produce movies or television and to record
music is widely available from numerous third parties for rent or for sale. The
final product is then manufactured and mass produced by a third party
independent contractor. The raw materials to produce CD's, audio cassettes,
digital video disks, videocassettes, laser disks and other medium are widely
available from numerous sources. No shortage of materials is expected in the
foreseeable future.
Dependence on one or few customers
The Company will rely heavily on its customers' preferences to best
determine the products which will be produced. The commercial success of the
Company's products will depend on its ability to predict the type of content
that will appeal to a broad audience. Although the Company plans to test market
their products prior to their release, there can be no assurance that the
Company will be able to predict the appeal of its products before their
production. Considerable expense is expended on production costs before a
product can be test marketed. Therefore, although a product which tests poor can
be scrapped before additional expense is incurred associated with release
including marketing and distribution, the Company may have to bear the expense
of production of some products, which may never be released. This may have a
material adverse effect on the Company.
Research and Development
The Company believes that research and development is an important
factor in its future growth. The entertainment industry is closely linked to
technological advances, which produce new ways of producing product and a new
medium for its use by the public. Recent developments include: on-line sales,
digital downloading of music and video, digital video disks and others.
Therefore, the Company must continually invest in the latest technology to
appeal to the public and to effectively compete with other companies in the
industry. No assurance can be made that the Company will have sufficient funds
to purchase technological advances as they become available. Additionally, due
to the rapid advance rate at which technology advances, the Company's equipment
and inventory may be outdated quickly, preventing or impeding the Company from
realizing its full potential profits.
16
<PAGE>
Patents, Copyrights and Trademarks
The Company intends to protect its original intellectual property with
patents, copyrights and/or trademarks as appropriate.
To date, the Company has registered two (2) copyrights. On November 7,
1997, the Company filed on Form SR (for sound recordings) copyright applications
for the works titled "If Only" and "Touch Me". The effective date of such
registrations is November 7, 1997.
Governmental Regulation
Currently there is no government regulation of the Company's business
nor of the Company's products.
State and Local Licensing Requirements
Currently there are no state or local licensing requirements which
apply to the Company's business or to its products
Effect of Probable Governmental Regulation on the Business
Currently there is no government regulation of the Company's business
nor of the Company's products. However, new laws are emerging which regulate
commerce over the internet and the way data and information may be transmitted
over the Internet. Should the Company engage in activities involving the
Internet in the future, it may be subject to these laws and/or regulations.
As the Company's products and services are available over the Internet
in multiple states and foreign countries, these jurisdictions may claim that the
Company is required to qualify to do business as a foreign corporation in each
such state and foreign country. New legislation or the application of laws and
regulations from jurisdictions in this area could have a detrimental effect upon
the Company's business.
A governmental body could impose sales and other taxes on the provision
of the Company's products and services, which could increase the costs of doing
business. A number of state and local government officials have asserted the
right or indicated a willingness to impose taxes on Internet-related services
and commerce, including sales, use and access taxes; however, no such laws have
become effective to date. The Company cannot accurately predict whether the
imposition of any such taxes would materially increase its costs of doing
business or limit the services which it provides, since it may be possible to
pass on some of these costs to the consumer and continue to remain competitive.
If, as the law in this area develops, the Company becomes liable for
information carried on, stored on, or disseminated through its website, it may
be necessary for the Company to take steps to reduce its exposure to this type
of liability through alterations in its equipment, insurance or other
17
<PAGE>
methods. This may require the Company to spend significant amounts of money for
new equipment or premiums and may also require it to discontinue offering
certain of its products or services.
Due to the increasing popularity and use of the Internet, it is
possible that additional laws and regulations may be adopted with respect to the
Internet, covering issues such as content, privacy, access to adult content by
minors, pricing, bulk e-mail (spam), encryption standards, consumer protection,
electronic commerce, taxation, copyright infringement and other intellectual
property issues. P&G cannot predict the impact, if any, that future regulatory
changes or developments may have on the Company's business, financial condition,
or results of operation.
Cost of Research and Development
For fiscal year 1997 and 1998, the Company expended no measurable
amount of money on research and development efforts. At the current time, none
of the costs associates with research and development are bourne directly by the
customer; however there is no guarantee that such costs will not be bourne by
customers in the future and, at the current time, the Company does not know the
extent to which such costs will be bourne by the customer, if at all.
Cost and Effects of Compliance with Environmental Laws
The Company's business is not subject to regulation under the state and
Federal laws regarding environmental protection and hazardous substances
control. The Company is unaware of any bills currently pending in Congress which
could change the application of such laws so that they would affect the Company.
Employees and Consultants
At June 30, 2000, the Company employed two (2) persons. Neither of
these employees are represented by a labor union for purposes of collective
bargaining. The Company considers its relations with its employees to be
excellent. The Company plans to employ additional personnel as needed upon
product rollout to accommodate fulfillment needs.
In October 1998, prior to its acquisition by the Company, PGRP entered
into an agreement with Randy Bernsen to be a Director of PGRP. The term was
until the next annual meeting of the shareholders and directors. As
compensation, Randy Bernsen was promised 10,000 shares of the restricted common
stock of the Company upon the share exchange to be conducted in November 1998.
The shares were issued in January 1999 pursuant to Section 4(2) of the Act, Rule
506 and Section 517.061(11) of the Florida code. See Part I, Item 4. "Security
Ownership of Certain Beneficial Owners and Management"; Part I, Item 5.
"Directors, Executive Officer, Promoters and Control Persons"; Part I, Item 7.
"Certain Relationships and Related Transactions"; and Part II, Item 4. "Recent
Sales of Unregistered Securities."
In November 1998, prior to its acquisition by the Company, PGRP entered
into an agreement with Glenda Grainger to be a Director of PGRP. As
18
<PAGE>
compensation, Glenda Grainger was promised 10,000 shares of the restricted
common stock of the Company upon the share exchange to be conducted in November
1998. The shares were issued in January 1999 pursuant to Section 4(2) of the
Act, Rule 506 and Section 517.061(11) of the Florida code. See Part I, Item 4.
"Security Ownership of Certain Beneficial Owners and Management"; Part I, Item
5. "Directors, Executive Officer, Promoters and Control Persons"; Part I, Item
7. "Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
In January 1999, the Company issued 10,000 shares of its restricted
common stock to Margaret Ann Ronayne in connection with her agreement to serve
on the Company's Board and a Representation Agreement entered into in December
1998. The shares were issued pursuant to Section 4(2) of the Act, Rule 506 and
Section 517.061(11) of the Florida code. See Part I, Item 4. "Security Ownership
of Certain Beneficial Owners and Management"; Part I, Item 5. "Directors,
Executive Officer, Promoters and Control Persons"; Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
In November 1999, the Company entered into a consulting contract with
Joyce Research Group, Inc. to provide financial public relations services to the
Company. As payment for these services, the Company committed to pay $225,000 or
to issue shares of its "free-trading" Common Stock within a six (6) month
period. An initial payment of $50,000 was made in December 1999. See Part I,
Item 7. "Certain Relationships and Related Transactions."
In November and December 1999, the Company entered into consulting
contracts with three (3) individuals to provide financial, public and investor
relations services to the Company. As payment for such services, the Company
issued 800,000 shares of its Common Stock and paid $20,000 For such offering,
the Company relied upon Section 3(b) of the Act, Rule 701, NSMIA, Section
517.061(11) of the Florida Code and Section 10-5-9(13) of the Georgia Code. See
Part I, Item 7. "Certain Relationships and Related Transactions"; and Part II,
Item 4. "Recent Sales of Unregistered Securities."
Currently, the Company has no employment agreements with its employees.
Facilities
The Company maintains its executive offices at 12724 N.W. 11th Court,
Sunrise, Florida 33323, which is the residence of both Valerie Peters and Louise
Cavell. Approximately 500 square feet of space is devoted entirely to P&G as an
office. Its telephone number is (800) 525-8495 and its facsimile number is (954)
845-0656. The Company plans to lease office space in either Broward or Palm
Beach County, Florida upon receipt of sufficient capital resulting from revenues
or debt or equity financing. It is planned that such office space shall serve as
the Company headquarters and also as a fulfillment center for the Company's
products. See Part I, Item 3. "Description of Property."
19
<PAGE>
Risk Factors
Before making an investment decision, prospective investors in the
Company's Common Stock should carefully consider, along with other matters
referred to herein, the following risk factors inherent in and affecting the
business of the Company.
1. History of Losses. Although the Company has been in business since
February 19, 1997 it is still in the development stage. As of December 31, 1998,
the Company had total assets of $38,375, a cumulative net loss of $18,050 with
no revenues and stockholders deficit of $1,295. As of December 31, 1999, the
Company had total assets of $134,996, a net loss of $216,909 on no revenues and
stockholders deficit of $217,350. Due to the Company's operating history and
limited resources, among other factors, there can be no assurance that
profitability or significant revenue will occur in the future. Moreover, the
Company expects to continue to incur operating losses through at least the first
fiscal quarter of the year 2001, and there can be no assurance that losses will
not continue thereafter. The ability of the Company to establish itself as a
going concern is dependent upon the receipt of additional funds from operations
or other sources to continue those activities. The Company is subject to all of
the risks inherent in the operation of a development stage business and there
can be no assurance that the Company will be able to successfully address these
risks.
2. Minimal Assets. Working Capital and Net Worth. As of December 31,
1999, the Company's total assets in the amount of $134,996, consisted,
principally, of the sum of $98,329 in cash, $4,321 in equipment and $32,346 in
other assets. As a result of its minimal assets and a net loss from operations,
in the amount of $216,909, as of December 31, 1999, the Company had a net worth
of $134,996. Further, there can be no assurance that the Company's financial
condition will improve. Even though management believes, without assurance, that
it will obtain sufficient capital with which to implement its expansion plan,
the Company is not expected to proceed with its expansion without an infusion of
capital. In order to obtain additional equity financing, management may be
required to dilute the interest of existing shareholders or forego a substantial
interest of its revenues, if any.
3. Need for Additional Capital. Without an infusion of capital or
profits from operations, the Company is not expected to proceed with its
expansion as planned. Accordingly, the Company is not expected to overcome its
history of losses unless additional equity and/or debt financing is obtained.
While the Company anticipates the receipt of increased operating revenues, such
increased revenues cannot be assured. Further, the Company may incur significant
unanticipated expenditures which deplete its capital at a more rapid rate
because of among other things, the stage of its business, its limited personnel
and other resources and its lack of a widespread client base and market
recognition. Because of these and other factors, management is presently unable
to predict what additional costs might be incurred by the Company beyond those
currently contemplated. The Company has not identified sources of additional
capital funds, and there can be no assurance that resources will be available to
the Company when needed.
4. Dependence on Management. The possible success of the Company is
expected to be largely dependent on the continued services of its Chairman,
President and Treasurer, Louise Cavell and its Vice-President, Secretary and
Director, Valerie Peters. Virtually all decisions concerning the production,
marketing, distribution and sales of the Company's products and services will be
20
<PAGE>
made or significantly influenced by the Company's officers. These officers are
expected to devote only such time and effort to the business and affairs of the
Company as may be necessary to perform their responsibilities as executive
officers. The loss of the services of either of these officers would adversely
affect the conduct of the Company's business and its prospects for the future.
The Company presently has no employment agreements with any of its officers and
holds no key-man life insurance on the lives of, and has no other agreement with
any of these officers. See Part I, Item 5. "Directors, Executive Officers,
Promoters and Control Persons."
5. Limited Distribution Capability. The Company's success depends in
large part upon its ability to distribute its products and services. As compared
to the Company, which lacks the financial, personnel and other resources
required to compete with its larger, better-financed competitors, virtually all
of the Company's competitors have much larger budgets for securing customers.
Depending upon the level of operating capital or funding obtained by the
Company, management believes, without assurance, that it will be possible for
the Company to attract distributors for its products and services. However, in
the event that only limited funds are available from operations or obtained, the
Company anticipates that its limited finances and other resources may be a
determinative factor in the decision to go forward with planned expansion. Until
such time, if ever, as the Company is successful in generating sufficient cash
flow from operations or securing additional capital, of which there is no
assurance, it intends to continue to operate at its current stage.
6. High Risks and Unforeseen Costs Associated with the Company's
Expanded Entry into the Music and Related Entertainment Industries. There can be
no assurance that the costs for the establishment of a distributor network, and
the marketing and sales costs associated with the rollout of its products and
services will not be significantly greater than those estimated by Company
management or that significant expenditures will not be needed to record and
produce the Company's products. Therefore, the Company may expend significant
unanticipated funds or significant funds may be expended by the Company without
development of a commercial market for its products. There can be no assurance
that cost overruns will not occur or that such cost overruns will not adversely
affect the Company. Further, unfavorable general economic conditions and/or a
downturn in customer acceptance and appeal could have an adverse affect on the
Company's business. Additionally, competitive pressures and changes in customer
mix, among other things, which management expects the Company to experience in
the uncertain event that it achieves commercial viability, could reduce the
Company's gross profit margin from time to time. Accordingly, there can be no
assurance that the Company will be capable of establishing itself in a
commercially viable position in local, state, nationwide and international music
and motion picture markets.
7. Few Artists Under Contract or Customer Base. While the Company has
signed several contracts with aspiring artists, the Company presently has no
established musical artists, musical groups, comedy acts or other artists or
entertainers under contract. The Company will be dependent upon its management
to select the musicians, musical groups, comics and other artists and performers
whose talents the Company will seek to develop and record. Management will
utilize its contacts with musicians, musical groups, agents, directors,
21
<PAGE>
producers and others to select and target performing artists and groups and
comedy acts to be signed by the Company, there can be no assurance that any such
artists or performers will have a chance of achieving popular and commercial
success.
8. Dependency on Securing a Suitable Strategic Partner. The Company's
ability to establish an adequate customer base at a level sufficient to meet the
larger competition depends in part upon the ability of the Company to capitalize
on distribution agreements not yet in place and to establish a joint venture
agreement with a suitable partner for its production of new music and motion
picture works. There can be no assurance that a qualified strategic arrangement
will be found at the levels which management believes are possible. Further,
even if the Company receives sufficient cash flow from operations or proceeds
from equity and/or debt financing or otherwise, thus enabling it to go forward
with its planned expansion, it will nevertheless be dependent upon the
availability of a qualified strategic partner to progress at the levels which
the Company believes are necessary.
9. Significant Customer and Product Concentration. There is no
assurance that the Company will be able to obtain adequate distribution of its
products. Most motion pictures and audio works are produced by large companies
which have distribution agreements already in place. Most distributors carry an
extensive line of products which they make available to customers in the form of
box office movies, video rentals and audio sales. The Company's ability to
achieve revenues in the future will depend in significant part upon its ability
to obtain and provide support to distributors, as well as the condition of its
distributors. Even if the Company secures distribution agreements, there can be
no assurance that the distributors with which the Company contracts, will be
able to compete with larger distributors who appeal to a wider customer base as
a result of their ability to carry a more extensive line of products. Any
cancellation of a distributorship agreement or delay in payment may materially
adversely affect the Company's business, financial condition and results of
operations. There can be no assurance that the Company's revenues will increase
in the future or that the Company will be able to support or attract
distributors for its products. See Part I, Item 2. Management's Discussion and
Analysis of Financial Condition or Plan of Operation - Revenues."
10. Fluctuations in Results of Operations. The Company has experienced
and may in the future experience significant fluctuations in revenues, gross
margins and operating results. In addition, a single order for the Company's
products can represent a significant portion of the Company's potential sales
for such quarter. As with many developing businesses, the Company expects that
some orders may not materialize or delivery schedules may have to be deferred as
a result of changes in distribution schedules, among other factors. As a result,
the Company's operating results for a particular period to date have been and
may in the future be materially adversely affected by a delay, rescheduling or
cancellation of even one purchase order. Moreover, purchase orders are often
received and accepted substantially in advance of shipment, and the failure to
reduce actual production costs to the extent anticipated or an increase in
anticipated costs before shipment could materially, adversely affect the gross
margins for such order, and as a result, the Company's results of operations.
Moreover, a majority of the Company's anticipated orders could be canceled since
orders are expected to be made substantially in advance of shipment, and even
though the Company's contracts will not typically provide that orders may be
canceled, if an important distributor wishes to cancel an order, the Company may
22
<PAGE>
be compelled, due to competitive conditions, to accede to such request. As a
result, backlog, if any, will not necessarily be indicative of future sales for
any particular period. Furthermore, a substantial portion of net sales may be
realized near the end of each quarter. A delay in a shipment near the end of a
particular quarter, due, for example, to an unanticipated shipment rescheduling,
to cancellations or deferrals by customers or to unexpected production
difficulties experienced by the Company, may cause net revenues in a particular
quarter to fall significantly below the company's expectations and may
materially adversely affect the Company's operating results for such quarter.
A large portion of the Company's expenses are variable but difficult to
reduce should revenues not meet the Company's expectations, thus magnifying the
material adverse effect of any revenue shortfall. Furthermore, announcements by
the Company or its competitors of new artists and new releases could cause
distributors to defer purchases of the Company's products or a reevaluation of
products under development, which would materially adversely affect the
Company's business, financial condition and results of operations. Additional
factors that may cause the Company's revenues, gross margins and results of
operations to vary significantly from period to period include: product
production costs, patent processing, possible government regulation of the
Company's business and/or products and their method of distribution, mix of
products sold, manufacturing efficiencies, costs and capacity, price discounts,
market acceptance and the timing of availability of new products by the Company
or its distributors, usage of different distribution and sales channels and
methods and general economic and political conditions. In addition, the
Company's results of operations are influenced by competitive factors, including
the pricing and availability of and demand for works in the same genre. All of
the above factors are difficult for the company to forecast, and these or other
factors could materially adversely affect the Company's business, financial
condition and results of operations. As a result, the Company believes that
period-to-period comparisons are not necessarily meaningful and should not be
relied upon as indications of future performance. See Part I, Item. 2.
"Management's Discussion and Analysis of Financial Condition or Plan of
Operation."
11. Potential for Unfavorable Interpretation of Future Government
Regulation. The Company is not subject to regulations governing its products at
the present time. The Company may be subject to regulation if it elects to
distribute its products through means such as the Internet, in which case the
Company will be required to comply with new and emerging laws, the
interpretation of which will be uncertain and unclear. In such event the Company
shall have all of the uncertainties such laws present including the risk of loss
of substantial capital in the event the Company is unable to comply with the law
or is unable to utilize the method of distribution it thinks will best serve the
Company's products.
12. No Assurance of Product Quality. Performance and Reliability. The
Company expects that its distributor and their customers will continue to
establish demanding specifications for quality, performance and reliability.
Although the Company will attempt to purchase equipment and raw materials from
manufacturers who adhere to good manufacturing practice standards, there can be
no assurance that problems will not occur in the future with respect to quality,
performance, reliability and price. If such problems occur, the Company could
experience increased costs, delays in or cancellations or rescheduling of orders
23
<PAGE>
or shipments and product returns and discounts, any of which would have a
material adverse effect on the Company's business, financial condition or
results of operations.
13. Future Capital Requirements. The Company's future capital
requirements will depend upon many factors, including the cost of production of
the Company's products, requirements to either rent or construct adequate
production facilities such as a recording studio and the status of competitive
products and services. The Company believes that it will require additional
funding in order to fully exploit its plan for operations. There can be no
assurance, however, that the Company will secure such additional financing.
There can be no assurance that any additional financing will be available to the
Company on acceptable terms, or at all. If additional funds are raised by
issuing equity securities, further dilution to the existing stockholders will
result. If adequate funds are not available, the Company may be required to
delay, scale back or even eliminate its production schedules or obtain funds
through arrangements with partners or others that may require the Company to
relinquish rights to certain of its existing or potential products or other
assets. Accordingly, the inability to obtain such financing could have a
material adverse effect on the Company's business, financial condition and
results of operations. See Part I, Item 2. "Management's Discussion and Analysis
of Financial Condition or Plan of Operation."
14. Uncertainty Regarding Protection of Proprietary Rights. The Company
will attempt to protect its intellectual property rights through patents,
trademarks, secrecy agreements, trade secrets and a variety of other measures.
However, there can be no assurance that such measures will provide adequate
protection for the Company's original works, that additional disputes with
respect to the ownership of its intellectual property rights will not arise
between the Company and the artists it contracts with, that the Company's
products will not otherwise be copied by competitors or that the Company can
otherwise meaningfully protect its intellectual property rights. There can be no
assurance that any copyright owned by the Company will not be invalidated,
circumvented or challenged, that the rights granted thereunder will provide
competitive advantages to the Company or that any of the Company's pending or
future applications will be issued with the scope of the claims sought by the
Company, if at all. Furthermore, there can be no assurance that others will not
develop similar products which appeal to the same genre or duplicate the
Company's products or that third parties will not assert intellectual property
infringement claims against the Company. In addition, there can be no assurance
that foreign intellectual property laws will adequately protect the Company's
intellectual property rights abroad. The failure of the Company to protect its
proprietary rights could have a material adverse effect on its business,
financial condition and results of operations.
Litigation may be necessary to protect the Company's intellectual
property rights, to determine the validity of and scope of the proprietary
rights of others or to defend against claims of infringement or invalidity. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that
infringement, invalidity, right to use or ownership claims by third parties or
claims for indemnification resulting from infringement claims will not be
asserted in the future. If any claims or actions are asserted against the
Company, the Company may seek to obtain a license under a third party's
24
<PAGE>
intellectual property rights. There can be no assurance, however, that a license
will be available under reasonable terms or at all. In addition, should the
Company decide to litigate such claims, such litigation could be extremely
expensive and time consuming and could materially adversely affect the Company's
business, financial condition and results of operations, regardless of the
outcome of the litigation. See Part I, Item 1. Description of Business - (b)
Business of Issuer - Patents, Copyrights and Trademarks."
15. Ability to Grow. The Company expects to grow through one or more
strategic alliances, acquisitions, internal growth and by establishing
distributorship relationships. There can be no assurance that the Company will
be able to create a greater market presence, or if such market is created, to
expand its market presence or successfully enter other markets. The ability of
the Company to grow will depend on a number of factors, including the
availability of working capital to support such growth, existing and emerging
competition, one or more qualified strategic alliances and the Company's ability
to achieve and maintain sufficient profit margins in the face of pricing
pressures. The Company must also manage costs in an environment which is
notorious for unforeseen and underestimated costs and adapt its infrastructure
and systems to accommodate growth within the niche market which it hopes to
create.
The Company also plans to expand its business, in part, through
acquisitions. Although the Company will continuously review potential
acquisition candidates, it has not entered into any agreement, understanding or
commitment with respect to any additional acquisitions at this time. There can
be no assurance that the Company will be able to successfully identify suitable
acquisition candidates, complete acquisitions on favorable terms, or at all, or
integrate acquired businesses into its operations. Moreover, there can be no
assurance that acquisitions will not have a material adverse effect on the
Company's operating results, particularly in the fiscal quarters immediately
following the consummation of such transactions, while the operations of the
acquired business are being integrated into the Company's operations. Once
integrated, acquisitions may not achieve comparable levels of revenues,
profitability or productivity as the then existing Company products or otherwise
perform as expected. The Company is unable to predict whether or when any
prospective acquisition candidate will become available or the likelihood that
any acquisitions will be completed. The Company will be competing for
acquisition and expansion opportunities with entities that have substantially
greater resources than the Company. In addition, acquisitions involve a number
of special risks, such as diversion of management's attention, difficulties in
the integration of acquired operations and retention of personnel, unanticipated
problems or legal liabilities, and tax and accounting issues, some or all of
which could have a material adverse effect on the Company's results of
operations and financial condition.
16. Competition. The music and motion picture industries and the
entertainment industry in general are all highly competitive, with several major
companies involved. The Company will be competing with larger competitors in
international, national, regional and local markets. In addition, the Company
may encounter substantial competition from new market entrants. Many of the
Company's competitors have significantly greater name recognition and have
greater marketing, financial and other resources than the Company. Further,
competition for ticket sales and product purchases has meant the expenditure of
additional monies in the production and promotion of new products and services.
There can be no assurance that the Company will be able to complete effectively
against such competitors in the future.
25
<PAGE>
The market for online commerce is extremely competitive, and the
Company believes that competition, particularly in connection with online music
sales, will continue to grow and intensify. Although the Company's primary focus
is on sales of the Company's works, rather than pre-recorded music of various
artists, the Company may ultimately compete with existing online websites that
provide sales of pre-recorded music on the Internet. Online competitors include
CDnow, Inc., Amazon.com, Inc., barnesandnoble.com inc., Columbia House and BMG
Music Service.
The Company also faces significant competition in the growing market to
provide digitally downloaded music, specifically for music files in MP3 format.
Digitally downloaded music can currently be found on the websites of existing
online music retailers, artists and record labels as well as catalogs of songs
provided by Internet portals such as Lycos. The Company's most visible
competitors for digitally downloaded music include GoodNoise Corporation
(recently renamed EMusic.com) and MP3.com. The Company expects the competition
to provide MP3 files to intensify with further entry by additional record
labels, artists and portals, including those with greater resources and music
content than the Company. In February 1999, the five major record labels
announced that they have joined with IBM to conduct a market trial of a digital
distribution system, providing over 1,000 albums to cable subscribers in the San
Diego area. In May 1999, Matsushita Electric Industrial Co. Ltd., AT&T Corp.,
BMG Entertainment and Universal Music Group announced an alliance to develop and
test technology for secure digital distribution of music to personal computers
and new digital music playback devices. In June 1999, media company Cox
Enterprises Inc. announced an investment in and joint venture with MP3.com. The
Company expects additional market trials and alliances by technology and music
industry participants to continue as the music industry attempts to integrate
emerging technology into its existing distribution methods.
In addition to competition encountered on the Internet, the Company
faces competition from traditional music retail chains and megastores, mass
merchandisers, consumer electronics stores, music clubs, and a number of small
custom compilation start-up companies. The Company could also face competition
from record companies, multimedia companies and entertainment companies that
seek to offer recorded music either directly to the public or through strategic
ventures and partnerships. In April 1999, Universal and BMG, which collectively
control approximately 45% of the U.S. music market, announced a joint venture to
promote and sell their pre-recorded CD's through a series of Internet websites
organized by music categories. In May 1999, Microsoft Corporation and Sony
Corporation announced an agreement to pursue a number of cooperative activities
and Sony decided to make its music content available for downloading from the
Internet using Microsoft's multimedia software MS-Audio. In June 1999, Sony
announced a partnership with Digital On-Demand in which Sony will make its music
catalog available for digital delivery to retailers through in-store kiosks.
17. Dependence on the Growth of Online Commerce. Purchasing products
and services over the Internet is a new and emerging market. The Company's
future revenues and profits are substantially dependent upon widespread consumer
26
<PAGE>
acceptance and use of the internet and other online services as a medium for
commerce. Rapid growth of the use of the internet and other online services is a
recent phenomenon. This growth may not continue. A sufficiently broad base of
consumers may not adopt, or continue to use, the internet as a medium of
commerce. Demand for and market acceptance of recently introduced products and
services over the internet are subject to a high level of uncertainty, and there
are few proven products and services. For the Company to grow, consumers who
have historically used traditional means of commerce will instead need to
purchase products and services online, and as a result the online music markets
may not be viable without the growth of internet commerce.
18. Dependence on improvement of the Internet. The Internet has
experienced, and is expected to continue to experience, significant growth in
the number of users and amount of traffic. The Company's success will partially
depend upon the development and maintenance of the Internet's infrastructure to
cope with this increased traffic. This will require a reliable network backbone
with the necessary speed, bandwidth, data capacity and security. Improvement of
the Internet's infrastructure will also require the timely development of
complementary products, such as high-speed modems, to provide reliable Internet
access and services.
19. Requirement for Response to Rapid Technological Change and
Requirement for Frequent New Product Introductions. The entertainment market for
audio and video products and services is subject to rapid technological change,
frequent new equipment and product introductions and enhancements, product
obsolescence and changes in end-user requirements. The Company's ability to be
competitive in this market will depend in significant part upon its ability to
successfully obtain, utilize and produce for sale and distribution new products
and services on a timely and cost- effective basis that are based upon this new
technology. Any success of the Company in developing new and enhanced products
and services will depend upon a variety of factors, including new product
selection, timely and efficient completion of production schedules, its cost
reduction program and the development, completion, performance, quality and
reliability of competitive products and services by competitors. The Company may
experience delays from time to time in completing development and introduction
of new products and services. Moreover, there can be no assurance that the
Company will be successful in selecting and developing new artists, or in
producing and marketing new products and services. There can be no assurance
that defects will not be found in the Company's products and services after
commencement of commercial shipments, which could result in the loss of or delay
in market acceptance. The inability of the Company to introduce in a timely
manner new products that contribute to revenues could have a material adverse
effect on the Company's business, financial condition and results of operations.
20. Possible Adverse Affect of Fluctuations in the General Economy and
Business of Customers. Historically, the general level of economic activity has
significantly affected the demand for new music sales and also attendance at box
office movie showings. There can be no assurance that an economic downturn would
not adversely affect the demand for the Company's products and services. There
can be no assurance that such economic factors will not adversely affect the
Company's planned products and services.
27
<PAGE>
21. Lack of Working Capital Funding Source. Other than revenues from
the anticipated sale of its products, the Company has no current source of
working capital funds, and should the Company be unable to secure additional
financing on acceptable terms, its business, financial condition, results of
operations and liquidity would be materially adversely affected.
22. Dependence on Contract Manufacturers and Lease of Equipment;
Reliance on Sole or Limited Sources of Supply. As of the date hereof, the
Company has no internal manufacturing/production capacity, nor does it own the
equipment necessary to produce audio recordings or television or motion picture
movies. The Company also intends to utilize contract manufacturers to produce
its products once produced. No formal agreements are currently in place. The
Company will also indirectly rely on raw material suppliers to provide CD's,
cassette tapes, videotapes, digital video disks and other medium to record its
product onto for distribution to its distributors. Certain necessary components
and services anticipated to be necessary for the manufacture and production of
the Company's products could be required to be obtained from a sole supplier or
a limited group of suppliers. There can be no assurance that the Company's
contract manufacturers, will be sufficient to fulfill the Company's orders.
Should the Company be required to rely solely on contract manufacturers
and a limited group of suppliers, such increasing reliance involves several
risks, including a potential inability to obtain an adequate supply of finished
products and required components, and reduced control over the price, timely
delivery, reliability and quality of finished products and components. The
Company does not believe that it is currently necessary to have any long-term
supply agreements with its manufacturers or suppliers but this may change in the
future. The Company may experience delays in the delivery of and quality
problems with its products and certain components from vendors. Certain of the
Company's suppliers may have relatively limited financial and other resources.
Any inability to obtain timely deliveries of acceptable quality or any other
circumstances that would require the Company to seek alternative sources of
supply, or to manufacture its finished products internally, could delay the
Company's ability to ship its products which could damage relationships with
current or prospective customers and have a material adverse effect on the
Company's business, financial condition and operating results.
23. Uncertainty of Market Acceptance. The future operating results of
the Company depend to a significant extent upon the development of products and
services deemed appealing, attractive and affordable by consumers of audio and
video related entertainment products. There can be no assurance that the Company
has the ability to continuously introduce original products and services into
the marketplace which will achieve the market penetration and acceptance
necessary for the Company to grow and become profitable on a sustained basis,
especially given the fierce competition that exists from companies more
established and well financed than the Company.
24. International Operations; Risks of Doing Business in Developing
Countries. Substantially all of the Company's products will be initially made to
distribute to customers located inside of the United States. The Company
anticipates, however that international sales will, as a result of various
distribution agreements be entered into, and will account for revenues from
product sales for the foreseeable future. The Company's international sales may
be denominated in foreign or United States currencies. The Company does not
28
<PAGE>
currently engage in foreign currency hedging transactions. As a result, a
decrease in the value of foreign currencies relative to the United States dollar
could result in losses from transactions denominated in foreign currencies. With
respect to the Company's international sales that are United States
dollar-denominated, such a decrease could make the Company's products less
price-competitive. Additional risks inherent in the Company's international
business activities include changes in regulatory requirements, costs and risks
of local customers in foreign countries, availability of suitable export
financing, timing and availability of export licenses, tariffs and other trade
barriers, political and economic instability, difficulties in staffing and
managing foreign operations, difficulties in managing distributors, potentially
adverse tax consequences, foreign currency exchange fluctuations, the burden of
complying with a wide variety of complex foreign laws and treaties and the
possibility of difficulty in accounts receivable collections. Some of the
Company's customer purchase agreements may be governed by foreign laws, which
may differ significantly from U.S. laws. Therefore, the Company may be limited
in its ability to enforce its rights under such agreements and to collect
damages, if awarded. There can be no assurance that any of these factors will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
25. No Dividends. While payments of dividends on the Common Stock rests
with the discretion of the Board of Directors, there can be no assurance that
dividends can or will ever be paid. Payment of dividends is contingent upon,
among other things, future earnings, if any, and the financial condition of the
Company, capital requirements, general business conditions and other factors
which cannot now be predicted. It is highly unlikely that cash dividends on the
Common Stock will be paid by the Company in the foreseeable future. See Part I,
Item 8. "Description of Securities - Description of Common Stock - Dividend
Policy."
26. No Cumulative Voting. The election of directors and other questions
will be decided by a majority vote. Since cumulative voting is not permitted and
a majority of the Company's outstanding Common Stock constitute a quorum,
investors who purchase shares of the Company's Common Stock may not have the
power to elect even a single director and, as a practical matter, the current
management will continue to effectively control the Company. See Part I, Item 8.
"Description of Securities - Description of Common Stock."
27. Control by Present Shareholders. The present shareholders of the
Company's Common Stock will, by virtue of their percentage share ownership and
the lack of cumulative voting, be able to elect the entire Board of Directors,
establish the Company's policies and generally direct its affairs. Accordingly,
persons investing in the Company's Common Stock will have no significant voice
in Company management, and cannot be assured of ever having representation on
the Board of Directors. See Part I, Item 4. "Security Ownership of Certain
Beneficial Owners and Management."
28. Potential Anti-Takeover and Other Effects of Issuance of Preferred
Stock May Be Detrimental to Common Shareholders. Potential Anti-Takeover and
Other Effects of Issuance of Preferred Stock May Be Detrimental to Common
Shareholders. The Company is authorized to issue shares of preferred stock.
("Preferred Stock") although none has been issued to date. The issuance of
Preferred Stock may not require approval by the shareholders of the Company's
Common Stock. The Board of Directors, in its sole discretion, may have the power
29
<PAGE>
to issue shares of Preferred Stock in one or more series and to establish the
dividend rates and preferences, liquidation preferences, voting rights,
redemption and conversion terms and conditions and any other relative rights and
preferences with respect to any series of Preferred Stock. Holders of Preferred
Stock may have the right to receive dividends, certain preferences in
liquidation and conversion and other rights; any of which rights and preferences
may operate to the detriment of the shareholders of the Company's Common Stock.
Further, the issuance of any shares of Preferred Stock having rights superior to
those of the Company's Common Stock may result in a decrease in the value of
market price of the Common Stock provided a market exists, and additionally,
could be used by the Board of Directors as an anti-takeover measure or device to
prevent a change in control of the Company. See Part I, Item 1. "Description of
Securities - Description of Preferred Stock."
29. No Secondary Trading Exemption. Secondary trading in the Common
Stock will not be possible in each state until the shares of Common Stock are
qualified for sale under the applicable securities laws of the state or the
Company verifies that an exemption, such as listing in certain recognized
securities manuals, is available for secondary trading in the state. There can
be no assurance that the Company will be successful in registering or qualifying
the Common Stock for secondary trading, or availing itself of an exemption for
secondary trading in the Common Stock, in any state. If the Company fails to
register or qualify, or to obtain or verify an exemption for the secondary
trading of, the Common Stock in any particular state, the shares of Common Stock
could not be offered or sold to, or purchased by, a resident of that state. In
the event that a significant number of states refuse to permit secondary trading
in the Company's Common Stock, a public market for the Common Stock will fail to
develop and the shares could be deprived of any value.
30. Possible Adverse Effect of Penny Stock Regulations on Liquidity of
Common Stock in any Secondary Market. Although the Company does not currently
trade on any medium, the Common Stock when listed is expected to come within the
meaning of the term "penny stock" under 17 CAR 240.3a51-1 because such shares
are issued by a small company; are expected to be low- priced (under five
dollars); and will not traded on NASDAQ or on a national stock exchange. The SEC
has established risk disclosure requirements for broker-dealers participating in
penny stock transactions as part of a system of disclosure and regulatory
oversight for the operation of the penny stock market. Rule 15g-9 under the
Securities Exchange Act of 1934, as amended, obligates a broker- dealer to
satisfy special sales practice requirements, including a requirement that it
make an individualized written suitability determination of the purchaser and
receive the purchaser's written consent prior to the transaction. Further, the
Securities Enforcement Remedies and Penny Stock Reform Act of 1990 require a
broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure instrument that provides information about penny
stocks and the risks in the penny stock market. Additionally, the customer must
be provided by the broker-dealer with current bid and offer quotations for the
penny stock, the compensation of the broker-dealer and the salesperson in the
transaction and monthly account statements showing the market value of each
penny stock held in the customer's account. For so long as the Company's Common
Stock is considered penny stock, the penny stock regulations can be expected to
have an adverse effect on the liquidity of the Common Stock in the secondary
market, if any, which develops.
30
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Discussion and Analysis
Initially the Company was engaged in the medical supply business. In
November 1998, at the time it acquired PGRP as a wholly-owned subsidiary, its
purpose changed to P&G's initial purpose of discovering, developing, recording
and marketing new talent in the entertainment industry. PGRP's founding
philosophy arose from the diversified experience of its management in the music,
video, film and related industries.
The Company was in the development stage until November 1998 when the
Share Exchange took place between PGRP and the Company and is still emerging
from that stage. The Company has only recently begun selling the Betty Dickson
albums and has not yet completed the "If Only" and "Touch Me" singles. From the
date of the Share Exchange in November 1998 through December 31, 1999, the
Company generated no revenues. Since inception (February 17, 1997 through
December 31, 1999, the Company has generated cumulative losses of approximately
$234,959. Due to the Company's limited operating history and limited resources,
among other factors, there can be no assurance that profitability or significant
revenues on a quarterly or annual basis will occur in the future.
The Company is currently preparing to launch its first two (2) singles
and expects to introduce other products by Ms. Dickson and others by the end of
2000 and expects to continue to invest significant resources in several new
products and enhancements through 2000.
Since recording of the first two (2) singles and upon entering into
contracts with several artists, the Company has begun to make preparations for a
period of growth, which may require it to significantly increase the scale of
its operations. This increase will include the hiring of additional personnel in
all functional areas and will result in significantly higher operating expenses.
The increase in operating expenses is expected to be matched by a concurrent
increase in revenues. However, the Company's net loss may continue even if
revenues increase and operating expenses may still continue to increase.
Expansion of the Company's operations may cause a significant strain on the
Company's management, financial and other resources. The Company's ability to
manage recent and any possible future growth, should it occur, will depend upon
a significant expansion of its accounting and other internal management systems
and the implementation and subsequent improvement of a variety of systems,
procedures and controls. There can be no assurance that significant problems in
these areas will not occur. Any failure to expand these areas and implement and
improve such systems, procedures and controls in an efficient manner at a pace
consistent with the Company's business could have a material adverse effect on
the Company's business, financial condition and results of operations. As a
result of such expected expansion and the anticipated increase in its operating
expenses, as well as the difficulty in forecasting revenue levels, the Company
expects to continue to experience significant fluctuations in its revenues,
costs and gross margins, and therefore its results of operations.
Results of Operations - Full Fiscal Years - December 31, 1999 and December 31,
1998
31
<PAGE>
Revenues
Revenues for the twelve (12) month period ended December 31, 1999 was
$0 and for the twelve (12) month period ended December 31, 1998 was $0.
Operating Expenses
Operating Expenses for the twelve (12) months of calendar year 1999
were $216,472 versus $17,944 for the twelve (12) months of calendar year 1998.
Net loss was $216,472 and $17,944 respectively.
During 1999, the officers of the Company incurred expenses on behalf of
the Company, for which they had yet to receive reimbursement as of December 31,
1999, which expenses totaled $20,589 and for which the Company accounted for
such unpaid expenses as stockholder loans on the Company's balance sheet.
Assets and Liabilities
Assets were $134,996 as of December 31, 1999, and $38,375 as of
December 31, 1998. As of December 31, 1998, assets consisted primarily of
deferred production costs and organizational costs with a net book value of
$34,683. As of December 31, 1999, assets consisted primarily of cash.
Liabilities were $352,346 and $39,670 as of December 31, 1999 and December 31,
1998 respectively. As of December 31, 1999, liabilities consisted primarily of
accounts and notes payable.
During the year ended December 31, 1999, the Company owed its officers
$20,589 for expenses advanced on behalf of the Company.
Stockholders' Equity
Stockholders' equity was ($217,350) as of December 31, 1999 and
($1,295) as of December 31, 1998. The Company had 12,431,000 and 11,600,000
shares of Common Stock issued and outstanding at December 31, 1999 and 1998,
respectively.
In November 1998, the Company entered into a share exchange agreement
with PGRP, and its shareholders which had been formed in June 1997. The exchange
was made whereby the Company issued 10,000,000 shares of its Common Stock to the
shareholders of PGRP for all of the issued and outstanding stock of PGRP. As
part of the exchange, Ms. Peters and Ms. Cavell each received 2,000,000 shares
of the Company's Common Stock. This offering was conducted pursuant to Section
4(2) of the Act and Rule 506 and Section 517.061(11) of the Florida Code. See
Part I, Item 7. "Certain Relationships and Related Transactions"; and Part II,
Item 4. "Recent Sales of Unregistered Securities."
Interest and Other Income (Expense), Net In September 1999, the Company
executed a Promissory Note in favor of Carol Neal, the Company's past Chairman,
President and Treasurer in the amount of $24,600. The Note was in exchange for
32
<PAGE>
monies lent by Ms. Neal to the Company for working capital. The Note is payable
on demand and bears no interest. Ms. Neal passed away in December 1999. For such
offering, the Company relied upon Section 4(2) of the Act, Rule 506 and Section
517.061(11) of the Florida Code. See Part I, Item 7, "Certain Relationships and
Related Transactions"; and Part II, Item 4, "Recent Sales of Unregistered
Securities."
The Company did not report foreign currency gains or losses for the
year ended December 31, 1998 since the Company has had no foreign transactions
to date. In the event that the Company contracts with a foreign entity for the
purchase of its products, the Company may in the future be exposed to the risk
of foreign currency gains or losses depending upon the magnitude of a change in
the value of a local currency in an international market. The Company does not
currently engage in foreign currency hedging transactions, although it may
implement such transactions in the future.
Financial Condition, Liquidity and Capital Resources
At December 31,1999 the Company had cash of $98,329 as compared to
$1,553 at December 31, 1998.
In July 1999, the Company initiated an offering of its Convertible
Notes. The Notes have a term of one (1) year, bear interest at a rate of nine
percent (9%) and are automatically convertible to shares of the Company's Common
Stock in one (1) year (if they are not converted earlier) at a price of $1.00
per share plus interest, which interest is also payable in shares of the
Company's Common Stock. To date, one (1) note has been sold in the principal
amount of $200,000 in December 1999. The offering is ongoing. For such offering,
the Company relied upon Section 3(b) of the Act, Rule 504 and Section
517.061(11) of the Florida Code. See Part III, Item 12. "Certain Relationships
and Related Transactions".
The Company may raise additional capital through private and/or public
sales of securities in the future but has no definite commitments at this time.
Year 2000 Compliance
The Year 2000 Issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates where the date has
been stored as just two digits (e.g. 98 for 1998). On January 1, 2000, any clock
or date recording mechanism including date sensitive software which uses only
two digits to represent the year, may recognize the date using 00 as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar activities.
The Company determined that the Year 2000 impact is not material to P&G
and that it will not impact its business, operations or financial condition
since all of the internal software utilized by the Company has the capability of
being upgraded to support Year 2000 versions.
33
<PAGE>
The Company believes that it has disclosed all required information
relative to Year 2000 issues relating to its business and operations. However,
there can be no assurance that the systems of other companies on which the
Company's systems rely also will be timely converted or that any such failure to
convert by another company would not have an adverse affect on the Company's
systems.
Forward-Looking Statements
This Form 10-SB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included or incorporated by reference in
this Form 10-SB which address activities, events or developments which the
Company expects or anticipates will or may occur in the future, including such
things as future capital expenditures (including the amount and nature thereof),
demand for the Company's products and services, expansion and growth of the
Company's business and operations, and other such matters are forward-looking
statements. These statements are based on certain assumptions and analyses made
by the Company in light of its experience and its perception of historical
trends, current conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances. However, whether
actual results or developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties, general economic
market and business conditions; the business opportunities (or lack thereof)
that may be presented to and pursued by the Company; changes in laws or
regulation; and other factors, most of which are beyond the control of the
Company. Consequently, all of the forward-looking statements made in this Form
10-SB are qualified by these cautionary statements and there can be no assurance
that the actual results or developments anticipated by the Company will be
realized or, even if substantially realized, that they will have the expected
consequence to or effects on the Company or its business or operations. The
Company assumes no obligations to update any such forward-looking statements.
Item 3. Description of Property
The Company maintains its executive offices at 12724 N.W. 11th Court,
Sunrise, Florida 33323, which is the residence of both Valerie Peters and Louise
Cavell. Approximately 500 square feet of space is devoted entirely to P&G as an
office. Its telephone number is (800) 525-8495 and its facsimile number is (954)
845-0656. The Company plans to lease office space in either Broward or Palm
Beach County, Florida upon receipt of sufficient capital resulting from revenues
or debt or equity financing. It is planned that such office space shall serve as
the Company headquarters and also as a fulfillment center for the Company's
products.
The Company owns no real property and its personal property consists of
furniture, fixtures and equipment, with an original cost of $2,177 on July 31,
1999.
Item 4. Security Ownership of Certain Beneficial Owners and Management:
34
<PAGE>
The following table sets forth information as of June 30, 2000,
regarding the ownership of the Company's Common Stock by each shareholder known
by the Company to be the beneficial owner of more than five percent (5%) of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Except as otherwise indicated, each of the shareholders
has sole voting and investment power with respect to the share of Common Stock
beneficially owned.
Name and Address of Title of Amount and Nature of Percent of
Beneficial Owner Class Beneficial Owner Class
------------------------- ---------- -------------------- --------------
Carol Neal Common 6,000,000 48.3%
Valerie Peters Common 2,000,000 16.1%
Louise Cavell Common 2,000,000 16.1%
Glenda Grainger-Miller(2) Common 10,000 0.1%
Randy Bernsen(3) Common 10,000 0.1%
Margaret Ann Ronayne(4) Common 10,000 0.1%
All Executive Officers and Common 4,030,000 32.4%
Directors as a Group
(Five (5) persons)
-------------------
(1) The address for each of the above is c/o Platinum and Gold, Inc., 12724
N.W. 11th Court, Sunrise, FL 33323.
(2) In November 1998, prior to its acquisition by the Company, PGRP entered
into an agreement with Glenda Grainger to be a Director of PGRP. As
compensation, Glenda Grainger was promised 10,000 shares of the restricted
common stock of the Company upon the share exchange to be conducted in
November 1998. The shares were issued in January 1999 pursuant to Section
4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida code. See
Part I, Item 5. "Directors, Executive Officer, Promoters and Control
Persons"; Part I, Item 7. "Certain Relationships and Related Transactions";
and Part II, Item 4. "Recent Sales of Unregistered Securities."
(3) In October 1998, prior to its acquisition by the Company, PGRP entered into
an agreement with Randy Bernsen to be a Director of PGRP. The term was
until the next annual meeting of the shareholders and directors. As
compensation, Randy Bernsen was promised 10,000 shares of the restricted
common stock of the Company upon the share exchange to be conducted in
November 1998. The shares were issued in January 1999 pursuant to Section
4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida code. See
Part I, Item 5. "Directors, Executive Officer, Promoters and Control
Persons"; Part I, Item 7. "Certain Relationships and Related Transactions";
and Part II, Item 4. "Recent Sales of Unregistered Securities."
35
<PAGE>
(4) In January 1999, the Company issued 10,000 shares of its restricted common
stock to Margaret Ann Ronayne in connection with her agreement to serve on
the Company's Board and a Representation Agreement entered into in December
1998. The shares were issued pursuant to Section 4(2) of the Act, Rule 506
and Section 517.061(11) of the Florida code. See Part I, Item 5.
"Directors, Executive Officer, Promoters and Control Persons"; Part I, Item
7. "Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
There are no arrangements which may result in the change of control of
the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons:
Executive Officers and Directors
Set forth below are the names, ages, positions, with the Company and
business experiences of the executive officers and directors of the Company.
Name Age Position(s) with Company
Louise Cavell 56 President, Treasurer and Chairman
Valerie Peters 61 Vice-President, Secretary and Director
Glenda Grainger-Miller 55 Director
Randy Bernsen 46 Director
Margaret Ann Ronayne 49 Director
All directors hold office until the next annual meeting of the
Company's shareholders and until their successors have been elected and qualify.
Officers serve at the pleasure of the Board of Directors. The officers and
directors will devote such time and effort to the business and affairs of the
Company as may be necessary to perform their responsibilities as executive
officers and/or directors of the Company.
In October 1998, prior to its acquisition by the Company, PGRP entered
into an agreement with Randy Bernsen to be a Director of PGRP. The term was
until the next annual meeting of the shareholders and directors. As
compensation, Randy Bernsen was promised 10,000 shares of the restricted common
stock of the Company upon the share exchange to be conducted in November 1998.
The shares were issued in January 1999 pursuant to Section 4(2) of the Act, Rule
506 and Section 517.061(11) of the Florida code. See Part I, Item 7. "Certain
Relationships and Related
36
<PAGE>
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
In November 1998, prior to its acquisition by the Company, PGRP entered
into an agreement with Glenda Grainger to be a Director of PGRP. As
compensation, Glenda Grainger was promised 10,000 shares of the restricted
common stock of the Company upon the share exchange to be conducted in November
1998. The shares were issued in January 1999 pursuant to Section 4(2) of the
Act, Rule 506 and Section 517.061(11) of the Florida code. See Part I, Item 7.
"Certain Relationships and Related Transactions"; and Part II, Item 4. "Recent
Sales of Unregistered Securities."
In January 1999, the Company issued 10,000 shares of its restricted
common stock to Margaret Ann Ronayne in connection with her agreement to serve
on the Company's Board, although the agreement was never memorialized in
writing. The shares were issued pursuant to Section 4(2) of the Act, Rule 506
and Section 517.061(11) of the Florida code. See Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
Family Relationships
There are no family relationships between or among the executive
officers and directors of the Company.
Business Experience
Louise Cavell, age 56, currently serves as President, Treasurer and
Chairman. She has served in those capacities since the death of the former
President, Carol Neal in December 1999. Ms. Cavell obtained her Real Estate
Broker's License in 1977, which is still active. She graduated from Newfield
High School in 1962. Since 1981, Ms. Cavell has co-owned and co-managed Sunglass
Haven with Ms. Peters. Also between the years of 1992 and 1995, she owned a
cocktail lounge located in Davie, Florida.
Valerie Peters, age 61, currently serves as Vice-President, Secretary
and a Director. She has served as a Director and as Vice-President since the
Share Exchange in November 1998. Since 1981, Ms. Peters has co-owned and
co-managed Sunglass Haven, a high-end wholesale/retail outfitter for annual
local and national trade shows. Sunglass Haven provides specialty eyewear for
the marine/water sport industry. Ms. Peters graduated from Wm. Culen Bryant High
School in 1956.
Glenda Grainger-Miller, age 55, currently serves as a Director. She
has served in this capacity since the Share Exchange in November 1998. Ms.
Grainger-Miller worked for Miller-Reich Productions, Inc. as a Production
Associate and Executive Administrator in North Miami Beach, Florida from 1972 to
1994. Between January and May 1995, she produced Cruise Ship Revue Shows for
Holland America Cruise Lines in Miami Florida for Glen-Scott Productions, Inc.
She currently works for FJM Productions, Inc. in Coral Springs, Florida, where
she is an Associate Producer, Executive Administrator and Executive Assistant to
the President. Ms. Grainger-Miller graduated from Great Britain High School in
1962. She is fluent (written and conversational) in French and Spanish and also
speaks conversational Italian.
37
<PAGE>
Randy Bernsen, age 46, currently serves as a Director. He has served
the Company in this capacity since the Share Exchange in November 1998. Mr.
Bernsen currently owns a digital recording studio, where he has produced his own
work as well as the work of other artists. Mr. Bernsen travels annually to
Southeast Asia and Europe to perform in concert with other jazz musicians. He
also teaches music and performs locally. Mr. Bernsen graduated from Plantation
High School in 1972.
Margaret Ann Ronayne, age 49, currently serves as a Director. She has
served the Company in this capacity since December 1999. Ms. Ronayne has worked
as National Top 40's Promotional Director of Arista Records since 1993. There
she is responsible for radio exposure for Whitney Houston, Aretha Franklin,
Kenny G., Barry Manilow, Tony Braxton, Puff Daddy and others. Ms. Ronayne
graduated from St. Thomas Aquinas High School in 1969.
Item 6. Executive Compensation
<TABLE>
<CAPTION>
Name Year Annual Annual LT
and Post Comp Comp Annual Comp LT All
Salary Bonus Comp Rest Comp LTIP Other
(1) ($) Other Stock Options Payouts (1)
------- ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Louise 1998 $0
Cavell,
President, 1999 $0
Treasurer
and
Chairman
---------------------------------------------------------------------------------------------
Valerie 1998 $0
Peters,
Vice- 1999 $0
President,
Secretary
and Director
---------------------------------------------------------------------------------------------
Glenda 1998 $0
Grainger-
Miller, 1999 $0 (2)
Director
---------------------------------------------------------------------------------------------
Randy 1998 $0
Bernsen,
Director 1999 $0 (3)
---------------------------------------------------------------------------------------------
Margaret 1998 $0
Ann
Ronayne, 1999 $0 (4)
Director
---------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
(1) All other compensation includes certain health and life insurance benefits
paid by the Company on behalf of its employee.
(2) In November 1998, prior to its acquisition by the Company, PGRP entered
into an agreement with Glenda Grainger to be a Director of PGRP. As
compensation, Glenda Grainger was promised 10,000 shares of the restricted
common stock of the Company upon the share exchange to be conducted in
November 1998. The shares were issued in January 1999 pursuant to Section
4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida code. See
Part I, Item 7. "Certain Relationships and Related Transactions"; and Part
II, Item 4. "Recent Sales of Unregistered Securities."
(3) In October 1998, prior to its acquisition by the Company, PGRP entered into
an agreement with Randy Bernsen to be a Director of PGRP. The term was
until the next annual meeting of the shareholders and directors. As
compensation, Randy Bernsen was promised 10,000 shares of the restricted
common stock of the Company upon the share exchange to be conducted in
November 1998. The shares were issued in January 1999 pursuant to Section
4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida code. See
Part I, Item 7. "Certain Relationships and Related Transactions"; and Part
II, Item 4. "Recent Sales of Unregistered Securities."
(4) In January 1999, the Company issued 10,000 shares of its restricted common
stock to Margaret Ann Ronayne in connection with her agreement to serve on
the Company's Board and a Representation Agreement entered into in December
1998. The shares were issued pursuant to Section 4(2) of the Act, Rule 506
and Section 517.061(11) of the Florida code. See Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales
of Unregistered Securities."
Employee Contracts and Agreements
The Company has entered into Employee Agreements with only a limited
number of its officers and directors, but intends to enter into formal contracts
with each of them in the near future.
Key Man Life Insurance
The Company intends to apply for Key Man Life Insurance and
Officer/Director Insurance upon the quotation of its Common Stock on the Over
the Counter Bulletin Board.
39
<PAGE>
Employee and Consultants Stock Option Plans
There is currently no employee nor consultant stock option plan in
place, although the Company plans to submit such a plan or plans to the
shareholders at the next annual meeting.
Compensation of Directors
The Company has no standard arrangements for compensating the directors
of the Company for their attendance at meetings of the Board of Directors.
Item 7. Certain Relationships and Related Transactions
In July 1997, prior to its acquisition of PGRP, the Company entered
into a share exchange agreement with FAD, and its shareholders which had been
formed in February 1997. The exchange was made whereby the Company issued
2,970,000 shares of its Common Stock to the shareholders of FAD for all of the
issued and outstanding stock of FAD. This offering was conducted pursuant to
Section 4(2) of the Act and Rule 506 and Section 517.061(11) of the Florida
Code. See Part II, Item 4. "Recent Sales of Unregistered Securities."
In August 1998, prior to its acquisition of PGRP, the Company entered
into a Recission and Cancellation Agreement with FAD and its shareholders,
thereby returning the parties to their original positions prior to the share
exchange conducted in July 1997 ab initio. Thus, FAD exchanged 2,970,000 shares
of common stock of the Company for 100% of the issued and outstanding stock of
FAD and FAD was no longer a wholly-owned subsidiary of the Company. See Part II,
Item 4. "Recent Sales of Unregistered Securities."
In October 1998, prior to its acquisition by the Company, PGRP entered
into an agreement with Randy Bernsen to be a Director of PGRP. The term was
until the next annual meeting of the shareholders and directors. As
compensation, Randy Bernsen was promised 10,000 shares of the Common Stock of
the Company upon the share exchange to be conducted in November 1998. The shares
were issued in January 1999 pursuant to Section 4(2) of the Act, Rule 506 and
Section 517.061(11) of the Florida code. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
In November 1998, prior to its acquisition by the Company, PGRP entered
into an agreement with Glenda Grainger to be a Director of PGRP. As
compensation, Glenda Grainger was promised 10,000 shares of the Common Stock of
the Company upon the share exchange to be conducted in November 1998. The shares
were issued in January 1999 pursuant to Section 4(2) of the Act, Rule 506 and
Section 517.061(11) of the Florida code. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
In November 1998, the Company entered into a share exchange agreement
with PGRP, and its shareholders which had been formed in June 1997. The exchange
was made whereby the Company issued 10,000,000 shares of its Common Stock to the
shareholders of PGRP for all of the issued and outstanding stock of PGRP. As
part of the exchange, Ms. Peters and Ms. Cavell each received 2,000,000 shares
40
<PAGE>
of the Company's Common Stock. This offering was conducted pursuant to Section
4(2) of the Act and Rule 506 and Section 517.061(11) of the Florida Code. See
Part II, Item 4. "Recent Sales of Unregistered Securities."
In January 1999, the Company issued 10,000 shares of its restricted
common stock to Margaret Ann Ronayne in connection with her agreement to serve
on the Company's Board and a Representation Agreement entered into in December
1998. The shares were issued pursuant to Section 4(2) of the Act, Rule 506 and
Section 517.061(11) of the Florida code. See Part II, Item 4.
"Recent Sales of Unregistered Securities."
In September 1999, the Company executed a Promissory Note in favor of
Carol Neal, the Company's past Chairman, President and Treasurer in the amount
of $24,600. The Note was in exchange for monies lent by Ms. Neal to the Company
for working capital. The Note is payable on demand and bears no interest. Ms.
Neal passed away in December 1999. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida Code.
See Part II, Item 4, "Recent Sales of Unregistered Securities".
In November 1999, the Company entered into a consulting contract with
Joyce Research Group, Inc. to provide financial public relations services to the
Company. As payment for these services, the Company committed to pay $225,000 or
to issue shares of its "free-trading" Common Stock within a six (6) month
period. An initial payment of $50,000 was made in December 1999.
In November and December 1999, the Company entered into consulting
contracts with three (3) individuals to provide financial, public and investor
relations services to the Company. As payment for such services, the Company
issued 800,000 shares of its Common Stock and paid $20,000 For such offering,
the Company relied upon Section 3(b) of the Act, Rule 701, NSMIA, Section
517.061(11) of the Florida Code and Section 10-5-9(13) of the Georgia Code. See
Part II, Item 4. "Recent Sales of Unregistered Securities."
Item 8. Description of Securities
Description of Capital Stock
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, $0.001 par value per share and 1,000,000 shares of Preferred
Stock, $0.001 par value per share. As of June 30, 2000, the Company had
12,431,000 shares of its Common Stock outstanding and none of its Preferred
Stock outstanding.
Description of Common Stock
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, are entitled to one (1) vote per share in all matters to
be voted upon by shareholders. The shares of Common Stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as
fully-paid and non-assessable shares. Cumulative voting in the election of
41
<PAGE>
directors is not permitted; which means that the holders of a majority of the
issued and outstanding shares of Common Stock represented at any meeting at
which a quorum is present will be able to elect the entire Board of Directors if
they so choose and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any directors. In the event of liquidation of
the Company, each shareholder is entitled to receive a proportionate share of
the Company's assets available for distribution to shareholders after the
payment of liabilities and after distribution in full of preferential amounts,
if any, to be distributed to holders of the Preferred Stock. All shares of the
Company's Common Stock issued and outstanding are fully-paid and nonassessable.
Dividend Policy
Holders of shares of Common Stock are entitled to share pro rata in
dividends and distribution with respect to the Common Stock when, as and if
declared by the Board of Directors out of funds legally available therefore,
after requirements with respect to preferential dividends on, and other matters
relating to, the Preferred Stock, if any, have been met. The Company has not
paid any dividends on its Common Stock and intends to retain earnings, if any,
to finance the development and expansion of its business. Future dividend policy
is subject to the discretion of the Board of Directors and will depend upon a
number of factors, including future earnings, capital requirements and the
financial condition of the Company.
Description of Preferred Stock
Shares of Preferred Stock may be issued from time to time in one or
more series as may be determined by the Board of Directors. The voting powers
and preferences, the relative rights of each such series and the qualifications,
limitations and restrictions thereof shall be established by the Board of
Directors, except that no holder of Preferred Stock shall have preemptive
rights.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Company's Common Stock is
Interwest Transfer Co., Inc. which is located at 1981 East Murray Holliday Road,
Suite 100, Salt Lake City, Utah 84117, telephone (801) 272-9294 and facsimile
(801) 277-3147. There is no transfer agent for shares of the Company's preferred
stock.
PART II.
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
a) Market Information.
The Company is not presently trading on an exchange, but has made
application to have its Common Stock quoted on the Over the Counter Bulletin
Board.
42
<PAGE>
In July 1997, prior to its acquisition of PGRP, the Company conducted a
1 for 4 reverse split of its common stock. This transaction was effected by the
Company's Board of Directors in accordance with the Company's Articles of
Incorporation and Bylaws and also in accordance with Nevada law. See Part II,
Item 4. "Recent Sales of Unregistered Securities."
In October 1998, prior to its acquisition of PGRP, the Company
conducted a 4 for 1 forward split of its common stock. This transaction was
effected by the Company's Board of Directors in accordance with the Company's
Articles of Incorporation and Bylaws and also in accordance with Nevada law. See
Part II, Item 4. "Recent Sales of Unregistered Securities."
(b) Holders.
As of June 30, 2000 the Company had 62 shareholders of record of its
12,431,000 outstanding shares of Common Stock, 10,830,000 of which are
restricted Rule 144 shares and 1,601,000 of which are free-trading. Of the Rule
144 shares, 10,030,000 shares have been held by affiliates of the Company for
more than one (1) year.
(c) Dividends.
The Company has never paid or declared any dividends on its Common
Stock and does not anticipate paying cash dividends in the foreseeable future.
Item 2. Legal Proceedings
No legal proceedings have been initiated either by or against the
Company to date.
Item 3. Changes in and Disagreements with Accountants
None.
Item 4. Recent Sales of Unregistered Securities
The Company relied upon Section 4(2) of the Act and Rule 506 for
several transactions regarding the issuance of its unregistered securities. In
each instance, such reliance was based upon the fact that (i) the issuance of
the shares did not involve a public offering, (ii) there were no more than 35
investors (excluding "accredited investors"), (iii) each investor who was not an
accredited investor either alone or with his purchaser representative(s) has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the prospective investment, or the
issuer reasonably believes immediately prior to making any sale that such
purchaser comes within this description, (iv) the offers and sales were made in
compliance with Rules 501 and 502, (v) the securities were subject to Rule 144
limitation on resale and (vi) each of the parties is a sophisticated purchaser
and had full access to the information on the Company necessary to make an
informed investment decision by virtue of the due diligence conducted by the
purchaser or available to the purchaser prior to the transaction.
43
<PAGE>
The Company relied upon Section 3(b) of the Act and Rule 504 for
several transactions regarding the issuance of its unregistered securities. In
each instance, such reliance was based on the following: (i) the aggregate
offering price of the offering of the shares of Common Stock and warrants did
not exceed $1,000,000, less the aggregate offering price for all securities sold
with the twelve months before the start of and during the offering of shares in
reliance on any exemption under Section 3(b) of, or in violation of Section 5(a)
of the Act; (ii) no general solicitation or advertising was conducted by the
Company in connection with the offering of any of the shares; (iii) the fact the
Company has not been since its inception (a) subject to the reporting
requirements of Section 13 or 15(d) of the Securities Act of 1934, as amended,
(b) and "investment company" within the meaning of the Investment Company Act of
1940, as amended, or (c) a development stage company that either has no specific
business plan or purpose or has indicated that its business plan is to engage in
a merger or acquisition with an unidentified company or companies or other
entity or person.
The Company relied upon Florida Code Section 517.061(11) for several
transactions. In each instance, such reliance is based on the following: (i)
sales of the shares of Common Stock were not made to more than 35 persons; (ii)
neither the offer nor the sale of any of the shares was accomplished by the
publication of any advertisement; (iii) all purchasers either had a preexisting
personal or business relationship with one or more of the executive officers of
the Company or, by reason of their business or financial experience, could be
reasonably assumed to have the capacity to protect their own interests in
connection with the transaction; (iv) each purchaser represented that he was
purchasing for his own account and not with a view to or for sale in connection
with any distribution of the shares; and (v) prior to sale, each purchaser had
reasonable access to or was furnished all material books and records of the
Company, all material contracts and documents relating to the proposed
transaction, and had an opportunity to question the executive officers of the
Company. Pursuant to Rule 3E-500.005, in offerings made under Section
517.061(11) of the Florida Statutes, an offering memorandum is not required;
however each purchaser (or his representative) must be provided with or given
reasonable access to full and fair disclosure of material information. An issuer
is deemed to be satisfied if such purchaser or his representative has been given
access to all material books and records of the issuer; all material contracts
and documents relating to the proposed transaction; and an opportunity to
question the appropriate executive officer. In the regard, the Company supplied
such information and was available for such questioning (the "Florida
Exemption").
In February 1997, prior to its acquisition of PGRP, the Company sold
1,720,000 shares of its Common Stock to 70 individuals for $17,200. The Company
relied upon Section 3(b) of the Act and Rule 504 and the Florida Exemption,
Section 90.530(11) of the Nevada code, Section 48-2-103(b)(4) of the Tennessee
code and Section 5[581-5]I(c) of the Texas code. No state exemption was
necessary for the sales made to Canada or France investors. A Form D was filed
with the SEC.
The facts upon which the Company relied in Nevada are as follows: the
transaction was part of an issue in which (a) there were no more than 25
purchasers in Nevada, other than those designated in subsection 10, during any
12 consecutive months; (b) no general solicitation or general advertising is
used in connection with the offer to sell or sale of the securities; (c) no
44
<PAGE>
commission or other similar compensation is paid or given, directly or
indirectly, to a person, other than a broker-dealer licensed or not required to
be licensed under this chapter, for soliciting a prospective purchaser in
Nevada; and (d) one of the following conditions was satisfied: (1) the seller
reasonably believed that all the purchasers in Nevada, other than those
designated in subsection 10, were purchasing for investment; or (2) immediately
before and immediately after the transaction, the Company reasonably believed
that its securities were held by 50 or fewer beneficial owners, other than those
designated in subsection 10, and the transaction was part of an aggregate
offering that does not exceed $500,000 during any 12 consecutive months.
The facts upon which the Company relied in Tennessee are as follows:
(A) The aggregate number of persons in Tennessee purchasing the securities from
the Company and all affiliates of the Company pursuant to this exemption during
the twelve month period ending on the date of such sale did not exceed fifteen
(15) persons, exclusive of persons who acquired the securities in transactions
which were not subject to this exemption or which were otherwise exempt from
registration under the provisions of this exemption or which have been
registered pursuant to Sec. 48-2-105 or Sec. 48- 2-106. (B) The securities were
not offered for sale by means of publicly disseminated advertisements or sales
literature; and (C) All purchasers in Tennessee purchased such securities with
the intent of holding such securities for investment for their own accounts and
without the intent of participating directly or indirectly in a distribution of
such securities.
The facts upon which the Company relied in Texas are as follows: The
sale during the period of twelve (12) months ending with the date of the sale in
question was to not more than fifteen (15) persons and such persons purchased
such securities for their own account and not for distribution.
In July 1997, prior to its acquisition of PGRP, the Company conducted a
1 for 4 reverse split of its common stock. This transaction was effected by the
Company's Board of Directors in accordance with the Company's Articles of
Incorporation and Bylaws and also in accordance with Nevada law.
In July 1997, prior to its acquisition of PGRP, the Company entered
into a share exchange agreement with FAD, and its shareholders which had been
formed in February 1997. The exchange was made whereby the Company issued
2,970,000 shares of its Common Stock to the shareholders of FAD for all of the
issued and outstanding stock of FAD. This offering was conducted pursuant to
Section 4(2) of the Act and Rule 506 and the Florida Exemption. No Form D was
filed with the SEC.
In August 1998, prior to its acquisition of PGRP, the Company entered
into a Recission and Cancellation Agreement with FAD and its shareholders,
thereby returning the parties to their original positions prior to the share
exchange conducted in July 1997 ab initio. Thus, FAD exchanged 2,970,000 shares
of Common Stock of the Company for 100% of the issued and outstanding stock of
FAD and FAD was no longer a wholly-owned subsidiary of the Company.
In October 1998, prior to its acquisition of PGRP, the Company
conducted a 4 for 1 forward split of its Common Stock. This transaction was
45
<PAGE>
effected by the Company's Board of Directors in accordance with the Company's
Articles of Incorporation and Bylaws and also in accordance with Nevada law.
In October 1998, prior to its acquisition by the Company, PGRP entered
into an agreement with Randy Bernsen to be a Director of PGRP. The term was
until the next annual meeting of the shareholders and directors. As
compensation, Randy Bernsen was promised 10,000 shares of the Common Stock of
the Company upon the share exchange to be conducted in November 1998. The shares
were issued in January 1999 pursuant to Section 4(2) of the Act, Rule 506 and
the Florida Exemption.
In November 1998, prior to its acquisition by the Company, PGRP entered
into an agreement with Glenda Grainger to be a Director of PGRP. As
compensation, Glenda Grainger was promised 10,000 shares of the Common Stock of
the Company upon the share exchange to be conducted in November 1998. The shares
were issued in January 1999 pursuant to Section 4(2) of the Act, Rule 506 and
the Florida Exemption.
In November 1998, the Company entered into a share exchange agreement
with PGRP, and its shareholders which had been formed in June 1997. The exchange
was made whereby the Company issued 10,000,000 shares of its Common Stock to the
shareholders of PGRP for all of the issued and outstanding stock of PGRP. As
part of the exchange, Ms. Peters and Ms. Cavell each received 2,000,000 shares
of the Company's Common Stock. This offering was conducted pursuant to Section
4(2) of the Act and Rule 506 and the Florida Exemption. No Form D was filed with
the SEC.
In January 1999, the Company issued 10,000 shares of its Common Stock
to Margaret Ann Ronayne in connection with her agreement to serve on the
Company's Board and a Representation Agreement entered into in December 1998.
The shares were issued pursuant to Section 4(2) of the Act, Rule 506 and the
Florida Exemption.
In January 1999, the Company conducted an offering of its Common Stock
pursuant to section 3(b) of the Act and Rule 504. No shares were sold
thereunder. A Form D was filed with the SEC.
In April 1999, the Company sold 1,000 shares of its Common Stock to one
(1) investor for $850. The Company relied upon Section 3(b) of the Act, Rule 504
and Section 90.530(11) of the Nevada code. No Form D was filed with the SEC.
The facts upon which the Company relied in Nevada are as follows: the
transaction was part of an issue in which (a) there were no more than 25
purchasers in Nevada, other than those designated in subsection 10, during any
12 consecutive months; (b) no general solicitation or general advertising is
used in connection with the offer to sell or sale of the securities; (c) no
commission or other similar compensation is paid or given, directly or
indirectly, to a person, other than a broker-dealer licensed or not required to
be licensed under this chapter, for soliciting a prospective purchaser in
Nevada; and (d) one of the following conditions was satisfied: (1) the seller
reasonably believed that all the purchasers in Nevada, other than those
46
<PAGE>
designated in subsection 10, were purchasing for investment; or (2) immediately
before and immediately after the transaction, the Company reasonably believed
that its securities were held by 50 or fewer beneficial owners, other than those
designated in subsection 10, and the transaction was part of an aggregate
offering that does not exceed $500,000 during any 12 consecutive months.
In July 1999, the Company initiated an offering of its Convertible
Notes. The Notes have a term of one (1) year, bear interest at a rate of nine
percent (9%) and are automatically convertible to shares of the Company's Common
Stock in one (1) year (if they are not converted earlier) at a price of $1.00
per share plus interest, which interest is also payable in shares of the
Company's Common Stock. To date, one (1) note has been sold in the principal
amount of $200,000 in December 1999. The offering is ongoing. For such offering,
the Company relied upon Section 3(b) of the Act, Rule 504 and the Florida
Exemption.
In September 1999, the Company executed a Promissory Note in favor of
Carol Neal, the Company's past Chairman, President and Treasurer in the amount
of $24,600. The Note was in exchange for monies lent by Ms. Neal to the Company
for working capital. The Note is payable on demand and bears no interest. Ms.
Neal passed away in December 1999. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and the Florida Exemption.
In November and December 1999, the Company entered into consulting
contracts with three (3) individuals to provide financial, public and investor
relations services to the Company. As payment for such services, the Company
issued 800,000 shares of its Common Stock and paid $20,000 For such offering,
the Company relied upon Section 3(b) of the Act, Rule 701, NSMIA, Section
517.061(11) of the Florida Code and Section 10-5-9(13) of the Georgia Code.
For purposes of Rule 701, the facts upon which the Company relied are:
(i) The offer was under a written compensatory benefit plan or contract
established by the issuer for the participation of its consultants and advisors;
(ii) the consultants and advisors were providing services to the issuer at the
time the securities were offered; (iii) the consultants and advisors were
natural persons; (iv) the consultants and advisors provided bona fide services
to the issuer; (v) the services were not in connection with the offer or sale of
securities in a capital-raising transaction; (vi) the consultants and advisors
did not directly or indirectly promote or maintain a market for the issuer's
securities; and (vii) the aggregate sales price during a consecutive twelve (12)
month period did not exceed the greater of: (a) $1,000,000; (b) fifteen percent
(15%) of the total assets of the issuer; or (c) fifteen percent (15%) of the
outstanding amount of the class of securities being sold.
For purposes of Section 10-5-9(13) of the Georgia Code, the facts upon
which the Company relied are: (i) the number of Georgia purchasers did not
exceed fifteen (15); (ii) the securities were not offered for sale by means of
any form of general or public solicitations or advertisements; (iii) a legend
was placed upon the certificates; and (iv) each purchaser represented that he
purchased for investment.
47
<PAGE>
Item 5. Indemnification of Directors and Officers
The Company's Articles of Incorporation provide that: To the fullest
extent permitted by law, no director or officer of the Corporation shall be
personally liable to the Corporation or its shareholders for damages for breach
of any duty owed to the Corporation or its shareholders. In addition, the
Corporation shall have the power, in its Bylaws or in any Resolution of its
stockholders or directors, to undertake to indemnify the officers and directors
of this Corporation against any contingency or peril as may be determined to be
in the best interests of this Corporation, and to procure policies of insurance
at this Corporation's expense.
The Company's Bylaws provide that: The Corporation hereby indemnifies
each person (including the heirs, executors, administrators, or estate of such
person) who is or was a director or officer of the Corporation to the fullest
extent permitted or authorized by current or future legislation or judicial or
administrative decision against all fines, liabilities, costs and expenses,
including attorneys' fees, arising out of his or her status as a director,
officer, agent, employee or representative. The foregoing right of
indemnification shall not be exclusive of other rights to which those seeking an
indemnification may be entitled. The Corporation may maintain insurance, at its
expense, to protect itself and all officers and directors against fines,
liabilities, costs and expenses, wither or not the Corporation would have the
legal power to indemnify them directly against such liability.
The Nevada Revised Statutes provide that: (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 believes 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
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 believes 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 and (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 believes 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
<PAGE>
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 entitles to
indemnify for such expenses as the court deems proper.
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 statutes also provide that any discretionary indemnification under
NRS 78.7502 unless ordered by a court or advanced pursuant to subsection 2, may
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances. The determination must be made: (1) by the
stockholders; (2) by the board of directors by majority vote of a quorum
consisting of directors who were not parties to the action, suit or proceeding;
(3) if a majority vote of a quorum consisting of directors who were not parties
to the action, suit or proceeding so orders, by independent legal counsel in a
written opinion; or (4) if a quorum consisting of directors who were not parties
to the action, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
The articles of incorporation, the bylaws or an arrangement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsequent do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section: (1) does not exclude any other
rights to which a person seeking indemnification or advancement of expenses may
be entitled under the articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an action in
his official capacity or an action in another capacity while holding his office,
except that indemnification, unless ordered by a court pursuant to NRS 78.7502
or for the advancement of expenses made pursuant to subsection 2, may not be
made to or on behalf of any director if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action and (2) continues
for a person who has ceased to be a director, officer, employee or agent and
inures to the benefit of the heirs, executors and administrators of such a
person.
PART F/S
The Financial Statements of Surgical required by Regulation S-X
commence on page F-1 hereof in response to Part F/S of this Registration
Statement on Form 10-SB and are incorporated herein by this reference.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report............................................F-2
Independent Auditors' Report............................................F-3
Consolidated Balance Sheets.............................................F-4
Consolidated Statements of Operations...................................F-5
Consolidated Statements of Stockholders' Deficit........................F-6
Consolidated Statements of Cash Flows...................................F-7
Notes to Consolidated Financial Statements.............................F-8
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Platinum and Gold, Inc.
I have audited the accompanying consolidated balance sheets of Platinum and
Gold, Inc. and Subsidiary (a Development Stage Company) as of December 3l, l999,
and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the year ended December 3l, l999. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit. The
financial statements of Platinum and Gold, Inc. and Subsidiary (a Development
Stage Company) as of December 31, 1998 were audited by other auditors, whose
report dated January 18, 1999 expressed an unqualified opinion on those
statements.
I conducted our audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from 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.
I believe that my audit provides a reasonable basis for our opinion.
In my opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Platinum and Gold, Inc. and
Subsidiary (a Development Stage Company), as of December 3l, l999 and the
results of its operations and its cash flows for the year ended December 3l,
l999, in conformity with generally accepted accounting principles.
The Company is in the development stage as of December 3l, l999 and to date has
had no significant operations. Recovery of the Company's assets is dependent on
future events, the outcome of which is indeterminable. In addition, successful
completion of the Company's development program and its transition, ultimately,
to attaining profitable operations is dependent upon obtaining adequate
financing to fulfill its development activities and achieving a level of sales
adequate to support the Company's cost structure.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has suffered losses and has yet to
generate an internal cash flow that raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are described in Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Michael Kravatz
Michael Kravatz, C.P.A.
March 2l, 2000
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Platinum and Gold, Inc.
We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the year ended December 31,
1998 of Platinum and Gold, Inc. and Subsidiary (a Development Stage Company).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
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 results of operations and cash flows for the year
ended December 31, 1998 of Platinum and Gold, Inc. and Subsidiary (a Development
Stage Company) in conformity with generally accepted accounting principles.
The Company is in the development stage as of December 31, 1998 and to date has
had no significant operations. Recovery of the Company's assets is dependent on
future events, the outcome of which is indeterminable. In addition, successful
completion of the Company's development program and its transition, ultimately,
to attaining profitable operations is dependent upon obtaining adequate
financing to fulfill its development activities and achieving a level of sales
adequate to support the Company's cost structure.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has suffered losses and has yet to
generate an internal cash flow that raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are described in Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Margolies, Fink and Wichrowski
Certified Public Accountants
Pompano Beach, Florida
January 18, 1999
F-3
<PAGE>
<TABLE>
<CAPTION>
Platinum and Gold, Inc.
(A Development Stage Enterprise)
Consolidated Balance Sheets
December 31, 1999 June 30, 2000
---------------------- -------------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 98,329 $ 32,174
---------------------- -------------------
Total current assets 98,329 32,174
---------------------- -------------------
PROPERTY AND EQUIPMENT
Equipment, net 4,321 3,621
Other assets 32,346 30,746
---------------------- -------------------
Net property and equipment 36,667 34,367
---------------------- -------------------
Total Assets $ 134,996 $ 66,541
====================== ===================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 131,757 $ 130,519
Notes payable 200,000 200,000
---------------------- -------------------
Total current liabilities 331,757 330,519
---------------------- -------------------
NON-CURRENT LIABILITIES
Stockholder loans 20,589 21,207
---------------------- -------------------
Total non-current liabilities 20,589 21,207
---------------------- -------------------
Total Liabilities 352,346 351,726
---------------------- -------------------
STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.001 par value, authorized 1,000,000
shares; 0 issued and outstanding 0 0
Common stock, $0.001 par value, authorized 20,000,000
shares; 12,431,000 shares issued and outstanding 12,431 12,431
Additional paid-in capital 5,178 5,178
Deficit accumulated during the development stage (234,959) (302,794)
---------------------- -------------------
Total stockholders' deficiency (217,350) (285,185)
---------------------- -------------------
Total Liabilities and Stockholders' Equity $ 134,996 $ 66,541
====================== ===================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
Platinum and Gold, Inc.
(A Development Stage Enterprise)
Consolidated Statements of Operations
Period from
February 19, 1997
Six Months (Inception)
Year Ended December 31 Ended June 30, through
----------------------------- ---------------------------
1999 1998 2000 1999 June 30, 2000
---------------- ------------- ------------- ------------ ---------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $ 0 $ 0 $ 0 $ 0 $ 0
---------------- ------------- ------------- ------------ ---------------------
OPERATING EXPENSES
Consulting fees 195,000 1,170 2,085 0 198,255
Depreciation 739 218 700 436 1,657
General and administrative expenses 7,248 6,494 20,811 3,075 34,553
Amortization expense 3,200 0 1,600 1,600 4,800
Professional fees 7,762 8,233 4,666 3,808 20,661
Stockholder expense 15 1,829 624 15 2,574
Contract labor 2,508 0 0 0 2,508
Recording artists 0 0 3,438 0 3,438
Salaries 0 0 33,889 0 33,889
---------------- ------------- ------------- ------------ ---------------------
Total expenses 216,472 17,944 67,813 8,934 302,335
---------------- ------------- ------------- ------------ ---------------------
Loss from operations (216,472) (17,944) (67,813) (8,934) (302,335)
---------------- ------------- ------------- ------------ ---------------------
OTHER INCOME (EXPENSE)
Interest expense (437) 0 (22) 0 (459)
---------------- ------------- ------------- ------------ ---------------------
Total other income (expense) (437) 0 (22) 0 (459)
---------------- ------------- ------------- ------------ ---------------------
Net loss $ (216,909)$ (17,944)$ (67,835)$ 8,934 $ (302,794)
================ ============= ============= ============ =====================
Basic net loss per weighted average share $ (0.02) $ (0.01)$ (0.01)$ (0.01)
================ ============= ============= ============
Weighted average number of shares 12,431,000 11,600,000 12,431,000 12,431,000
================ ============= ============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
Platinum and Gold, Inc.
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Deficiency
Period from February 17, 1997 (Inception) through June 30, 2000
Deficit
Accumulated
Additional During the Total
Number of Common Paid-in Development Subscription Stockholders'
Shares Stock Capital Stage Receivable Equity
----------- ------------ ------------ ------------------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE, February 17, 1997
(Inception) 0 $ 0 $ 0 $ 0$ 0 $ 0
Year Ended December 31, 1997:
----------------------------
Issuance of common stock 11,600,000 11,600 5,155 0 (2,800) 13,955
Net loss 0 0 0 (106) 0 (106)
----------- ------------ ------------ ------------------------------ ---------------
BALANCE, December 31, 1997 11,600,000 11,600 5,155 (106) (2,800) 13,849
Year Ended December 31, 1998:
----------------------------
Collection of subscription receivable 0 0 0 0 2,800 2,800
Net loss 0 0 0 (17,944) 0 (17,944)
----------- ------------ ------------ ------------------------------ ---------------
BALANCE, December 31, 1998 11,600,000 11,600 5,155 (18,050) 0 (1,295)
Year Ended December 31, 1999:
----------------------------
Issuance of common stock 831,000 831 23 0 0 854
Net loss 0 0 0 (216,909) 0 (216,909)
----------- ------------ ------------ ------------------------------ ---------------
BALANCE, December 31, 1999 12,431,000 12,431 5,178 (234,959) 0 (217,350)
Six Months Ended June 30, 2000: (unaudited)
------------------------------
Net loss 0 0 0 (67,835) 0 (67,835)
----------- ------------ ------------ ------------------------------ ---------------
ENDING BALANCE, June 30, 2000
(unaudited) 12,431,000 $ 12,431 $ 5,178 $ (302,794$ 0 $ (285,185)
=========== ============ ============ ============================== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-6
<PAGE>
<TABLE>
<CAPTION>
Platinum and Gold, Inc.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
Period from
February 19, 1997
Six Months (Inception)
Year Ended December 31, Ended June 30, through
----------------------------- -------------------------
1999 1998 2000 1999 June 30, 2000
-------------- -------------- ------------ ------------ --------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (216,909)$ (17,944) $ (67,835)$ (8,934)$ (302,794)
Adjustments to reconcile net loss to net cash
used by operating activities:
Amortization expense 3,200 0 1,600 1,600 4,800
Depreciation expense 739 218 700 436 1,657
Changes in operating assets and liabilities:
(Increase) decrease in other assets (663) (34,883) 0 200 (35,546)
Increase (decrease) in accounts payable 107,107 24,543 (1,238) 1,000 130,519
-------------- -------------- ------------ ------------ --------------------
Net cash used by operating activities (106,526) (28,066) (66,773) (5,698) (201,364)
-------------- -------------- ------------ ------------ --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment (3,101) (2,177) 0 0 (5,278)
-------------- -------------- ------------ ------------ --------------------
Net cash used by investing activities (3,101) (2,177) 0 0 (5,278)
-------------- -------------- ------------ ------------ --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stockholder loans, net 5,568 15,021 618 3,800 21,206
Proceeds from notes payable 200,000 0 0 0 200,000
Proceeds from issuance of common stock 855 16,755 0 855 17,610
-------------- -------------- ------------ ------------ --------------------
Net cash provided by financing activities 206,423 31,776 618 4,655 238,816
-------------- -------------- ------------ ------------ --------------------
Net increase (decrease) in cash 96,796 1,533 (66,155) (1,043) 32,174
CASH, beginning of period 1,533 0 98,329 1,533 0
-------------- -------------- ------------ ------------ --------------------
CASH, end of period $ 98,329 $ 1,533 $ 32,174 $ 490 $ 32,174
============== ============== ============ ============ ====================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-7
<PAGE>
Platinum and Gold, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Information with regard to the six months
ending June 30, 2000 and 1999 is unaudited)
(1) Summary of Significant Accounting Policies
(a) The Company The Company, ("Platinum and Gold, Inc.") was organized
in the state of Nevada on February 19, 1997 under the name Integra
Ventures, Inc. The Company changed its name to Platinum and Gold, Inc.
on November 5, 1998 and, on November 11, 1998, completed a merger with
its wholly-owned subsidiary, Platinum and Gold Recording and Publishing
Company. The subsidiary, a Florida corporation incorporated on June 18,
1997, was formed to develop and commercialize unique compact disc
single and cassettes.
The Company, through its wholly-owned subsidiary, is in the
entertainment industry involved in the music and film business. The
principal activity of the Company is the acquisition, development,
production, marketing, manufacturing and distribution of recorded music
by new recording artists, principally from other countries.
The Company is currently in a development stage and is in the process
of raising additional capital. There is no assurance that the
development of these artists and their music will be successful and
that the Company will achieve a profitable level of operations.
(b) Principles of consolidation The consolidated financial statements
include all of the accounts of Platinum and Gold, Inc. and its
wholly-owned subsidiary, Platinum and Gold Recording and Publishing
Company. All significant intercompany transactions and balances have
been eliminated in preparing the consolidated financial statements.
(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 these estimates.
(d) Cash and cash equivalents Holdings of highly liquid investments
with original maturities of three months or less and investments in
money market funds are considered to be cash equivalents by the
Company.
(e) Net income (loss) per share In 1998, the Company adopted SFAS No.
128, ("Earnings Per Share"), which requires the reporting of both basic
and diluted earnings per share. Basic net loss per share is determined
by dividing loss available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted
loss per share reflects the potential dilution that could occur if
options or other contracts to issue common stock were exercised or
converted into common stock, as long as the effect of their inclusion
is not anti-dilutive.
(f) Property and equipment All property and equipment are recorded at
cost, less accumulated depreciation. Depreciation is computed using
straight-line methods over the depreciable lives of the related
assets, which is five years for office equipment.
F-8
<PAGE>
Platinum and Gold, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(g) Interim financial information The financial statements for the six
months ended June 30, 2000 and 1999 are unaudited and include all
adjustments which in the opinion of management are necessary for fair
presentation, and such adjustments are of a normal and recurring
nature. The results for the six months are not indicative of a full
year results.
(2) Significant Acquisition On November 11, 1998, the Company acquired
Platinum and Gold Recording and Publishing Company in a business
combination accounted for as a pooling of interests. Platinum and Gold
Recording and Publishing Company, which engages in the development and
commercialization of unique compact disc single and cassettes, became a
wholly-owned subsidiary of the Company through the exchange of
10,000,000 shares of the Company's common stock for all of the issued
and outstanding stock of Platinum and Gold Recording and Publishing
Company.
Results of operations of the separate companies have not been
presented, as the Company did not have any operations since inception
other than its organization.
(3) Other Assets Other assets consist of the following:
June 30, December 31,
2000 1999
-------------- ---------------
Deferred production costs $ 19,546 $ 19,546
Organization costs 16,000 16,000
-------------- ---------------
35,546 35,546
Less: Accumulated amortization (4,800) (3,200)
-------------- ---------------
$ 30,746 $ 32,346
============== ===============
(4) Stockholders' Deficiency The Company has authorized 20,000,000 shares
of $0.001 par value common stock and 1,000,000 shares of $0.001par
value preferred stock. Rights and privileges of the preferred stock are
to be determined by the Board of Directors prior to issuance. In
February 1997, the Company sold 1,600,000 shares of its common stock in
a Regulation D exempt offering at a subscription price of $0.01 per
share. A total of $16,000 was received from the sale of stock and was
used to pay all of the costs associated with the offering and the
organization of the Company.
On November 11, 1998, Platinum and Gold Recording and Publishing merged
with Platinum and Gold, Inc. to become a wholly-owned subsidiary of
Platinum and Gold in exchange for 10,000,000 shares of its stock in
Platinum and Gold Recording and Publishing.
(5) Income Taxes The Company adopted the method of accounting for income
tax purposes pursuant to the Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109
requires an asset and liability approach for financial accounting and
reporting for income taxes. Under SFAS 109, the effect on deferred
taxes of a change in tax rates is recognized in income in the year of
its occurrence.
F-9
<PAGE>
Platinum and Gold, Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(6) Related Parties Since the inception of the Company, the principal
stockholder has loaned the Company the necessary funds to operate the
business. These loans are non-interest bearing and unsecured.
(7) Note Payable On December 14, 1999, a convertible note was issued in the
amount of $200,000 for the benefit of Professional Acquisitions
Management and Marketing Corp. This note, if not paid in one year, will
be converted into Rule 144 Restricted Common Stock of the Company.
Interest on the unpaid principal balance of this Note, at the rate of
nine percent (9%) per annum, shall accrue from the date thereof, and
shall be payable to the payee in shares of common stock of the Company
at the maturity date.
(8) Going Concern The Company is currently a development stage enterprise
and its continued existence is dependent upon the Company's ability to
resolve its liquidity problems, principally by obtaining additional
debt financing and/or equity capital. The Company has yet to generate
an internal cash flow and, until the sales of this product begin, the
Company is totally dependent upon the debt and equity funding.
As a result of these factors, there exists substantial doubt about the
Company's ability to continue as a going concern. However, management
of the Company is continually negotiating with various outside entities
for additional funding. To date, management has been able to raise the
necessary capital to reach this stage of product development, and has
been able to fund any capital requirements. However, there is no
assurance that the development of these artists and their music will be
successful and that the Company will achieve a profitable level of
operations.
F-10
<PAGE>
<TABLE>
<S> <C>
PART III
Item 1. Index to Exhibits
3.(i).1 (1) Articles of Incorporation of Integra Ventures, Inc. filed February 19, 1997.
3.(i).2 (1) Certificate of Amendment of Articles of Incorporation changing name to First Aid
Direct, Inc. filed July 25, 1997.
3.(i).3 (1) Certificate of Amendment of Articles of Incorporation changing name to Platinum and
Gold, Inc.
3.(ii).1 (1) Bylaws of Integra Ventures, Inc.
4.1 (1) Form of Private Placement Offering of 1,600,000 common shares at $0.01 per share.
4.2 (1) Form of Private Placement Offering of 984,000 common shares at $1.00 per share.
4.3 (1) Form of Private Placement Offering of 9% convertible notes at $10,000 per Unit.
4.4 (1) Form of Convertible Note pursuant to 9% convertible note offering.
4.5 (2) 9% Convertible Note in favor of Professional Acquisitions Management & Marketing
Corp. dated December 14, 1999.
10.1 (1) Share Exchange Agreement between Integra Ventures, Inc. and First Aid Direct, Inc.
dated July 23, 1997.
10.2 (1) Recision and Cancellation Agreement between First Aid Select, Inc. d/b/a First Aid
Direct and Integra Ventures, Inc. dated August 28, 1998.
10.3 (1) Share Exchange Agreement between Platinum and Gold, Inc. and shareholders of
Platinum and Gold Recording & Publishing Company dated November 11, 1998.
10.4 (1) Agreement with Randy Bernsen dated October 28, 1998.
10.5 (1) Agreement with Glenda Grainger-Miller dated November 1, 1998.
10.6 (1) Agreement with B&D Productions dated September 3, 1999.
10.7 (1) Letter of Intent with Steve Jordan dated July 1, 1998.
10.8 (1) Agreement with Barbara Chadwick dated September 3, 1999.
10.9 (1) Agreement with Beverly Fortin dated September 3, 1999.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.10 (1) Promissory Note with Carol Neal dated September 7, 1999.
10.11 (1) Agreement with Margaret Ann Ronayne dated December 2, 1998.
10.12 (2) Financial Public Relations Consulting Agreement with Joyce Research Group, Inc.
dated November 1, 1999.
10.13 (2) Consulting Agreement with Elyse R. Doss dated November 5, 1999.
10.14 (2) Consulting Agreement with Mark F. Jordan dated December 7, 1999.
10.15 (2) Consulting Agreement with David C. Osborne dated December 7, 1999.
10.16 (3) Agreement with B&D Productions executed February 22, 2000
10.17 * Agreement between PGRP and Houston dated April 11, 2000.
10.18 * Agreement between PGRP, Terry Ritchie and Mary Jane
Cunningham dated April 19, 2000.
16.1 (4) Letter on change of certifying accountant pursuant to Regulation SK Section 304(a)(3)
[1]
16.2 (4) Letter dated August 7, 2000 from Margolies, Fink and Wichrowski
16.3 (5) Letter on change of certifying accountant pursuant to Regulation SK Section 304(a)(3)
[1]
16.4 (5) Letter dated August 9, 2000 from Michael Kravatz C.P.A.
27.1 * Financial Data Schedule.
</TABLE>
----------------
1. Incorporated herein by reference to the Company's Registration Statement on
Form 10-SB.
2. Incorporated herein by reference to the Company's annual report on Form
10KSB for the period ending December 31, 1999.
3. Incorporated herein by reference to the Company's quarterly report on Form
10QSB for the period ending March 31, 2000.
4. Incorporated herein by reference to the Company's current report on Form 8K
filed August 9, 2000.
<PAGE>
5. Incorporated herein by reference to the Company's current report on Form 8K
filed August 9, 2000.
(* Filed herewith)
Item 2. Description of Exhibits
The documents required to be filed as Exhibits Number 2 and 6 and in
Part III of Form 1-A filed as part of this Registration Statement on Form 10-SB
are listed in Item 1 of this Part III above. No documents are required to be
filed as Exhibit Numbers 3 , 5 or 7 in Part III of Form 1-A and the reference to
such Exhibit Numbers is therefore omitted. The following additional exhibits are
filed hereto:
----------------
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Platinum and Gold, Inc.
(Registrant)
Date: August 18, 2000 By:/s/ Louise Cavell
---------------------------------
Louise Cavell, President, Treasurer and Chairman
By:/s/ Valerie Peters
---------------------------------
Valerie Peters, Vice-President, Secretary
and Director
By:/s/ Glenda Grainger-Miller
---------------------------------
Glenda Grainger-Miller, Director
By:/s/Randy Bernsen
---------------------------------
Randy Bernsen, Director
By:/s/Margaret Ann Ronayne
---------------------------------
Margaret Ann Ronayne, Director
