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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
(MARK ONE)
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/X/ ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
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/ / TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 000-27615
CREATIVE PRODUCTS INTERNATIONAL
(Name of small business issuer in its charter)
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DELAWARE 52-2158936
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
</TABLE>
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3317 3RD AVE SOUTH, SEATTLE, WASHINGTON 98134
(principal executive offices)
(206) 264-1005
(issuer's telephone number, including area code)
------------------------
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Securities registered under Section 12(b) of the Exchange
Act: None
Securities registered under Section 12(g) of the Exchange
Act:
Common Stock, $.01 par value
Warrants to purchase common stock
</TABLE>
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports). And
(2) has been subject to such filing requirements for the past 90
days. Yes /X/ No / /
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to be the best of the registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KS. /X/
State issuer's other income for its most recent fiscal year. $1,200
State the aggregate market value of the voting stock held my non-affiliated
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. (See definition of affiliate in Rule 12b-2 of the Exchange Act. Not
applicable.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEEDING FIVE YEARS
Not applicable
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable. As of December 31, 1999, the
Registrant had 1,912,204 shares of Common Stock outstanding.
Transitional Small Business Disclosure Format (check one) Yes / / No /X/
DOCUMENTS INCORPORATED BY REFERENCES
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Part II--Certain exhibits Included in prior filings made
Listed in response to Item 13(a) under the Securities Act of 1933
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PART I
ITEM 1 ORGANIZATION AND DESCRIPTION OF BUSINESS
GENERAL
Creative Products International, Inc. (the "Company" or "CPI") is a
development stage company organized to commercialize certain educational print
materials and consumer products geared to families with children under the age
of six, as well as other Internet-based promotion, marketing, and merchandising
businesses. Management anticipates that these products, once developed, will be
offered to consumers through retail, catalog, and the internet and are intended
to generate fee based income through licensing, royalties or service fees. The
Company's first internet business, developed under the business names
Coupons4Everything.com and ePromo Networks intends to offer fully integrated
manufacturers' coupons and rebate distribution and processing services for
client consumer product manufacturers. It is expected that this will be the
Company's first live web site.
CORPORATE HISTORY
The Company was incorporated in the State of Delaware on March 25, 1999 as a
subsidiary of Caring Products International, Inc. The Company was spun-off to
shareholders on December 23, 1999. The Company has had limited operations to
date and is in the development stage. On February 15, 2000, the Company signed a
lease for approximately 5,000 sq. ft. of office space which will be available to
the Company April 1, 2000. Having commercial office space will enable the
Company to move forward to develop its business plans, hire staff, complete
research, development and market testing of its products, seek partnerships or
alliances to help promote the Company's products and raise new sources of equity
through financial investors or strategic partners. No assurances can be made
that the Company will be successful in achieving its business objectives.
PRODUCTS AND SERVICES
Research and develop priorities for the Company are geared to identifying
niche oriented products and services which can be promoted over the internet or
offer certain measurable cost-saving and other beneficial service improvements
through information technology. The Company seeks to develop products and
services which are unique to other competing products or services. Additionally,
the Company seeks to develop products and services which are not trend-related
and are need-based, either to the business community or the end-consumer. These
services are also geared to broad target markets, with opportunities for product
or service extensions.
The Company is most advanced in the development of an internet business
which significantly lowers the cost of distribution of manufacturers' coupons
and rebates to brand-name consumer product manufacturers. Under the brand names
and URL's Coupons4Everything and Rebates4Everything, the Company seeks to offer
the largest selection of coupons and rebates for products purchased in grocery,
drug, mass market, home improvement, toy, lawn & garden, craft, pet, computer
equipment, auto, bike and boat dealerships and office supply stores. Service
fees are expected to be paid by the client manufacturers and represent a
substantial reduction in daily cost of coupon distribution advertising versus
traditional Sunday supplement and direct mail vehicles. Management believes that
the cost savings plus added promotional features and "micro site" space
availability to adequately promote and describe product services, not
traditionally available with competing print-based coupon distribution will give
the Company a competitive advantage when it begins to sell these services to
target consumer product manufacturers. The Company has also developed certain
other features which management believes will be attractive to consumers and
target consumer product manufacturers. In general, the Company will not "spam"
or use unsolicited e-mail notices, require registration, or include any features
which typically irritate browsing consumers in its
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Web site design. The service also offers home consumers the ability to print
manufacturers' coupons directly to a consumer's home or office printer, without
having to download specialized software. Receipt of coupons and rebates is a
free service to home consumers. The Company is planning other services related
to improving the efficiency of various consumer product promotion, processing,
redemption and information management for the Company's target consumer product
manufacturers. Potential sources of revenue include listing fees for coupon and
rebate promotion, site referral fees, coupon and rebate processing fees and
management reporting.
The Company also has certain patents, trademarks and copyrights on certain
materials geared to households with children under the age of six. These
properties include a set of picture books, developed characters and stories
which can be distributed to consumers or viewed over the internet at the
Company's developed web site. Additionally, management intends to develop
complementary products which can be commercialized through traditional
publishing vehicles. The Company intends to develop these products into a
multi-media product line which utilize the internet, television and traditional
product distribution vehicles with the assistance of a strategic partner.
Management believes that the internet site developed for the distribution of its
proprietary content will be conducive to generating sponsorship arrangements
from consumer product advertisers which target households with children under
the age of 6.
Additionally, the Company has obtained the right to market certain products
related to teaching young children their first hygiene and social skills,
including toilet training. These products incorporate certain patents,
copyrights, and trademarks detailed in the Company's financial statements as
intangible assets.
SALES AND MARKETING
The Company has had limited operations to date. Management anticipates that
the introduction of the Company's internet businesses and consumer products will
be advanced through strategic alliances or partnerships. Management anticipates
that the Company's coupon and rebate distribution services will be promoted
through a variety of relationships with search engines, portals, unaffiliated
e-retailers and other trade and consumer advertising. Introduction of any of the
Company's products and services is dependent on the Company raising new sources
of financing, including, but not limited to new equity.
PRODUCT DEVELOPMENT AND COMMERCIALIZATION
The Company is in the early stages of product development and has not
generated any product or service based revenues. The Company has engaged various
programmers, designers and other personnel to begin product and service
development on an outsourced basis. The Company intends to hire staff to
complete product and service development with the addition of new funding. There
is no assurance that the Company's outsourced personnel will continue to be
available to the Company to complete product development or that it will be able
to hire qualified staff to complete product development, introduce the Company's
products and services to potential partners or target consumer product
manufacturers and other businesses whose services are required to introduce a
Web site in today's competitive internet marketplace.
EMPLOYEES
As of December 31, 1999, the Company had one part-time employee, the
Company's CEO. During early 2000, the Company has hired various part-time
consultants to perform certain product development work for the Company.
ITEM 2 DESCRIPTION OF PROPERTIES
The Company has signed a lease on February 15, 2000. This office, covers
approximately 5000 sq. ft. is rented pursuant to a lease from 3317 3rd Ave. S.
General Partnership, which to the best of the Company's
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knowledge, has no affiliation with any of the officers, directors or principal
stockholders of the Company. The lease expires in March, 2005, and its current
monthly base rent is $4,800 per month with annual increases.
ITEM 3 LEGAL PROCEEDINGS
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matters to a vote of its security holders
during the fiscal year ended December 31, 1999.
PART II
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(A) (1) MARKET INFORMATION
The Company's common stock is not traded on any exchange.
(A) (2) SALE OF SECURITIES
On October 4, 1999, The Company sold to the CEO and Chairman of the Board
384,000 shares of common stock, in connection with an employment agreement for
an aggregate cash consideration of $19,200, which consideration the independent
directors of the Company concluded represented no less than the fair value of
such shares, based on certain factors and the appraisal of such shares that was
conducted by an independent valuation firm.
HOLDERS
The number of record holders of the Company's common stock as of
December 31, 1999 was 125.
DIVIDENDS
The Company has never paid a dividend on its common stock. It is the present
policy of the Company not to pay cash dividends on the Common Stock. Any payment
of cash dividends on the Common Stock in the future will be dependent upon the
Company's financial condition, results of operations, current and anticipated
cash requirements, plans for expansion, as well as other factors that the Board
of Directors deems relevant.
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, OF THE COMPANY CONTAINED ELSEWHERE IN
THIS FORM 10-KSB.
OVERVIEW
From the date of the Company's incorporation in March, 1999 to present, the
Company has had limited operations. The Company is in the development stage and
organized to commercialize certain educational and consumer products geared to
children under the age of six, as well as other Internet-based promotion,
marketing, and merchandising businesses. Management anticipates that these
products, once developed, will be offered to consumers through retail, catalog,
and the internet. Creative Products plans
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to seek to finance the development of its business through strategic
partnerships in the publishing, media, video production, consumer products and
electronic commerce markets.
The Company generated income from liquid assets of $1,200. This income was
offset by accrued but not paid officer's salary of $25,000 and amortization of
certain trademark, copyright and patent properties of $9,339. As a result of the
foregoing, the company generated a net loss of $33,139 for this fiscal year. The
net loss per share during the Company's first fiscal year of operation was $.05.
The Company's liquidity and capital resources at December 31, 1999 consisted
of cash of $370,400 which was held primarily in interest bearing accounts. This
cash was generated through a $350,000 cash investment by the former parent and
$19,200 investment by an officer of the Company. The Company's future operations
are dependent on raising financing from debt or equity, or obtaining positive
cash flow from operating activities.
OTHER MATTERS AND CONTINGENCIES
Subsequent to the close of the fiscal year ended December 31, 1999, the
Company signed a 5-year lease for office space in Seattle. This lease requires
monthly payments of $4,800 with annual increases. In addition, the Company
purchased certain content management software and training services to serve as
the operating backbone of the Coupons4Everything.com coupon distribution
service. This software obligates the Company to pay approximately $103,000 plus
annual licensing fees to the vendor, which management does not believe are
material.
The Company's recorded contingent liability consists of accrued but unpaid
cash compensation to an officer and director in the amount of $25,000.
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
The Company's has adopted for its accounting policies the provision of SFAS
No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
("SFAS 131") which establishes standards for the way public business enterprises
are to report information about operating segments in annual financial
statements and requires those enterprises to report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes the related disclosures about products and services, geographic
areas and major customers. The adoption of SFAS 131 had no significant impact on
the Company's financial statements.
FORWARD-LOOKING STATEMENTS
This Form 10-KSB and other reports and statements filed by the Company from
time to time with the Securities and Exchange Commission (collectively the
"Filings") contain or may contain forward-looking statements and information
that are based upon beliefs of, and information currently available to, the
Company's management, as well as estimates and assumptions made by the Company's
management.
When used in the Filings, the words anticipate, believe, estimate, expect,
future, intend, plan and similar expression as they relate to the Company or the
Company's management, identify forward-looking statements. Such statements
reflect the current view of the Company with respect to future events and are
subject to risks, uncertainties and assumptions relating to the Company's
operations and results of operations, competitive factors and pricing pressures,
shifts in market demand, the performance and needs of the industries which
constitute the customers of the Company, to costs of product development and
other risks and uncertainties, including, in addition to any uncertainties with
respect to management of growth, increases in sales, the competitive
environment, hiring and retention of employees, pricing, new product
introductions, product productivity, distribution channels, enforcement of
intellectual property rights, possible volatility of stock price and general
industry growth and economic conditions. Should one or more of these risks or
uncertainties materialize or should the underlying assumptions prove incorrect,
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actual results may differ significantly from these anticipated, believed,
estimated, expected intended or planned.
ITEM 7 FINANCIAL STATEMENTS
The following financial statements of Creative Products International, Inc.
are included in Item 7.
Balance Sheet as of December 31, 1999
Statement of Operations for the year ended December 31, 1999
Statement of Stockholders' Equity for the year ended December 31, 1999
Statement of Cash Flow for the year ended December 31, 1999
Notes to Financial Statements
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Creative Products International, Inc.
Seattle, Washington
We have audited the accompanying balance sheet of Creative Products
International, Inc. (a development stage company) as of December 31, 1999, and
the related statements of operations, stockholder's equity, and cash flows for
the period March 25, 1999 (date of incorporation) to December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 1999, and the results of its operations and its cash flows for the
period from March 25, 1999 (date of incorporation) to December 31, 1999, in
conformity with generally accepted accounting principles.
/s/ Peterson Sullivan P.L.L.C.
February 9, 2000
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CREATIVE PRODUCTS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
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ASSETS
Current assets--Cash........................................ $370,400
Intangible assets, net...................................... 156,313
--------
TOTAL ASSETS $526,713
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities--accrued salaries $ 25,000
--------
Stockholders' equity:
Preferred stock, par value $.01 per share, 1,000,000
shares
authorized, none issued and outstanding.................
Common stock, par value $.01 per share, 15,000,000 shares
authorized, 1,912,205 shares issued and outstanding..... 19,122
Additional paid-in capital................................ 515,730
Retained earnings (deficit)............................... (33,139)
--------
Total stockholders' equity.................................. 501,713
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $526,713
========
</TABLE>
See Notes to Financial Statements
8
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CREATIVE PRODUCTS INTERNATIONAL, INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
MARCH 25,1999 (DATE OF INCORPORATION) TO DECEMBER 31, 1999
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Officer salaries............................................ $ 25,000
Amortization expenses....................................... 9,330
Net Loss from operations.................................. (34,339)
--------
Other Income - interest..................................... 1,200
========
Net Loss.................................................. $(33,139)
Net loss per common share................................... (.05)
</TABLE>
See Notes to Financial Statements
9
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CREATIVE PRODUCTS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
MARCH 25, 1999 (DATE OF INCORPORATION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- ADDITIONAL RETAINED
DATE OF NUMBER PAID-IN EARNINGS
TRANSACTION OF SHARES PAR VALUE CAPITAL (DEFICIT) TOTAL
-------------- --------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Shares issued to parent for
cash............................ March 25, 1999 1 $ -- $ 50,000 $ -- $ 50,000
Intangible assets contributed by
parent at historical cost....... June 30, 1999 -- -- 165,652 165,652
Shares issued to parent for
cash............................ Sept 27, 1999 1,528,204 15,282 284,718 300,000
Shares issued to officer for
cash............................ Oct 4, 1999 384,000 3,840 15,360 19,200
Net Loss.......................... (33,139) (33,139)
--------- ------- -------- -------- --------
1,912,205 $19,122 $515,730 $(33,139) $501,713
========= ======= ======== ======== ========
</TABLE>
See Notes to Financial Statements
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CREATIVE PRODUCTS INTERNATIONAL, INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
MARCH 25, 1999 (DATE OF INCORPORATION) TO DECEMBER 31, 1999
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Cash flows from operating activities
Net loss.................................................. $(33,139)
Amortization Expense...................................... 9,339
Increase in accrued salaries.............................. 25,000
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Net cash provided from operating activities............. 1,200
Cash Flows from Financing Activities
Proceeds from issuance of common stock to parent.......... $350,000
Proceeds from issuance of common stock to officer......... 19,200
--------
Net cash provided from financing services............... 369,200
Cash at March 25, 1999 (date of incorporation).............. 0
--------
Cash at December 31, 1999................................... $370,400
========
</TABLE>
See Notes to Financial Statements
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CREATIVE PRODUCTS INTERNATIONAL, INC
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
NOTE 1 ORGANIZATION AND DESCRIPTION OF BUSINESS
Creative Products International, Inc. ("the Company"), a development stage
company, was incorporated in the state of Delaware on March 25, 1999. The
Company was a subsidiary of another corporation until December 23, 1999, when it
was spun-off. The Company is developing consumer product promotional services
and licensing products which can be commercialized through publishing, the
internet, and video.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. Cash balances regularly
exceed the Federally insured limit.
INTANGIBLE ASSETS
Intangible assets consist of the following:
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Purchased technology........................................ $ 72,656
Patent...................................................... 43,181
Copyright................................................... 29,583
Trademark................................................... 20,232
--------
165,652
Less accumulated amortization............................... (9,339)
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$156,313
========
</TABLE>
These assets were transferred to the Company by its former parent at
historical cost at June 30, 1999. Amortization is recorded using the
straight-line method over the estimated useful lives of the assets which does
not exceed ten years.
The Company periodically reviews intangible assets to assess recoverability.
Impairment will be recognized in results of operations when intangible assets
are deemed unrecoverable. Management has determined that these intangible assets
will be recoverable.
REVENUE RECOGNITION
The Company will recognize revenue as contractual terms are satisfied.
ADVERTISING
Advertising costs will be expensed during the period incurred.
RESEARCH AND DEVELOPMENT
Research and development costs will be expensed during the period incurred.
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CREATIVE PRODUCTS INTERNATIONAL, INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
period. Diluted earnings per share takes into consideration common shares
outstanding (computed under basic earnings per share) and potentially dilutive
common shares; however, there are no dilutive securities. The weighted average
number of shares outstanding was 646,851 for the period ended December 31, 1999.
STOCK-BASED COMPENSATION
The Company adopted a stock-based compensation plan in 1999. The plan
provides for options to be granted to officers, directors and employees to
acquire a maximum of 1,000,000 shares of the Company's stock. Compensation cost
for stock options is measured as the excess, if any, of the value of the
Company's stock at the date of the grant over the amount an employee is required
to pay for the stock.
During 1999, options to acquire 14,000 shares at $.30 per share and 5,000
shares at $.32 per share of stock were granted to officers and directors of the
Company. These options expire in ten years or five years if the Grantee holds
10% or more of the outstanding common shares. As the exercise price of the
options is in excess of the option value, no compensation expense has been
recognized in 1999. The pro forma amounts required to be calculated by Statement
of Financial Accounting Standards No. 123 are not material to the financial
statements.
Following is a summary of the status of the plan during 1999:
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<CAPTION>
NUMBER OF WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at March 25, 1999...................... -- $ --
Granted............................................ 19,000 .305
Exercised.......................................... -- --
Forfeited.......................................... -- --
------ -------
Outstanding at December 31, 1999................... 19,000 $ .305
====== =======
</TABLE>
These options and the warrants discussed in Note 4 were not included in the
computation of earnings per share because they are anti-dilutive.
INCOME TAXES
Income taxes are accounted for using the asset and liability approach, which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Deferred income taxes will be provided for the
temporary differences between the financial reporting basis and the tax basis of
the Company's assets and liabilities. A valuation allowance will be recognized
for deferred tax assets not likely to be realized. Deferred taxes are to be
measured by the provisions of currently enacted tax laws. There were no material
temporary differences at December 31, 1999.
PREFERRED STOCK
The Company has authorized 1,000,000 shares of preferred stock at a par
value of $.01 per share. No preferred shares had been issued nor had preferences
been determined as of December 31, 1999.
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CREATIVE PRODUCTS INTERNATIONAL, INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
USE OF ACCOUNTING ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in accordance 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
COMPREHENSIVE INCOME
The Company had no elements of comprehensive income for the period ended
December 31, 1999. Further, there are no other new financial accounting
standards which would have an effect on these financial statements.
NOTE 3 EMPLOYMENT AGREEMENT
On September 24, 1999, the Company entered into a three-year employment
agreement with its chairperson, Susan Schreter. The agreement may be extended in
one-year increments. Ms. Schreter is obligated to spend up to 25% of her time on
Company business at an annual compensation of $25,000. In the event she devotes
100% of her time to the Company, she will receive an annual salary of $150,000.
On October 4, 1999, the Company sold 384,000 shares of the Company's common
stock to Ms. Schreter for $19,200 in cash.
NOTE 4 WARRANT
On August 25, 1999, the Company entered into an agreement with a Hong Kong
based company for the identification of product manufacturing sources in China.
As part of the agreement, the Company is obligated to issue a warrant to
purchase 26,000 shares of its common stock upon the first successful shipment of
product from China. The exercise price of the warrant is to be determined by the
closing bid price of the Company's shares on the date of approval of the product
by the Company's board of directors which is to occur within 30-days of
shipment. The warrant is for a five-year period beginning on the date of Board
approval. As of December 31, 1999, no warrants were issued under this agreement.
NOTE 5 OPERATING LEASE
The Company entered into a non-cancelable five-year lease for its
facilities. The future minimum lease payments are as follows:
<TABLE>
<S> <C>
2000........................................................ $ 43,200
2001........................................................ 59,760
2002........................................................ 62,748
2003........................................................ 65,885
2004........................................................ 69,176
Thereafter.................................................. 17,507
--------
$318,276
========
</TABLE>
The Company did not pay rent in 1999.
14
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PART III
ITEM 8 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of the Common Stock of
the Company to file reports of ownership and change in ownership with the
Securities and Exchange Commission and the exchange on which the Common Stock is
listed for trading. Executive officers, directors and more than ten percent
stockholders are required by regulations promulgated under the Exchange Act to
furnish the Company with copies of all Section 16(a) reports filed. The Company
believes that all reporting requirements applicable to its executive officers,
directors, and more than ten percent stockholders were compiled with for the
fiscal year ended December 31, 1999.
The following table sets forth information concerning the directors and
executive officers of the Company as of December 31, 1999.
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<CAPTION>
NAME AGE POSITION
- - ---- -------- ------------------
<S> <C> <C>
Susan A. Schreter................................. 39 Chairman and CEO
Joan Lundgren..................................... 46 Director
Lisa Indovino..................................... 38 Director
</TABLE>
The Company's by-laws provide that the size of the Board of Directors shall
initially be fixed by the Incorporater, and thereafter may be changed by
resolution of the Board. Creative Products anticipates that it will name other
directors during the next 12 months. Members of the Board serve until the next
annual meeting of stockholders and until their successors are elected and
qualified. Meetings of the Board are held when and as deemed necessary or
appropriate. Officers are appointed by and serve at the discretion of the Board.
There are no family relationships among any of Creative Products directors.
Susan A Schreter has been president and a director of Caring Products
International, Inc since January 1993 where she was responsible for the design
and commercialization of Caring Product's products as well as other executive
functions. She will continue to serve as president and a director of Caring
Products International, Inc following the spin off. From July 1985 to December
1992, she was president of Beta International Inc, New York, New York, a firm
providing consulting services to growing companies, private business investors
and buy-out funds in the areas of acquisition due diligence, cash flow planning,
strategic business planning and capital investment.
Lisa Indovino is a telecommunications expert with over 15 years of
specialization in the commercialization planning and market introductions of new
internet and cellular technologies. Since 1997, she has been Director of
Business Development at Lucent Technologies, where she is responsible for
identifying internet based acquisition and joint venture opportunities. From
1993 to 1996, Ms Indovino was Executive Vice President and a founding partner of
Customer Information Inc of Randallstown, Maryland, a firm which provided
telecommunications technology research and consulting to Fortune 500 companies
including IBM. From 1992 to 1993, Ms Indovino was a Program Manager for
Mercedes-Benz of North America, Montvale, New Jersey, where she was responsible
for the design and implementation of the company's first nationwide cellular
program to Mercedes dealerships.
Joan Lundgren served as Vice President of Retail Chain Sales for Caring
Products International Inc from February 1995 to August 1999, where she was
responsible for product introduction to retail chains and development of
in-store advertising programs and "roto's" promotional programs. From 1988 to
1995, Ms Lundgren worked as Senior Vice President for Yegen Associates and an
affiliate of Yegen Associates, Lion Associates, in Paramus, New Jersey. Ms
Lundgren was responsible for the marketing program development and credit
quality standard review for a privately held consumer lending organization which
15
<PAGE>
had 75 offices nationwide. Ms Lundgren has served in other marketing and sales
capacities in the financial services and banking sectors.
ITEM 9 EXECUTIVE COMPENSATION
The Company has not paid any compensation to its current directors.
On September 24, 1999, Creative Products entered into a three-year
employment agreement with Susan Schreter, which is subject to automatic one-year
extensions unless terminated by Ms Schreter or Creative Products. Under the
terms of the agreement, Ms Schreter is to spend up to 25% of her time working
for Creative Products and is to receive a $25,000 salary for her services to
Creative Products. At such time when she devotes 100% of her time, she will be
entitled to receive $150,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS/
NAME OF PRINCIPAL POSITION YEAR SALARY OPTIONS
- - -------------------------- -------- ------------ ------------
<S> <C> <C> <C>
Susan A Schreter............................................ 1999 $25,000* 5,000
</TABLE>
- - ------------------------
* This amount is accrued but not paid.
ITEM 10 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
As part of the negotiation of Creative Products employment agreement with
Susan Schreter, Creative Products sold 384,000 shares of its common stock to Ms
Schreter on Oct 4, 1999 for $19,200, which consideration the independent
directors of Creative Products concluded no less than the fair value of such
shares. In reaching such conclusion, the independent directors took into
consideration, among other things, an appraisal of such shares that was
conducted by an independent valuation firm.
It is the policy of the Company with respect to insider transactions, that
all transactions between the Company, its officers, directors, principal
stockholders and their affiliates be on terms no less favorable to the Company
that could be obtained from unrelated third parties in arms-length transactions,
and that all such transactions shall be approved by a majority of the
disinterested members of the Board of Directors. The Company believes that the
transactions described above complied with such policy.
ITEM 11 DESCRIPTION OF SECURITIES
The authorized capital stock of Creative Products consists of 15,000,000
shares of common stock, $.01 par value per share, of which 1,912,204 are issued
or outstanding, and 1,000,000 shares of preferred stock (the "Preferred Stock")
of which no shares are issued or outstanding.
PREFERRED STOCK
The Board of Directors is authorized, subject to limitations prescribed by
law, to provide for the issuance of the Preferred Stock in series and by filing
a certificate pursuant to the Delaware General Corporation law to establish the
number of shares to be included in each series. The Preferred Stock may be
issued either as a class without series, or if so determined from time to time
by the Board of Directors, whether in whole or in part in one or more series,
each series to be appropriately designated by a distinguishing number, letter or
title prior to the issue of any shares thereof.
The Board of Directors has the authority to fix the voting power, the
designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions of
16
<PAGE>
the Preferred Stock in the resolution or resolutions adopted by the Board of
Directors providing for the issuance of the Preferred Stock.
COMMON STOCK
Subject to the provisions of law and the preferences of the Preferred Stock,
dividend may be paid on the Common Stock at such time and in such amounts as the
Board of Directors may deem advisable.
The Board of Directors is authorized to effect the elimination of shares of
Common Stock purchased or otherwise reacquired by Creative Products from the
authorized capital stock or number of shares of Creative Products in the manner
provided for in the General Corporation Law of Delaware.
ITEM 12 STOCK OPTION PLANS
The Company adopted a stock-based compensation plan in 1999. The plan
provides for options to be granted to officers, directors and employees to
acquire a maximum of 1,000,000 shares of the Company's stock. Compensation cost
for stock options is measured as the excess, if any, of the value of the
Company's stock at the date of the grant over the amount an employee is required
to pay for the stock.
During 1999, options to acquire 14,000 shares at $.30 per share and 5,000
shares at $.32 per share of stock were granted to officers and directors of the
Company. These options expire in ten years or five years if the Grantee holds
10% or more of the outstanding common shares. As the exercise price of the
options is in excess of the option value, no compensation expense has been
recognized in 1999. The pro forma amounts required to be calculated by Statement
of Financial Accounting Standards No. 123 are not material to the financial
statements.
Following is a summary of the status of the plan during 1999:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
NAME OPTIONS EXERCISE PRICE
- - ---- --------- ----------------
<S> <C> <C>
Susan A Schreter................................... 5,000 $ .32
c/o Creative Products International, Inc.
3317 3rd Ave S
Seattle WA 98134
Lisa Indovino...................................... 5,000 .30
118 Bellevue Ave
Upper Montclaire NJ 07403
Joan Lundgren...................................... 5,000 .30
326 Prospect Ave
Hackensack NJ 07601
------ -------
Non executive...................................... 4,000 .30
====== =======
Outstanding at December 31, 1999................... 19,000 $ .305
====== =======
</TABLE>
These options and the warrants discussed in Note 4 were not included in the
computation of earnings per share because they are anti-dilutive.
17
<PAGE>
ITEM 13 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 31, 1999
with respect to the beneficial ownership of the Company's Common Stock by
(i) each stockholder known by the company to be the beneficial owner of more
than 5% of the Company's Common Stock; (ii) each director, (iii) the Named
Executive Officers and (iv) all executive officers and directors as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OWNED
- - ------------------------------------ ---------------- -------------
<S> <C> <C>
Susan A Schreter................................ 473,447* 24.7%
c/o Creative Products International Inc
3317 3rd Ave S
Seattle WA 98134
Lisa Indovino................................... 5,000 **
118 Bellevue Ave
Upper Montclaire NJ 07403
Joan Lundgren................................... 37,500 1.9%
326 Prospect Ave
Hackensack NJ 07601
All directors as a group........................ 515,947 26.9%
</TABLE>
- - ------------------------
* number includes 5,000 unexercised incentive stock
** represents less than 1%
ITEM 14 EXHIBITS, LISTS AND REPORTS ON FORM 8-K
EXHIBITS
None
REPORTS ON FORM 8-K
None
18
<PAGE>
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
Washington, on March 23, 2000.
<TABLE>
<S> <C> <C>
CREATIVE PRODUCTS INTERNATIONAL, INC.
By: /s/ SUSAN A. SCHRETER
</TABLE>
In accordance with the requirements of the Exchange Act, this report has
been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - --------- ----- ----
<S> <C> <C>
Susan A Schreter Chairman and CEO March 23, 2000
Joan Lundgren Director March 23, 2000
Lisa Indovino Director March 23, 2000
</TABLE>
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> MAR-25-1999
<PERIOD-END> DEC-31-1999
<CASH> 370,400
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 9,339
<TOTAL-ASSETS> 526,713
<CURRENT-LIABILITIES> 25,000
<BONDS> 0
0
0
<COMMON> 501,713
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 526,713
<SALES> 0
<TOTAL-REVENUES> 1,200
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (33,139)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (33,139)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
