SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
Amendment No. 1
General Form For Registration of Securities
of Small Business Issuers Under
Section 12(b) or (g) of
the Securities Exchange Act of 1934
Promos, Inc.
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(Exact Name of Small Business Issuer as specified in its charter)
Colorado 84-1209909
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(State or other (IRS Employer File Number)
jurisdiction of
incorporation)
6000 E. Evans, Suite 2-020
Denver, Colorado 80222
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(Address of principal executive offices) (zip code)
(303) 758-3537
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(Registrant's telephone number, including area code)
Securities to be Registered Pursuant to Section 12(b) of the
Act:
None
Securities to be Registered Pursuant to Section 12(g) of the
Act:
Common Stock, $.0.001 per share par value
DOCUMENTS INCORPORATED BY REFERENCE
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Documents incorporated by reference are found in Item 15.
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References in this document to "us," "we," or "the Company" refer to Promos,
Inc.
Item 1. Description of Business.
(a) General Development of Business
We are a Colorado corporation. Our principal business address is 6000 E.
Evans, Suite 2- 020, Denver, Colorado 80222.
We were incorporated under the laws of the State of Colorado on September
24, 1992. We are a full service, innovative brand marketing organization whose
activities are centered around our client's products.
On August 30, 1999, our shareholders approved an 8,000- for-one forward
split of the Common Stock. As of the date of this Registration Statement, we
have 10,033,600 shares of Common Stock issued and outstanding.
The Company has not been subject to any bankruptcy, receivership or similar
proceeding.
(b) Narrative Description of the Business
General
We have had operations since inception. No independent market surveys have
ever been conducted to determine demand for our products and services. During
this period, we have had operations and generated revenues. We also have had
minimal profit from time to time, although we were unprofitable last fiscal
year. Our fiscal year end is December 31st.
Organization
We are comprised of one corporation with no subsidiaries or parent
entities.
We are filing this Form 10-SB on a voluntary basis because we plan to
engage in equity and/or debt financing in the foreseeable future and believe
that our fund raising will be enhanced by having a record of regular disclosure
under the Securities Exchange Act of 1934 (the "1934 Act"). We have no plans in
the foreseeable future, under any circumstances, to terminate our registration
under the 1934 Act.
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(c) Operations
Since inception, we have been a full service, innovative brand marketing
organization whose activities are centered around our client's products. Brand
marketing builds the value of the brand by connecting it with target audiences
to achieve strategic marketing objectives.
Our efforts are organized into four operating segments, composed of
promotional products and marketing services. The marketing services segment
includes promotion marketing, brand strategy and identity, presence marketing
and consumer event marketing. Each one of the segments has similar products and
services, production processes, types of clients, distribution methods and
regulatory environments. We attempt to physically connect the brand with
identified target markets and individuals through repeated exposure to
merchandise that builds brand awareness, enhances brand recognition and creates
brand loyalty.
PROMOTION MARKETING. This segment connects the brand with the consumer at
strategic points of contact through consumer and retail promotion, merchandising
and sponsorship activation.
BRAND STRATEGY AND IDENTITY. This segment connects a company product,
service or image with a target audience by creating, revitalizing, or leveraging
a brand through brand identity, design, and integrated communication programs.
PRESENCE MARKETING. This segment connects the brand with the target
audience through sports and corporate sponsorships, licensing, corporate
meetings, events and sales incentive programs.
RELATIONSHIP MARKETING. This segment connects the brand with the target
audience through consumer events--including a new product sampling and brand
awareness programs.
We plan to continue to generate revenues in each of these segments and to
focus on expanding our client base as a method of developing our business.
Our larger clients include: First Trust, Incorporated, a subsidiary of
Fiserv, Inc.; KMGH-TV, Channel 7, the ABC affiliate in Denver; Distinctive
Properties, a real estate broker in the Denver Metropolitan area; ReMax, a
worldwide real estate franchising company; Hallmark Entertainment; and the
National Potato Promotion Board.
In addition we plan to expand through acquisition. We will not only look at
our present industry but will reserve the right to investigate and, if
warranted, merge with or acquire the assets or common stock of an entity
actively engaged in business which generates revenues. We will seek
opportunities for long-term growth potential as opposed to short-term earnings.
As of the date hereof, we have no business opportunities under investigation.
None of our officers, directors, promoters or affiliates have engaged in any
preliminary contact or discussions with any representative of any other company
regarding the possibility of an acquisition or merger between us and such other
company.
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We have one full-time employee, our President, who receives a salary. Our
Secretary-Treasurer has agreed to allocate a portion of his time to our
activities, without compensation. These officers anticipate that our business
plan can be implemented by their collectively devoting approximately sixty hours
per month to our business affairs, consequently, conflicts of interest may arise
with respect to the limited time commitment of such officers. These officers
will use their best judgements to resolve all such conflicts.
(d) Markets
Our marketing plan is focused completely on expanding our client base. We
will use the efforts of our officers and directors and will rely upon the
satisfaction of previous clients to market our services.
(e) Raw Materials
The use of raw materials is not now material factor in our operations at
the present time.
(f) Customers and Competition
At the present time, we expect to be an insignificant participant among the
firms which engage in the brand marketing industry. There are a number of
established companies, most of which are larger and better capitalized than we
are and/or have greater personnel resources and technical expertise. In view of
our combined extremely limited financial resources and limited management
availability, we believe that we will continue to be at a significant
competitive disadvantage compared to our competitors. There can be no guarantee
that we will continue to generate substantial revenues or continue to be
profitable.
(g) Backlog
At September 30, 1999, we had no backlogs.
(h) Employees
At as of the date hereof, we have one employee. We do not plan to hire
employees in the future.
(i) Proprietary Information
We own no proprietary information.
(j) Government Regulation
We are not subject to any material governmental regulation or approvals.
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(k) Research and Development
We have never spent any amount in research and development activities.
(l) Environmental Compliance
We are not subject to any costs for compliance with any environmental laws.
Item 2. Management's Discussion and Analysis or Plan of Operation
Forward-Looking Statements
The following discussion contains forward-looking statements regarding our
Company, its business, prospects and results of operations that are subject to
certain risks and uncertainties posed by many factors and events that could
cause our actual business, prospects and results of operations to differ
materially from those that may be anticipated by such forward-looking
statements. Factors that may affect such forward-looking statements include,
without limitation: our ability to successfully develop new products for new
markets; the impact of competition on our revenues, changes in law or regulatory
requirements that adversely affect or preclude clients from using our products
for certain applications; delays our introduction of new products or services;
and our failure to keep pace with emerging technologies.
When used in this discussion, words such as "believes", "anticipates",
"expects", "intends" and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report. Our Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may subsequently
arise. Readers are urged to carefully review and consider the various
disclosures made by us in this report and other reports filed with the
Securities and Exchange Commission that attempt to advise interested parties of
the risks and factors that may affect our business.
Results of Operations
We have generated revenues from operations since inception. Our revenues
decreased from $122,768 for the year ended December 31, 1997 by approximately 6%
to $115,441 for the year ended December 31, 1998. The decrease was primarily due
to the completion of certain projects which were not immediately replaced.
During the nine month period ended September 30,1999, our revenues were $112,030
compared to the revenue in the previous year's period of $88,319. This increase
should continue through to the end of the fiscal year, since these revenues
involve projects which will continue into the next fiscal year.
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Costs of goods include all direct costs incurred in the process of
representing clients. The difference between our gross revenues and cost of
goods is our gross profit.
Gross profit from operations was $37,725 or approximately 33% of gross
revenues for the year ended December 31, 1998, a decrease by approximately 5%
from $46,924 or 38% of revenue for the year ended December 31, 1997. Gross
profit from operations for the nine month period ended September 30, 1999 was
$51,727 or approximately 46% of gross revenues, an increase of approximately
167% for the period compared to the same period in the previous year. Gross
profit from operations in the same period of the previous year was $30,912, or
approximately 35% of gross revenues.
Our operating expenses were $43,537 or approximately 36% of gross revenue
for the year ended December 31, 1997 compared to $44,845, or approximately 39%
of gross revenue for the year ended December 31, 1998. The principal variance
was a $3,500 increase in officer salaries. Our operating expenses were $32,859
or approximately 29% of gross revenue for the nine month period ended September
30, 1999, and $32,281 for the same period in the previous year, or approximately
37% of gross revenue for the same period of the previous fiscal year. Our
operating expenses during the first nine months of 1999 were essentially the
static from the previous year. The major components of operating expenses are
office salaries and associated payroll costs, general and health insurance
costs, rent and telephone expenses.
The principal difference between 1997 and 1998 was the reduction of gross
revenues. We have replaced the projects which had terminated so that the
revenues for fiscal year 1999 are expected to exceed those of 1997. Since our
operating expenses are static, we should see a larger profit in 1999 than we had
in 1997, assuming that our current expense trends continue.
Liquidity and Capital Resources
Net cash decreased to $746 for the year ended December 31, 1998, compared
to $4,069 for the year ended December 31, 1997. Net cash for the nine month
period ended September 30, 1999 increased to $11,002, compared to $5,491 for the
same period ended September 30, 1998.
Accounts receivable decreased slightly for the year ended December 31, 1998
to $15,741, compared to $18,271 for the year ended December 31, 1997. Accounts
receivable were $11,017 for the period ended September 30, 1999.
Prepaid Expenses remained relatively constant for all reporting periods,
except for the nine month period ended September 30, 1999 and increased to
$1,189.
Accounts payable decreased for the year ended December 31, 1998 to $9,986,
compared to $13,533 for the year ended December 31, 1997. Accounts payable
increased for the nine month period ended September 30, 1999 to $10,654,
compared to $9,986 for the period ended September 30, 1998.
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We were profitable in 1997 but sustained a loss in 1998. Our operating
expenses were relatively the same during both periods. The variation in client
projects accounts for the difference between a profit and a loss. In any case,
we try to operate with minimal overhead. Our primary activity will be to seek to
expand our client base and, consequently, our revenues. If we succeed in
expanding our client base and generating sufficient revenues, we will again
become profitable. We cannot guarantee that this will ever occur. Our plan is to
build our Company in any manner which will be successful. To that end, we may
also look for an acquisition candidate, although we have concluded no
acquisitions and have spoken with no potential candidates.
We feel that we have inadequate working capital to pursue any business
opportunities other than seeking additional clients or an acquisition candidate.
During the next twelve months, we plan to investigate an offering of our
securities, whether through a private placement or a public offering. At the
present time, we have no firm arrangements with regard to either type of
offering. We do not intend to pay dividends in the foreseeable future.
Item 3. Description of Properties
Our business office is located at 6000 E. Evans, Suite 2-020, Denver,
Colorado 80222. We pay $336 per month in rent for this office space to an
unaffiliated third party under a lease which expires on February 28, 2001. We
have no properties other than office equipment and furniture.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following sets forth the number of shares of the Registrant's $.0.001
par value common stock beneficially owned by (i) each person who, as of
September 30, 1999, was known by the Company to own beneficially more than five
percent (5%) of its common stock; (ii) the individual Directors of the
Registrant and (iii) the Officers and Directors of the Registrant as a group.
These shares reflect an 8,000- for-one forward split of the Common Stock.
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership (1)(2) Class
- ------------------- -------------------------- ----------
Judith F.Harayda(3) 8,000,000 80%
6000 E. Evans, Suite 2-020
Denver, Colorado 80222
Stephan R. Levy -0- -0-
2121 South Oneida, #332
Denver, Colorado 80224
All Officers and Directors as a Group 8,000,000 80%
(two persons)
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(1) All ownership is beneficial and on record, unless indicated otherwise.
(2) Beneficial owners listed above have sole voting and investment power
with respect to the shares shown, unless otherwise indicated.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The Directors and Executive Officers of the Company, their ages and present
positions held in the Company are as follows:
NAME AGE POSITION HELD
---- --- -------------
Judith F. Harayda 51 President and Director
Stephan R. Levy 60 Secretary, Treasurer and Director
The Company's Directors will serve in such capacity until the next annual
meeting of the Company's shareholders and until their successors have been
elected and qualified. The officers serve at the discretion of the Company's
Directors. There are no family relationships among the Company's officers and
directors, nor are there any arrangements or understandings between any of the
directors or officers of the Company or any other person pursuant to which any
officer or director was or is to be selected as an officer or director.
Ms. Harayda should be considered the "parent" or "promoter" of the Company
because of the shareholdings and control positions held by her in the Company.
Judith F. Harayda . Ms. Harayda has been the President and a Director of
the Company since inception. She has also previously been President of United
Venture Capital Fund, Inc. and the Treasurer of New World Publishing, Inc., both
of which were public companies at the time. Ms. Harayda received a Bachelors
Degree in Education from Edinboro University.
Stephan R. Levy. Mr. Levy has been Secretary-Treasurer and a Director of
the Company since inception. He has been retired since August, 1990. Prior to
that time, he was an officer and director of Tofruzen, Inc., a public company
which manufactured and marketed a non-dairy frozen dessert, novelty food
products, and promotional items. He has previously served as Secretary-Treasurer
of two public companies, Central Oil Corp. and United Venture Capital Fund, Inc.
He attended the University of Texas and graduated in 1961 from the University of
Colorado with a Bachelor of Science in Business. He is a member of the
International Monetary Market, which is a division of the Chicago Mercantile
Exchange and was appointed by the Governor of Colorado as a member of the
Colorado Municipal Bond Supervisory Board.
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Item 6. Executive Compensation
None of our executive officers received compensation in excess of $100,000
during the fiscal years ended December 31, 1996, 1997, or 1998. Compensation
does not include minor business-related and other expenses paid by us. Such
amounts in the aggregate do not exceed $10,000. Our President, Judith F.
Harayda, received compensation of $20,836, and $17,340 for 1998, and 1997,
respectively. Ms. Harayda serves as our President on a full-time basis.
We have granted no shares of our capital stock as additional compensation
and have no plans to do so.
For the fiscal years 1996, 1997, and1998, we paid our President's health
care. We have a Self Employment pension plan for the benefit of our President.
We have no plans or agreements which provide compensation on the event of
termination of employment or change in our control.
We do not pay members of our Board of Directors any fees for attendance or
similar remuneration, but reimburse them for any out-of- pocket expenses
incurred by them in connection with our business.
Item 7. Certain Relationships and Related Transactions
We paid our President, Judith F. Harayda, salary expenses of $15,000 during
fiscal year 1998. We also paid her auto rental, which is currently $403.38 per
month, and auto insurance.
On August 30, 1999, our shareholders approved an 8,000- for-one forward
split of the Common Stock. As of the date of this Registration Statement, we
have 10,033,600 shares of Common Stock issued and outstanding.
Item 8. Description of Securities.
We are authorized to issue 50,000,000 shares of Common Stock, par value
$.0.001 per share, and 10,000,000 shares of non-voting Preferred Stock, par
value $.0.01 per share. As of June 30, 1999, we had 1,250 shares of Common Stock
issued and outstanding. On August 30, 1999, the shareholders approved an 8,000-
for-one forward split of the Common Stock. As of the date of this Registration
Statement, we have 10,033,600 shares of Common Stock issued and outstanding. No
Preferred Stock has ever been issued or outstanding.
Common Stock
The holders of Common Stock have one vote per share on all matters
(including election of Directors) without provision for cumulative voting. Thus,
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors, if they choose to do so. The Common Stock is not
redeemable and has no conversion or preemptive rights.
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The Common Stock currently outstanding is validly issued, fully paid and
non-assessable. In the event of liquidation of the Company, the holders of
Common Stock will share equally in any balance of the Company's assets available
for distribution to them after satisfaction of creditors and the holders of the
Company's senior securities, whatever they may be. The Company may pay
dividends, in cash or in securities or other property when and as declared by
the Board of Directors from funds legally available therefor, but has paid no
cash dividends on its Common Stock.
Preferred Stock
Under the Articles of Incorporation, the Board of Directors has the
authority to issue non-voting Preferred Stock and to fix and determine its
series, relative rights and preferences to the fullest extent permitted by the
laws of the State of Colorado and such Articles of Incorporation. As of the date
of this Registration Statement, no shares of Preferred Stock are issued or
outstanding. The Board of Directors has no plan to issue any Preferred Stock in
the foreseeable future.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Shares and
Other Shareholder Matters.
(a) Principal Market or Markets
Our securities have never been listed for trading on any market and are not
quoted at the present time. At the present time, we do not know where secondary
trading will eventually be conducted. Because of our size, we believe that we
could potentially begin trading on the NASD's "Electronic Bulletin Board." To
the extent, however, that trading will be conducted in the over-the-counter
market in the so-called "pink sheets" or the NASD's "Electronic Bulletin Board,"
a shareholder may find it more difficult to dispose of or obtain accurate
quotations as to price of our securities. In addition, The Securities
Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure
related to the market for penny stock and for trades in any stock defined as a
penny stock.
(b) Approximate Number of Holders of Common Stock
As of the date hereof, a total of 10,033,600 of shares of our Common Stock
were outstanding and the number of holders of record of our common stock at that
date was approximately one hundred ten. These shares reflect an 8,000-for-one
forward split of the Common Stock.
(c) Dividends
Holders of common stock are entitled to receive such dividends as may be
declared by our Board of Directors. No dividends on the common stock were paid
by us during the periods reported herein nor do we anticipate paying dividends
in the foreseeable future.
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(d) The Securities Enforcement and Penny Stock Reform Act of 1990
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure and documentation related to the market for penny stock
and for trades in any stock defined as a penny stock. Unless we can acquire
substantial assets and trade at over $5.00 per share on the bid, it is more
likely than not that our securities, for some period of time, would be defined
under that Act as a "penny stock." As a result, those who trade in our
securities may be required to provide additional information related to their
fitness to trade our shares. These requirements present a substantial burden on
any person or brokerage firm who plans to trade our securities and would thereby
make it unlikely that any liquid trading market would ever result in our
securities while the provisions of this Act might be applicable to those
securities.
Item 2. Legal Proceedings.
No legal proceedings of a material nature to which we are a party were
pending during the reporting period, and we know of no legal proceedings of a
material nature pending or threatened or judgments entered against any of our
directors or officers in their capacity as such.
Item 3. Changes In and Disagreements With Accountants.
We did not have any disagreements on accounting and financial disclosures
with our accounting firm during the reporting period.
Item 4. Recent Sales of Unregistered Securities.
The following shareholders acquired their respective shares in October,
1999 at a price of $1.00 per share. These shares were issued after an 8,000-
for-one forward split of the Common Stock.
Name Number of Shares
- ---- ----------------
Anderson, Greg 500
Ayers, Patricia H. 500
Bardakjian, Annette 500
Bayer, Julie 100
Bayer, Judith 100
Bayer, Jordan 100
Bayer, Gary 500
Berggren, Scot 100
Bliss, Betty 100
Boylan, Jason 100
Boylan, Jeanette 100
Boylan, Jim 100
Bozorgpour, Hassan 1500
Bozorgpour, Susan 500
Bozorgpour, Dariush 500
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Brown, Ronald 500
Carter, Stephen L. 500
Connelly, Michael A. 500
Connelly, Michael A. 500
Connelly, Deborah 500
Connelly, Casey 500
Dang, Nghien 500
Duong, Kelly 200
Duong, Duc 500
Duong, Nhu V. 500
Gelfenbaum, Lynn 500
Gelfenbaum, Guy 500
Gibbons, Garth W. 500
Godfrey, Michael 100
Godfrey, Christina 100
Godfrey, Karen E. 100
Harayda, Irene 100
Hegwer, Leasha 100
Hegwer, Tom 100
Ho, An T. 500
Hollberg, Regina 100
Jallad, Armande 500
Jalland, Sami 500
Johnson, Lisa 500
Kim, Byung 400
Koppeman, Carrie 100
Kopperman, Kyle 500
Kosmiski, David 500
Kosmiski, James 500
Kosmiski, Lisa 500
Kosmiski, Pensopa 500
Kosmiski, Susan 500
Krantz, Mori 500
Lawrence, Carol 500
Lawrence, Mark 500
Lawrence, Megan 500
Levy, Jenna 500
Levy, Darrin 500
Levy, Todd 500
Levy, Lee 500
Levy, Herriet 500
Levy, Marc 500
Levy, Mindy 500
Levy, Brandon 500
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Levy, Burton 500
Levy, Jay R. 500
Martinez, Stephanie L. 100
Pachello, Lillian 500
Pachello, Geraldine 500
Reiver, Jannie 100
Rhodus, Tom 100
Rosenberg, Eric 500
Rosenberg, Evan 500
Rosenberg, Brian 500
Saiz, Vicki D. 100
Sanner, John 100
Schulteis, Cindy 500
Schultheis, John 500
Sckrabaz, Dan 500
Shearer, Dawn 500
Shearer, Norman 500
Sher, Laurie Levy 500
Siegel, Larry 500
Southwell, Shelley 100
Southwell, Paul 100
Spagnola, Cindy 100
Spagnola, Robert 100
Thompson, Donald W. 100
Weisbart, Letty 500
Weisbart, Graig 100
Williams, Dianne 300
Williams, Bryan 500
Zeppelin, Kalman 500
Total Shares 33,600
We believe that the offers and sales described above were exempt from
registration under Rule 504 of Regulation D under the Securities Act because
those offers and sales met all the conditions of Rule 504 as then in effect,
including the dollar limitation, and we were not at the time of such
transactions within any of the categories of issuers prohibited from using Rule
504.
Item 5. Indemnification of Directors and Officers.
The Company's Articles of Incorporation authorize the Board of Directors,
on behalf of the Company and without shareholder action, to exercise all of the
Company's powers of indemnifica tion to the maximum extent permitted under the
applicable statute. Title 7 of the Colorado Revised Statutes, 1986 Replacement
Volume ("CRS"), as amended, permits the Company to indemnify its directors,
officers, employees, fiduciaries, and agents as follows:
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Section 7-109-102 of CRS permits a corporation to indemnify such persons
for reasonable expenses in defending against liability incurred in any legal
proceeding if:
(a) The person conducted himself or herself in good faith;
(b) The person reasonably believed:
(1) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's best interests;
and
(2) In all other cases, that his or her conduct was at least not
opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person had no reasonable
cause to believe that his or her conduct was unlawful.
A corporation may not indemnify such person under this Section 7-109-102 of CRS:
(a) In connection with a proceeding by or in the right of the corporation
in which such person was adjudged liable to the corporation; or
(b) In connection with any other proceeding charging that such person
derived an improper benefit, whether or not involving action in an official
capacity, in which proceeding such person was adjudged liable on the basis that
he or she derived an improper personal benefit.
Unless limited by the Articles of Incorporation, and there are not such
limitations with respect to the Company, Section 7-109-103 of CRS requires that
the corporation shall indemnify such a person against reasonable expenses who
was wholly successful, on the merits or otherwise, in the defense of any
proceeding to which the person was a party because of his status with the
corporation.
Under Section 7-109-104 of CRS, the corporation may pay reasonable fees in
advance of final disposition of the proceeding if:
(a) Such person furnishes to the corporation a written affirmation of the
such person's good faith belief that he or she has met the Standard of Conduct
described in Section 7-109-102 of CRS;
(b) Such person furnishes the corporation a written undertaking, executed
personally or on person's behalf, to repay the advance if it is ultimately
determined that he or she did not meet the Standard of Conduct in Section
7-109-102 of CRS; and
(c) A determination is made that the facts then known to those making the
determination would not preclude indemnification.
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Under Section 7-109-106 of CRS, a corporation may not indemnify such
person, including advanced payments, unless authorized in the specific case
after a determination has been made that indemnification of such person is
permissible in the circumstances because he met the Standard of Conduct under
Section 7-109-102 of CRS and such person has made the specific affirmation and
undertaking required under the statute. The required determinations are to be
made by a majority vote of a quorum of the Board of Directors, utilizing only
directors who are not parties to the proceeding. If a quorum cannot be obtained,
the determination can be made by a majority vote of a committee of the Board,
which consists of at least two directors who are not parties to the proceeding.
If neither a quorum of the Board nor a committee of the Board can be
established, then the determination can be made either by the Shareholders or by
independent legal counsel selected by majority vote of the Board of Directors.
The corporation is required by Section 7-109-110 of CRS to notify the
shareholders in writing of any indemnification of a director with or before
notice of the next shareholders' meeting.
Under Section 7-109-105 of CRS, such person may apply to any court of
competent jurisdiction for a determination that such person is entitled under
the statute to be indemnified from reasonable expenses.
Under Section 7-107(1)(c) of CRS, a corporation may also indemnify and
advance expenses to an officer, employee, fiduciary, or agent who is not a
director to a greater extent than the foregoing indemnification provisions, if
not inconsistent with public policy, and if provided for in the corporation's
bylaw, general or specific action of the Board of Directors, or shareholders, or
contract.
Section 7-109-108 of CRS permits the corporation to purchase and maintain
insurance to pay for any indemnification of reasonable expenses as discussed
herein.
The indemnification discussed herein shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under the Articles of
Incorporation, any Bylaw, agreement, vote of shareholders, or disinterested
directors, or otherwise, and any procedure provided for by any of the foregoing,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of
heirs, executors, and administrators of such a person.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expense incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
14
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PART F/S
PROMOS, INC.
INDEX TO QUARTERLY REPORT
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
ITEM 1 - Financial Statements
Unaudited Balance Sheets at September
30, 1999 and December 31, 1998 (audited)............................. F-2
Unaudited Statements of Operations
for three and nine months ended
September 30, 1999 and 1998 ......................................... F-3
Statement of Stockholders' Equity (Deficit).......................... F-4
Unaudited Statements of Cash
Flows for nine months ended
September 30, 1999 and 1998 ......................................... F-5
Notes to Condensed Financial Statements ............................. F-6
F-1
<PAGE>
<TABLE>
<CAPTION>
PROMOS, INC.
BALANCE SHEETS
September 30, December 31,
1999 1998
(Unaudited) (Audited)
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .......................................................... $ 11,002 $ 746
Accounts receivable, net of
Allowance of doubtful accounts
$0 and $839 ........................................................................ 11,017 15,741
Prepaid expenses ................................................................... 1,189 100
--------- --------
Total Current Assets ........................................................... 23,208 $ 16,587
--------- --------
Fixed assets, at cost, net
Of accumulated depreciation
Of 1,520 and $ 1,280 ............................................................... 80 320
Security Deposit ................................................................... 260 260
--------- --------
Total Assets ................................................................... $ 23,548 $ 17,167
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable ................................................................... 10,654 9,986
Sales and payroll taxes payable .................................................... 777 1,577
Corporate Income taxes payable ..................................................... 3,681 0
Accrued expenses ................................................................... 0 3,840
Bank's line of credit,
Current portion .................................................................... 0 4,126
--------- --------
Total Current Liabilities ....................................................... $ 15,112 $ 19,529
--------- --------
LONG-TERM LIABILITIES:
Stockholder's Loan ................................................................. 576 4,500
--------- --------
Total Liabilities .............................................................. 15,688 24,029
--------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, 10,000,000
Shares of non-voting authorized,
Par value of $0.01 per share,
None issued ........................................................................ 0 0
Common stock, par value of $.001
Per share, 50,000,000 shares
Authorized 10,000,000 shares issued
And outstanding at September 30, 1999
And December 31, 1998 * ............................................................ 1,250 1,250
Retained earnings (Deficit) ........................................................ 6,610 (8,112)
--------- --------
Total Stockholders' Equity ..................................................... 7,860 (6,862)
--------- --------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY ................................................................ $ 23,548 $ 17,167
========= ========
</TABLE>
* Adjusting for an 8,000-for-one forward split of common stock.
"See notes to condensed financial statements."
F-2
<PAGE>
<TABLE>
<CAPTION>
PROMOS, INC.
CONDENSED STATEMENTS OF OPERATIONS
For Three and Nine Months Ended September 30, 1999 and 1998
For the three For the nine
Months ended Months ended
September 30, September 30,
------------------------ ------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Sales ....................................... $ 61,391 $ 32,693 $ 112,030 $ 88,319
---------- ---------- ---------- ----------
COSTS OF GOODS SOLD:
Purchases and freight ....................... 31,309 17,981 60,303 57,407
---------- ---------- ---------- ----------
GROSS PROFIT ............................ $ 30,082 14,712 51,727 30,912
---------- ---------- ---------- ----------
OPERATING PROFITS:
Advertising ................................. 235 156 945 596
Auto Expenses ............................... 225 205 675 608
Auto Rental ................................. 1,210 1,210 3,630 5,213
Delivery Expenses ........................... 141 387 424 854
Dues and Subscriptions ...................... 195 435 771 976
Depreciation ................................ 80 80 240 240
Employee Benefits ........................... 705 668 2,121 1,700
Insurance ................................... 180 288 539 827
Licenses and Taxes .......................... 305 378 1,222 986
Office Supplies and
Expenses .................................... 1,824 945 4,445 1,954
Officer's Salary ............................ 1,500 3,000 9,000 9,000
Professional Fees ........................... 241 0 394 0
Rent and Maintenance ........................ 1,008 1,008 3,445 4,857
Samples ..................................... 410 228 612 268
Telephone Expenses .......................... 1,572 1,527 3,817 3,684
Travel Expenses ............................. 421 368 579 518
---------- ---------- ---------- ----------
Total Operating Expenses ................. 10,252 10,883 32,859 32,281
---------- ---------- ---------- ----------
Net Income (Loss) Before
Other Income and (Expenses) ...................... 19,830 3,829 18,868 (1,369)
---------- ---------- ---------- ----------
Other Income and Expenses:
Interest Income ............................. 4 7 11 14
Interest Expense ............................ (132) (232) (476) (887)
---------- ---------- ---------- ----------
Total Other Income
And Expense ................................. (128) (225) (465) (873)
---------- ---------- ---------- ----------
Net Income (Loss) Before
Provision for Income Taxes .................. 19,702 3,604 18,403 (2,242)
Provision for Income Taxes ....................... (3,941) (48) (3,681) (125)
---------- ---------- ---------- ----------
NET INCOME (LOSS) ........................... $ 15,761 $ 3,556 $ 14,722 $ (2,367)
========== ========== ========== ==========
NET INCOME (LOSS) PER SHARE ...................... .002 N/A $ .001 N/A
========== ========== ========== ==========
NUMBER OF SHARES OUTSTANDING ..................... 10,000,000 10,000,000* 10,000,000 10,000,000*
========== ========== ========== ==========
</TABLE>
* Shares adjusted for an 8,000-for-one forward split of Common Stock
"See notes to condensed financial statements."
F-3
<PAGE>
<TABLE>
<CAPTION>
PROMOS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1999
(Unaudited)
Common Total
Stock Common (Deficit) Stockholders'
Number of Stock Retained Equity
Shares Amount Earnings (Deficit)
--------- ------ -------- ------------
<S> <C> <C> <C> <C>
Balance
January 1, 1998 ...... 1,250 $ 1,250 $ (8,112) $ (6,862)
8,000 - For
one forward
split on
August 30, 1999 ...... 9,998,750 0 0 0
Net income
for nine
months ended
September 30, 1999 ... 0 0 14,722 14,722
---------- ---------- ---------- -----------
Balance,
September 30, 1999 ... 10,000,000 $ 1,250 $ 6,610 $ 7,860
========== ========== ========== ===========
</TABLE>
"See notes of condensed financial statements"
F-4
<PAGE>
<TABLE>
<CAPTION>
PROMOS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
For the nine For the nine
Months ended Months ended
September 30 ,1999 September 30, 1998
------------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITITES:
Net Income ................................ $ 14,722 $ (2,367)
Adjustments to Reconcile
Net (Loss) to Cash Flow
From Operating Activities
Depreciation .............................. 240 240
Decrease (Increase) in
Accounts Receivable ....................... 4,724 4,113
(Increase) in Prepaid Expenses ................. (1,089) 0
Increase (Decrease) in
Payables .................................. 3,549 (564)
(Decrease) in Accrued Expenses ............ (3,840) 0
(Decrease) in Bank's Line
Of Credit ............................. (4,126) 0
--------- ---------
Cash (Used) by Operating
Activities ............................... 14,180 1,422
CASH FLOWS FROM (TO)
FINANCING ACTIVITIES:
(Decrease) in Stockholders' Loan ............... (3,924) 0
--------- ---------
Net Cash (Used) by Financing
Activities ................................ (3,924) 0
--------- ---------
Net Increase (Decrease)
In Cash ................................... 10,256 1,422
CASH, BEGINNING OF PERIOD ................. 746 4,069
--------- ---------
CASH, END OF THE
PERIOD ................................ $ 11,002 $ 5,491
========= =========
</TABLE>
"See notes to condensed financial statements"
F-5
<PAGE>
PROMOS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
accompanying statements should be read in conjunction with the audited financial
statements included in the Company's December 31, 1998 and 1997 audits. In the
opinion of management, all adjustments (Consisting only of normal recurring
accruals) considered necessary in order to make the financial statements not
misleading, have been included. Operating results for the nine months ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the full calendar year ended December 31, 1999. The financial
statements are presented on the accrual basis.
F-6
<PAGE>
PROMOS, INC.
INDEX TO FINANCIAL STATEMENTS
TABLE OF CONTENTS
ITEM PAGE
Report of Certified Public Accountant................................. F-8
Balance Sheets,
December 31, 1998 and 1997 .......................................... F-9
Statements of Operations, for the years
Ended December 31, 1998 and 1997 ..................................... F-10
Statements of Stockholders' Equity, for
The years ended December 31, 1998 and 1997 ........................... F-11
Statements of Cash Flows, for the years ended
December 31, 1998 and 1997 .......................................... F-12
Notes to Financial Statements ........................................ F-13-F-14
F-7
<PAGE>
Janet Loss, C.P.A., P.C.
Certified Public Accountant
3525 South Tamarac Drive, Suite 120
Denver, Colorado 80237
(303) 220-0227
Board of Directors
Promos, Inc.
6000 Evans Avenue, Building 2-20
Denver, Colorado 80222-5406
I have audited the accompanying Balance Sheets of Promos, Inc. as of December
31, 1998 and 1997, and the Statements of Operations, Stockholders' Equity, and
Cash Flows for the years ended December 31, 1998 and 1997.
I conducted my audit in accordance with generally accepted auditing standards.
These standards require that I plan and perform the audit to obtain reasonable
assurances about whether the financial statements are free of material
misstatements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentations.
In my opinion, the financial statements referred to above present fairly, in all
materials respects, the financial position of Promos, Inc. as of December 31,
1998 and 1997, and the results of its operations and its cash flow for the years
ended December 31, 1998 and 1997.
/s/ Janet Loss, C.P.A., P.C.
Janet Loss, C.P.A., P.C.
October 26,1999
F-8
<PAGE>
<TABLE>
<CAPTION>
PROMOS, INC.
BALANCE SHEETS
For the Years Ended December 31, 1998 and 1997
ASSETS 1998 1997
------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................... $ 746 $ 4,069
Accounts receivable, net of
Allowance of for doubtful accounts
$839 and $1,323 ......................................... 15,741 18,271
Prepaid Taxes ........................................... 100 0
-------- --------
Total Current Assets ............................... 16,587 22,340
-------- --------
Fixed assets at cost, net
Of accumulated depreciation
Of $1,280 and $960 ...................................... 320 640
Security Deposit ........................................ 260 260
-------- --------
Total Assets ....................................... $ 17,167 $ 23,240
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable ........................................ $ 9,986 $ 13,533
Sales and Payroll Taxes Payable ......................... 1,577 977
Corporate Income Taxes Payable .......................... 0 326
Accrued Expenses ........................................ 3,840 390
Bank's Line of Credit,
Current Portion .................................... 4,126 0
-------- --------
Total Current Liabilities ............................... 19,529 15,226
-------- --------
LONG TERM LIABILITIES:
Stockholder's Loan ...................................... 4,500 6,500
-------- --------
Total Liabilities .................................. $ 24,029 $ 21,726
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, no par value,
50,000 shares authorized, 1,250
shares issued and outstanding at
December 31, 1998 and 1997 .............................. 1,250 1,250
Retained earnings (Deficit) ............................. (8,112) 264
-------- --------
Total Stockholders' Equity .............................. (6,862) 1,514
-------- --------
Total Liabilities and
Stockholders' Equity ................................. $ 17,167 $ 23,240
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
<TABLE>
<CAPTION>
PROMOS, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1998 and 1997
1998 1997
---- ----
<S> <C> <C>
REVENUES:
Sales ...................................................... $ 115,441 $ 122,768
--------- ---------
COSTS OF GOODS SOLD:
Purchases and freight ...................................... 77,716 75,844
--------- ---------
GROSS PROFIT ............................................ 37,725 46,924
--------- ---------
OPERATING EXPENSES:
Advertising ................................................ 748 690
Auto Expenses .............................................. 787 849
Auto Rental ................................................ 4,840 6,422
Bad Debts .................................................. 0 1,323
Delivery Expenses .......................................... 1,006 873
Dues and Subscriptions ..................................... 1,175 892
Depreciation Expense ....................................... 320 320
Employee Benefits .......................................... 4,266 4,129
Insurance Expense .......................................... 1,044 1,187
Licenses and Taxes ......................................... 1,226 554
Office Supplies and Expenses ............................... 2,606 3,646
Officer's Salary ........................................... 15,000 11,500
Rent and Maintenance ....................................... 6,209 5,680
Samples .................................................... 451 500
Telephone Expenses ......................................... 4,451 4,562
Travel Expenses ............................................ 716 410
--------- ---------
Total Operating Expenses .............................. 44,845 43,537
--------- ---------
NET INCOME (LOSS) BEFORE
OTHER (EXPENSES) ........................................... (7,120) 3,387
--------- ---------
OTHER INCOME AND (EXPENSES):
Interest Income ............................................ 18 19
Interest (Expense) ......................................... (1,074) (904)
--------- ---------
Total Other Income and
(Expenses) .............................................. (1,056) (885)
--------- ---------
Net Income (Loss) before
Provision for Income Taxes .............................. (8,176) 2,502
Provision for Income Taxes ................................. 200 326
--------- ---------
NET INCOME (LOSS) .......................................... $ (8,376) $ 2,176
========= =========
NET INCOME (LOSS) PER SHARE ................................ $ (6.70) $ 1.74
========= =========
NUMBER OF SHARES OUTSTANDING ............................... 1,250 1,250
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
<TABLE>
<CAPTION>
PROMOS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1998 and 1997
Common
Stock (Deficit) Total
Number of Common Stock Retained Stockholders'
Shares Amount Earnings Equity
--------- ------------ -------- -------------
<S> <C> <C> <C> <C>
Balance
January 1, 1997 ................. 1,250 $ 1,250 $(1,912) $ (662)
Net income for
the year ended
December 31, 1997 ............... 0 0 2,176 2,176
------- ------- ------- -------
Balance
December 31, 1997 ............... 1,250 $ 1,250 $ 264 $ 1,514
Net (Loss) for
the year ended
December 31, 1998 ............... 0 0 (8,376) (8,376)
------- ------- ------- -------
Balance
December 31, 1998 ............... 1,250 $ 1,250 $(8,112) $(6,862)
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
<TABLE>
<CAPTION>
PROMOS, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998 and 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
1998 1997
---- ----
<S> <C> <C>
Net Income (Loss) ........................................ $(8,376) $ 2,176
Adjustments to Reconcile
Net (Loss) to Cash Flow From
Operating Activities:
Depreciation ............................................. 320 320
Decrease (Increase) in
Accounts receivable .................................. 2,530 (8,756)
(Increase) in prepaid
Expenses ............................................. (100) 0
Increase (Decrease) in
Payables ............................................. (3,273) 9,437
Increase in Accrued
Expenses .............................................. 3,450 0
Increase in Banks
Line of Credit ........................................ 4,126 0
------- -------
Cash Provided (Used)By
Operating Activities ..................................... (1,323) 3,177
------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Decrease in Stockholders'
Loan ................................................. (2,000) 0
------- -------
Net Cash (Used) by
Financing Activities ................................. (2,000) 0
Net Increase (Decrease) in
Cash ..................................................... (3,323) 3,177
------- -------
CASH, BEGINNING OF PERIOD ..................................... 4,069 892
------- -------
CASH, END OF PERIOD ........................................... $ 746 $ 4,069
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
PROMOS, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1998 and 1997
NOTE I - ORGANIZATION AND HISTORY
The Company is a Colorado corporation and has been incorporated since September
24, 1992. The business purpose of this corporation is to engage in the sale of
promotional products to other business companies.
NOTE II - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The company record income and expenses on the accrual method.
Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, cash on deposit and highly
liquid investments with maturities generally of three months or less.
Sales and Expenses
Sales and expenses are recorded using the accrual basis of accounting.
Fixed Assets and Accumulated Depreciation
Fixed assets consists of office equipment and are stated at cost less
accumulated depreciation which is provided for by charges to operations over the
estimated useful lives of the assets. The assets are depreciated over five
years.
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
revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-13
<PAGE>
NOTE III - AGING OF ACCOUNTS RECEIVABLE AND PAYABLE
The percentage aging of trade accounts receivable and accounts payable at
December 31, 1998 and 1997 is as follows:
Accounts Receivable Accounts Payable
Current 45% 100%
30-60 days 40%
over 60 days 15%
Bad Debt Policy
The Company uses the direct write-off method for its allowance for doubtful
accounts.
NOTE IV - LEASES AND OTHER COMMITMENTS
The Company leases its premises for $366.00 per month and currently has a two
year lease from March 1, 1999 through February 28, 2001.
NOTE V - RELATED PARTY TRANSACTIONS
The Company has incurred salary expenses of $15,000.00 and $11,500.00 for 1998
and 1997, respectively to its president. The Company also pays auto rental for
its president, this is currently $403.38 per month.
NOTE VI - LINE OF CREDIT
The Company has obtained a line of credit for $35,000.00. The interest rate
varies and is approximately 10.50 percent.
F-14
<PAGE>
PART III
Item 1. Index to Exhibits.
Exhibit Page or
Number Description Cross Reference
------- ----------- ---------------
3A Articles of Incorporation*
3B Amended and Restated Articles of Incorporation*
3C Bylaws*
*Previously Filed
Item 2. Description of Exhibits.
Original Articles of Incorporation, filed September 23, 1992.
Amended and Restated Articles of Incorporation, filed on August 27, 1999.
Bylaws of The Company, approved on August 5, 1999.
15
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Promos, Inc.
Dated: 4/9/00 By: /s/ Judith F. Harayda
-------------------------------
Judith F. Harayda
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
CHIEF FINANCIAL OFFICER
Dated: 4/9/00 By: /s/ Stephan R. Levy
-------------------------------
Stephan R. Levy
Treasurer and Director
Dated: 4/9/00 By: /s/ Judith F. Harayda
-------------------------------
Judith F. Harayda
Director
16
