UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b) OR 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
IAMG HOLDINGS, INC.
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(Name of Small Business Issuer in its Charter)
DELAWARE 770434421
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1400 BROADWAY, NEW YORK, NEW YORK 10018
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(Address of Principal Executive Offices) (Zip Code)
(212) 827-0301
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(Issuer's Telephone Number)
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, $.001 PAR VALUE PER SHARE
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(Title of Class)
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AVAILABLE INFORMATION
YOU SHOULD READ THIS ENTIRE REGISTRATION STATEMENT CAREFULLY INCLUDING
INFORMATION SET FORTH IN THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE
9.
Subsequent to the date of this Registration Statement, IAMG Holdings,
Inc. ("IAMG" or the "Company") will be subject to the information requirements
of the Securities Exchange Act of 1934, as amended ("Exchange Act") and in
accordance therewith will file reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports and other information filed
by the Company with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington D.C. 20549, and at the Commission's New York Regional
office at Seven World Trade Center, Suite 1300, New York, New York 10048. Copies
of such material can also be obtained from the Public Reference Section of the
Commission, Washington, DC 20549 at prescribed rates.
This Registration Statement, as well as all amendments thereto and
subsequent reports, have been and will be filed through the Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system. Documents filed through
EDGAR are publicly available through the Commission's Website at
http:/www.sec.gov.
IAMG has filed with the Commission this Registration Statement on Form
10-SB (together with all amendments and exhibits filed or to be filed in
connection herewith, the "Registration Statement") under the Exchange Act, with
respect to the IAMG's common stock, $.001 par value per share (the "Common
Stock"). Statements contained herein as to the contents of any document are
summaries of such documents and, in each instance, reference is hereby made to
the copy of such document filed as an exhibit to the Registration Statement, and
each such statement is qualified in all respects by such reference. All material
information relating to such exhibits are discussed in this Registration
Statement. The Registration Statement may be inspected and copied at the places
set forth above.
In addition to the foregoing, IAMG will furnish to registered holders
of its Common Stock annual reports containing audited financial statements, with
an opinion expressed by the Company's independent auditors. Such audited
financial statements will be prepared in conformity with generally accepted
accounting principals ("GAAP"). The Company may furnish to registered holders of
its Common Stock unaudited financial statements on a quarterly basis, such
unaudited financial statements to be prepared in conformity with GAAP. The
Company will also furnish to registered holders all notices of stockholder's
meetings and other reports and communications of the Company.
IAMG's principal executive offices are located at 1400 Broadway, Suite
1907, New York, NY 10018, and its telephone number is (212) 827-0301.
As of July 27, 2000, there were 17,950,000 shares of Common Stock,
$.001 par value, issued and outstanding held by 125 holders of record.
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PART I
ITEM 1. BUSINESS
FORWARD LOOKING STATEMENTS
Certain information contained in this Registration Statement are
forward-looking statements (within the meaning of Section 27A of the Securities
Act of 1933 (the "Act"), as amended and Section 21E of the Exchange Act, as
amended). Such potential risks and uncertainties include, but are not limited
to, the risk factors contained in the Registration Statement including those
relating to the Company's history of losses and early stage of development. See
"Risk Factors" below. When used herein, the words "believes", "anticipates",
"expects", and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties,
which could cause actual results to differ materially from those projected.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. IAMG undertakes no
obligation to republish revised forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. Readers are also urged to carefully review and consider
the various disclosures made by IAMG which attempt to advise interested parties
of the factors which affect the IAMG business, in this report, as well as the
IAMG periodic reports on Forms 10-KSB, 10QSB and 8-K filed with the Securities
and Exchange Commission.
GENERAL/HISTORICAL INFORMATION
IAMG was originally incorporated under the name Telequipment Inc. on
July 22, 1996 in the State of Nevada, and has since experienced three name
changes, two changes of control and changes of business focus. On August 19,
1999, Articles of Merger were filed with the Secretary of State, of the State of
Nevada, merging Telequipment, Inc. into Green Dolphin Systems Corp. ("Green
Dolphin"), a Nevada corporation. Green Dolphin was authorized to issue
100,000,000 shares of common stock, $.001 par value, and, as of December 31,
1999, 6,000,000 shares of common stock were issued and outstanding. On January
15, 2000, Green Dolphin signed a Cancellation and Recission Agreement, canceling
5,000,000 shares of common stock issued pursuant to a private placement offering
which was withdrawn, leaving 1,000,000 shares of common stock issued and
outstanding. On February 23, 2000, Home/Office Express Inc. ("Home/Office"), a
Nevada corporation, and Green Dolphin filed Articles of Merger with the
Secretary of State of the State of Nevada. This merger resulted in a change of
management. At the time of merger with Home/Office, the surviving corporation,
Green Dolphin, also amended its certificate of incorporation to (i) change its
name to Home/Office Express, Inc., (ii) increase the authorized shares to
105,000,000, with 100,000,000 shares of Common stock, $.001 par value and
5,000,000 shares of preferred stock, $.01 par value, and, (iii) authorize the
issuance of 1,000,000 shares of common stock to the former Home/Office
shareholders.
The Company's business was essentially owning and operating Personal
Touch Messenger Inc., a messenger service business located in Phoenix, Arizona.
On March 27, 2000,
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Home/Office acquired the assets of IAM Group, Ltd. and issued 11,000,000 shares
of common stock, resulting in a change of control of the Company. On March 27,
2000, the Company began trading on the OTC under the symbol: HOMX. In April, the
Company changed its name to IAMG Holdings, Inc., and sold Personal Touch
Messenger, Inc. to Larry Stout, James Richards and Steve Hartman, former
Home/Office shareholders for 1,000,000 shares of the Company's common stock, and
trading was continued under the IAMH symbol. On May 10, 2000, in order to change
its place of domicile, the Company formed IAMG Holdings, Inc., a Delaware
corporation. After shareholder approval on May 22, 2000, the Company changed its
place of domicile to the State of Delaware.
THE COMPANY
The Company is a start up entity without significant revenues or any
assurance of continued operations. IAMG has a 100% interest in four separate
subsidiaries: International Apparel Manufacturing of New York, Inc. ("IAMNY"),
PBA Tour Gear Inc. ("PBA Tour Gear"); Pro Star Athletic, Inc. ("Pro Star"), all
incorporated under the laws of the State of New York; and Guardian Internet
Solutions, Inc. ("GIS"), incorporated in the State of Florida.
IAMG was incorporated on May 2000, pursuant to the laws of the State of
Delaware. IAMG was founded by Jahn Avarello and Thomas Verola under the name:
IAM Group, Ltd. ("IAM"), and was incorporated in the State of New York on April
20, 1999.
Through IAMNY the Company's president, Jahn Avarello, has been engaged
in the apparel manufacturing business for over 29 years. The officers and
management of the Company collectively have over 100 years experience in
designing, manufacturing, marketing and selling men's, women's and children's
apparel. PBA Tour Gear is the Company's label for the Professional Bowlers
Association ("PBA") under an exclusive worldwide licensing agreement. Pro Star
Athletic is the Company's label for the National Football League ("NFL") under
licenses to manufacture apparel in the Team/Player and Big and Tall Series
Collection categories. GIS, located in Vero Beach, Florida, will host and
maintain the Company's e-commerce Websites: bigsportsmall.com and
pbatourgear.com. In partnership with the Fraunhofer Center for Research in
Computer Graphics Inc. ("Fraunhofer CRCG"), located in Providence, Rhode Island,
GIS will own and operate a market dominating web presence. GIS and Fraunhofer
CRCG will develop and deploy a number of advanced technologies, including
computer graphics, networking, and digital security. GIS's goal is to operate a
state-of-the-art shopping portal.
IAMG currently distributes PBA Tour Gear and NFL Team/Player licensed
sportswear and accessories through retailers, wholesalers and catalogs. It's Big
and Tall Collection Series has debuted for the 2000 season and will be sold
through Casual Man and Rochester Big and Tall retail outlets, and other
specialty retail and wholesale outlets, as well as via the Company's e-commerce
mall and QVC Cablevision Networks.
In addition to out-sourcing its manufacturing requirements, IAMG owns a
domestic manufacturing business: International Apparel Manufacturers of New
York, Inc. ("IAMNY"). In 1999 IAMNY grossed $4 million dollars in sales. IAMNY
manufactures licensed and non-licensed sportswear and accessories. In June 2000,
IAMNY substantially reduced its operating
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expenses by leasing its customer base, equipment, machinery and inventory to F&L
Apparel, Ltd. The lease agreement provides for IAMNY to control the leasees
billings and to receive up to 15% of all gross receipts for a five year period.
At the end of the lease period, IAMNY has the option to renew for a five year
period or to resume full control and operation of the business, or to convey the
equipment and machinery at an agreed price.
Through its subsidiaries, IAMG intends to create a powerful, vertically
integrated sportswear apparel and accessories business; and to design and
manufacture quality sportswear and successfully engage in retail, wholesale,
home shopping and internet distribution and retail sales of its products. IAMG
maintains its executive offices at 1400 Broadway, New York, New York 10018 and
its telephone number is (212) 827-0301.
IAMG'S PRODUCTS AND STRATEGIC PARTNERS
IAMG has formed alliances with certain entities which grant the Company
the right to manufacture and distribute sportswear and accessories bearing the
names and logos of the Professional Bowlers Association ("PBA") and National
Football League ("NFL"). The NFL Team/Player apparel bears insignias of NFL
teams and replica signatures of certain celebrity NFL players.
In May 1999, IAMG entered into a joint venture agreement with Pro Star
Athletics of Florida, LLC ("Pro Star Florida") whereby the entities have formed
Pro Star Athletic, Inc. which was 50% owned by IAMG and Pro Star Florida. Pro
Star Florida, whose principal is Leonard Marshall, former All-Pro football
player, owns a non-exclusive license to manufacture and market sportswear and
accessories bearing the NFL logo and NFL team insignias. Furthermore, such
license allows Pro Star Florida to manufacture apparel bearing an authentic
replica signature of some of the NFL's top players, both past and present. Under
the joint venture agreement, Pro Star Florida assigned its NFL license to Pro
Star Athletic to pursue the manufacture, distribution and sales of NFL apparel
and accessories. IAMG, through Pro Star Athletic, will manufacture and market
jackets, caps, sweaters, sweatshirts, shorts and other accessories under the
labels "Pro Star Athletic", "Big Time Player" and "Star Players". In May 2000,
Leonard Marshall and the Pro Star Florida shareholders completed the Joint
Venture Agreement and transferred their ownership in Pro Star Athletic to IAMG.
In April 2000, IAMG's Team Sport's Gear, Inc. received a second NFL
license to manufacture and sell an exclusive "Big and Tall Collection Series"
under the "Pro Star Athletic" label. Pro Star Athletic's Millenium "Big and Tall
Collection Series" was enthusiastically received by specialty retail operators,
including Casual Male Stores and Rochester Big and Tall. The NFL has committed
to lend its full support to the marketing and sales of this new product line.
IAMG's estimates for year 2000 gross sales for the "Big and Tall Collection
Series" is $1,500,000.
In May 1999, IAMG signed an exclusive, long-term, worldwide licensing
agreement with the Professional Bowler's Association ("PBA") to distribute
bowling apparel, equipment and accessories under the PBA logo and PBA player
brand names. IAMG has developed the "PBA Tour Gear" label under which it will
manufacture and market bowling apparel, equipment and accessories for men, women
and children.
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The PBA licensing agreement is effective until April 30, 2004 and
provides for a five year extension if IAMG has made all Royalty payments and has
met specific sales levels. IAMG has the right to a prominent link to the PBA
website, which receives more than 2 million "hits" per month. In addition, the
Agreement provides for IAMG to receive, without charge, a number of 30 second
advertising spots on PBA televised bowling tournaments.
IAMG has employed personnel to establish and operate mobile Kiosk sales
centers at each PBA National Tournament, and at the (seven) regional PBA
territories who sponsor regional tournaments. These centers are inexpensive and
portable. They are capable of going where the bowling consumers are and they
facilitate impulse purchasing. The Kiosks will have available over 80 bowling
products, ranging from bowling apparel, to equipment such as bowling bags,
shoes, and wrist bands, and accessories such as PBA bowling pins, key chains and
hats. IAMG has recently completed development of a PBA Tour Gear Catalogue
featuring PBA's leading bowlers wearing PBA Tour Gear apparel and accessories.
Mr. Mark Gerberich, Commissioner of the PBA has accepted a position on
IAMG's Board of Directors. His unsurpassed experience in the bowling industry
will guide IAMG to plan a successful marketing strategy. As a result of IAMG's
planning, for the first time in the PBA's 42 year history, bowlers will be able
to purchase more than 80 official PBA Tour Gear products in virtually every
category pertaining to bowling with the exception of bowling balls. IAMG's
premier bowling label, "PBA Tour Gear" includes a complete line of shoes, bags,
wrist supports, apparel, accessories and equipment as well as trophies of museum
quality never before offered in the United States.
In May 2000, PBA Tour Gear completed a production shoot for an annual
PBA Tour Gear catalog. IAMG contracted to have the current top 7 Professional
Players in Bowling model its apparel and accessories line, including 1998 Bowler
of the Year, Walter Ray Williams, and 1999 Bowler of the year, Parker Bohn III.
The PBA's popular Senior Tour player Johnny Petraglia is also a featured model
in the catalog. The PBA Tour Gear product line catalog will benefit from having
the top professional players in bowling endorsing the products.
In June 2000, IAMG launched its product line at the Bowling Expo
International Show in Las Vegas. As a result, 15 regional distributors of
bowling products agreed to sign distribution contracts and to purchase a minimum
of $50,000 of licensed products. As of July 28, 2000, three of the fifteen
distributors have signed purchase orders and deposited $5000.00 on account.
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IAMG'S TARGET MARKET
IAMG marketing strategy targets the growing legion of sports fans eager
to own quality merchandise at reasonable prices. According to the American
Association of Retail Marketers, the specialty apparel industry is projected to
become a trillion dollar industry by the year 2000. IAMG plans to tap a portion
of this growing market by offering high-quality, moderately priced, distinctive
products bearing the logos of some of the most popular professional sports and
leisure activities.
BOWLING INDUSTRY. IAMG's "PBA Tour Gear" products will be targeting the
bowling community which is one of the largest and wealthiest markets in the
world. The bowling community boasted 50 million bowlers in 1998. Today's youth
and teenagers represent the fastest growing segment of this market. These groups
exhibited 58% and 24.1% growth rates, respectively, since 1987.
The PBA enjoys an unprecedented record as a televised sport. The PBA is
the second largest running live sports series on network television, behind only
NCAA football. In 1999 and 2000, the PBA will be featured on 17 ESPN telecasts,
reaching more than 50 million people on an annual basis. IAMG's licensing
agreement with the PBA includes one 30-second unit of advertising time during
each PBA telecast, access to features and vignettes, open/close electronic
billboards and extensive camera-prominent signage.
IAMG is soliciting media involvement in special events projects
involving the Company's licenses. Currently, the Company is negotiating with a
major television network to produce a Celebrity Bowling Tournament involving NFL
players and PBA bowlers. This 26 week event culminates in a final bowling "Foot
Bowl" to take place during the NFL's Super Bowl Week. IAMG will sponsor public
appearances of past and present PBA and NFL players at local retail market
locations.
NFL MERCHANDISE INDUSTRY. Clearly the National Football League is the
dominant professional sport in the United States. With 31 teams (and growing)
the NFL takes in about $2.4 billion each year. IAMG's Pro Star Athletic product
line includes jackets, shirts, caps, sweaters, shorts and accessories. The
products are manufactured in a variety of fabrics, sizes, and colors and are
embroidered or silk screened with the company's trademarked logo(s). Pro Star
Athletic's apparel includes the authentic signature of a celebrity NFL player.
For example, Leonard Marshall, Deion Sanders, Dan Marino, John Elway and Randy
Moss signatures appear on Pro Star Athletic products. The Pro Star Athletic logo
is prominently displayed on each piece of apparel.
In May 1999, Leonard Marshall introduced Pro Star Athletic's new street
line: "NFL With Attitude". Created by IAMG's design team, under the direction of
Thomas Verola and Steve Ciancio, this dynamite product line promises to be a hot
seller for the 2000 Football season. The Big and Tall collection Series makes it
"cool" to wear sport's licensed apparel instead of the more expensive FUBU,
MECCA and PHAT FARM brands. Casual Male Stores is the first specialty retailer
to indicate they will be placing substantial orders for the 2000 season.
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QVC Cablevisions's Kathleen Kirkwood, a member of the IAMG Board of Directors,
is planning a major PBA and NFL apparel sales program with Leonard Marshall
hosting the programs.
In addition to the PBA and the NFL, IAMG is negotiating for licensing
agreements with the Women's Pro Bowling Association, and other major sports
leagues and associations.
IAMG will initiate sales and distribution of a PBA "Pro Star Athletic"
sports bottle offering Natural Spring pure water. The Bowling Proprietor's
Association of America ("BPAA") is negotiating with IAMG for distribution of PBA
products, including PBA Tour Gear's sports bottled pure water, to its 3800
bowling centers in the United States.
E-COMMERCE INDUSTRY. The development of the Internet has brought
computer usage and electronic commerce into the home on a practical level. As a
result, the computer industry has experienced explosive growth over the past
several years. It is estimated that there are over 75 million Internet users in
the United States alone. The Internet is dramatically affecting the manner in
which consumers evaluate and buy merchandise and the way businesses are
servicing customers and reaching new markets. According to Direct Marketing
Association, total retail sales are expected to grow at a rate of 3.5% into the
year 2000. More specifically, the percentage of total sales from the Internet,
including sales to consumers and businesses, is expected to increase 50%
annually through 2004. According to Forrester Research, in 1999 e-commerce
retail sales exceeded $18.1 billion and according to Jupiter Communications,
1999 on-line apparel and accessories sales exceeded $641 million. IAMG will seek
to take advantage of this growth through the establishment of a virtual shopping
mall on the Internet where customers may view and make on-line purchases of
IAMG's products.
IAMG'S BUSINESS AND MARKETING STRATEGY
IAMG plans to sell its products through multiple distribution channels
including major department stores, discount stores, specialty retail stores,
sporting goods stores, stadium concessions and catalogs. IAMG also plans to
establish an Internet site and engage in e-commerce.
IAMG's ultimate goal is to take advantage of its exclusive worldwide
license arrangement with the PBA its NFL licenses to establish brand name
recognition and brand loyalty in its target markets. IAMG plans to distribute
and sell its products through reputable retail stores. IAMG will start by
manufacturing products of quality fabrics and modern designs. IAMG's "Pro Star"
line will be marketed through upscale department and specialty store, while the
Company's "Big Time Player" and "Star Player" labels will be marketed through
more moderate retail establishments. Additionally, the Company plans to sell its
products through stadium concession areas and to develop a full-color catalog
for direct mail and dissemination at sporting events and stadiums.
IAMG also sees a tremendous opportunity to sell its products through
mobile sales centers or kiosks. The kiosks provide the Company with an
inexpensive and portable retail outlet. Kiosks will enable the Company to make
its products available to its target audience at athletic events, special
charity events and other exhibits.
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Finally, the Company plans to use its resources to advertise and sell
its products via the Internet. IAMG plans to establish "BigSportsMall.com" and
"PBATourGear.com" as its avenue for e-commerce. IAMG's web sites will allow its
customers to view IAMG's products and make purchases on-line. IAMG also plans to
establish its web sites as a portal for other sports-related information. For
instance, the Company has reached an agreement with the PBA to provide a direct
link to the PBA's official web site, or any other PBA website.
FACILITIES
IAMG leases approximately 4,200 square feet on the 19th Floor of 1400
Broadway, New York, New York which serves as the Company's executive offices.
For the period August 1, 2000 through July 31, 2003, monthly rent is
approximately $12,300. For the period August 1, 2003 through July 31, 2005,
monthly rent is approximately $12,600. August rent ($12,226.67), together with a
security deposit ($27,000) was paid in June 2000. The monthly rental is $13,000
plus utilities.
COMPETITION
The market in which IAMG operates is new, rapidly evolving and highly
competitive. The company competes on the basis of certain factors, including:
product features, time to market, product design, quality and price, and
consumer support. IAMG's competitive strengths include focusing on the needs of
the bowling and football fan consumers, establishing value added reseller
channels via the internet and QVC Home Shopping Network, its highly added
reseller channels via the internet and QVC Home Shopping Network, its highly
experienced apparel expert management, its closely held relationships with the
PBA, through Commissioner Mark Gerberich, and the NFL through Leonard Marshall,
Steven Ciancio and Stuart Frost.
IAMG has identified several companies who compete directly or
indirectly with the PBA Tour Gear and the Pro Star Athletic product lines. PBA
Tour Gear's competition in the shoe category is Linds Shoe Co. and Dexter Shoe
Co. IAMG has produced a complete line of high quality bowling shoes bearing the
exclusive PBA Tour logo. The shoe line has been enthusiastically received by
professional and non-professional bowlers. In the bowling apparel, bags and
accessories category, IAMG has identified AMF Inc., Brunswick Inc., Columbia
Inc., Ebonite Inc. and Hammer Inc. as its competitors.
Although the Company believes that it will be able to maintain a
competitive advantage over its competitors on the basis of the quality of its
products and services, there can be no assurance that other companies will not
penetrate the market. Nor can there be any assurance that the Company will be
able to compete effectively against currently anticipated or future competitors
or that competitive pressures will not materially adversely affect its business,
operating results and financial condition.
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LEGAL PROCEEDINGS
IAMG is not a party to any litigation or governmental proceedings.
GOVERNMENT REGULATION
Aspects of the IAMG's business that are subject to governmental
regulation include federal and state taxing authorities. In addition to the
federal and franchise taxing authorities, the Company collects and remits sales
tax in the one state in which it is has a physical presence. IAMG is prepared to
collect sales taxes for other states, if laws are passed requiring such
collection. IAMG does not believe that a change in the tax laws requiring the
collecting of sales tax will have a material adverse effect on IAMG's financial
condition or results or operations.
RESEARCH AND DEVELOPMENT
IAMG has incurred research and development costs in the past, and
management does not rule out additional costs occurring in the future.
INTELLECTUAL PROPERTY
IAMG's ability to compete successfully and achieve future revenue
growth will depend, in part, on its ability to protect its proprietary
technology and operate without infringing the rights of others. IAMG has a
policy of seeking patents, copyrights and trademarks when appropriate, on its
inventions or intellectual property resulting from its ongoing research and
development and manufacturing activities.
EMPLOYEES
As of June 1, 2000 the Company had a total of 16 full-time employees,
including nine in design, marketing and sales, four in administration and three
executive officers. The Company's IAMNY manufacturing division prior to June 1,
2000 had a total of twenty employees. Beginning June 1, 2000 the Company leased
its equipment, machinery and inventory to F&L Apparel, Ltd., pursuant to a
written agreement. The leasees pay the Company a percentage of sales for a five
year period, and at the expiration the Company owns all existing equipment,
machinery and inventory. IAMG has an independent contract relation with several
national salesmen whose earnings are based on commissions only. IAMG believes
its future performance will depend in large part on its ability to attract and
retain unskilled, semi-skilled and professional employees. None of the Company's
employees is represented by a labor union and the Company has not experienced
any work stoppages. IAMG considers its employee relations to be good.
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RISK FACTORS
IN ADDITION TO OTHER INFORMATION IN THIS REGISTRATION STATEMENT ON FORM
10-SB, THE FOLLOWING IMPORTANT FACTORS SHOULD BE CAREFULLY CONSIDERED IN
EVALUATING THE COMPANY AND ITS BUSINESS BECAUSE SUCH FACTORS CURRENTLY HAVE A
SIGNIFICANT IMPACT ON THE COMPANY'S BUSINESS, PROSPECTS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
START UP COMPANY; NO OPERATING HISTORY; UNCERTAINTY OF FUTURE
PROFITABILITY. IAMG is in its development stage. As such, the Company has no
operating history upon which investors may rely to evaluate the Company's
prospects. IAMG's prospects must be considered in light of the problems,
expenses, delays and complications associated with a new business. IAMG expects
that its future operating expenses will be significantly high as a result of the
implementation of its marketing initiatives and sales efforts. Accordingly, the
Company expects to incur operating losses for the foreseeable future until such
time, if ever, as the Company is able to generate revenues from operations
sufficient to offset such operating and expansion costs. However, there can be
no assurance that the Company will ever generate sufficient revenues or achieve
profitability. See "Business."
SIGNIFICANT CAPITAL REQUIREMENTS; DEPENDENCE ON PROCEEDS OF THE DEBT
AND EQUITY FINANCING. IAMG's capital requirements are and will continue to be
significant. IAMG is dependent upon the proceeds of the debt and equity
financing to further finance the cost of the development and marketing of its
athletic logo apparel. IAMG anticipates, based on management's internal
forecasts and assumptions relating to its operations (including the costs
associated with marketing its products and services) that the Company will be
able to satisfy the Company's contemplated cash requirements for no more than
the next six (6) months. In the event the Company's plans change, its
assumptions change or prove inaccurate, or other capital resources and projected
cash flow, prove to be insufficient to fund operations, the Company could be
required to seek additional financing sooner than currently anticipated. See
"Use of Proceeds," and "Business."
POSSIBLE NEED FOR ADDITIONAL FINANCING. There can be no assurance that
IAMG will not require additional financing in the near future. There can be no
assurance that any additional financing will be available to IAMG on acceptable
terms, or at all. If adequate funds are not available, IAMG may be required to
delay, scale back, or eliminate its research and development or obtain funds
through arrangement with partners or others that may require IAMG to relinquish
rights to certain of its technologies or potential products or other assets.
Accordingly, the inability to obtain such financing could have a material
adverse effect on IAMG's business, financial condition and results of
operations.
COMPETITION. IAMG has identified Joy Athletic, Inc., Dynasty Apparel,
Inc., and Logo Athletic, Inc. as direct competitors for its Team/Player NFL
license, and Cutter & Buck, Inc., and Puma Inc., as direct competitors for its
NFL Big and Tall Collection Series. IAMG has also identified several companies
who compete directly or indirectly with the PBA Tour Gear. In the shoe category,
Linds Shoe Co. and Dexter Shoe Co. are direct and formidable competitors. In the
bowling apparel, bags and accessories category, the Company has
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identified AMF Inc., Brunswick Inc., Columbia Inc., Ebonite Inc., and Hammer
Inc., as its competitors. IAMG believes that it will be able to maintain a
competitive advantage over these competitors on the basis of the quality of its
products and services, and, in the case of the PBA Tour Gear, on the basis of
having the exclusive world wide rights to the use of the PBA logo. However,
there can be no assurance that other companies will not penetrate the market. In
addition, there can be no assurances that the Company will be able to compete
effectively against currently anticipated or future competitors or that
competitive pressures will not materially adversely affect its business,
operating results and financial condition. Finally, other competitors may have a
significant advantage with respect to their financial resources.
DEVELOPING MARKETS; UNPROVEN ACCEPTANCE OF THE COMPANY'S PRODUCTS AND
SERVICES. The markets for the Company's bowling and NFL Big and Tall Collection
and Team/Player licensed products and services have only recently begun to
develop. As is typical in the case of a new and rapidly evolving industry,
demand and market acceptance for recently introduced products and services are
subject to a high level of uncertainty and risk. Because the market for the
Company's products is new and evolving, it is difficult to predict the future
growth rate, if any, and size of this market. There can be no assurance either
that the market for the Company's products and services will emerge or become
sustainable. If the market fails to develop, develops more slowly than expected
or becomes saturated with competitors, or if the Company's products and services
do not achieve or sustain market acceptance, the Company's business, results of
operations and financial condition will be materially and adversely affected.
See "Business."
RISK ASSOCIATED WITH NEED TO EXPAND BUSINESS. IAMG believes that it
will need to expand its business and operations. This growth is likely to
continue to place a significant strain on its resources. As the Company grows,
it will also have to implement new operational and financial systems, procedures
and controls. If the Company is unable to accomplish any of these, its business
could be adversely affected.
ATTRACTION AND RETENTION OF CUSTOMERS. IAMG's profitability is
dependent on its ability to market its products and satisfy its customers, and
there can be no assurance that it will be successful in these efforts. There are
numerous factors that could prevent the Company from obtaining success in its
efforts, including the public image of the Company's products, the Company's
ability to maintain relationships with its licensors and the presence of direct
and indirect competition. As a result of these factors, there can be no
assurance that the Company's efforts will be adequate to maintain profitability
or permit the expansion of the Company's operations.
DEPENDENCE ON CERTAIN CONTRACTS. In May 1999, the Company obtained from
the Professional Bowler's Association ("PBA") an exclusive worldwide licensing
agreement for the manufacture and sale of bowling apparel, equipment and
accessories. The license expires in 2004, with a five year renewal option
available to the Company, depending on reaching stated levels of sales. In April
1999, the Company obtained a 50% interest in an NFL license to manufacture and
sell Team/Player football apparel. In April 2000, the Company obtained a 100%
ownership of the Team/Player license, and the NFL awarded it (through Team
Sports Gear Inc., a wholly owned subsidiary) a second license for the
manufacture and sale of a Big
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and Tall Collection Series. The NFL licenses are issued for a one year period
and are renewable at the option of NFL Properties Inc. While the Company is
actively seeking to increase and diversify its apparel licensing agreements,
there can no assurances that the Company will be able to obtain or finance
additional licenses. Also, there can be no assurances that the PBA or NFL
licenses will be renewed.
DEPENDENCE UPON KEY PERSONNEL. IAMG is dependent upon the efforts and
skills of its executive officers. The loss of the services of any of the
Company's management could have a material adverse effect on the Company's
business and prospects. [See "Management - Employment Agreements" for a
discussion of the employment agreements of certain members of management.]
The success of the Company will be dependent upon its ability to hire
and retain additional qualified personnel. IAMG will compete with other
companies with greater financial and other resources for such other personnel.
Although to date, the Company has not experienced any difficulty in attracting
qualified personnel, there can be no assurance that the Company will be able to
retain its present personnel or acquire additional qualified personnel as and
when needed. See "Management."
STAFFING AND LABOR COSTS. IAMG is dependent upon the available labor
pool of semi and unskilled employees for its operations. IAMG is also subject to
the Fair Labor Standards Act, which governs such matters as a minimum wage,
overtime and other working conditions. A shortage in the labor pool or other
general inflationary pressures or changes in applicable laws and regulations
could require the Company to enhance its wage and benefits packages. There can
be no assurance that the Company's labor costs will not increase. Any increase
in such costs could have a material adverse effect on the Company's financial
condition and results of operations.
LIMITED MARKETING EXPERIENCE. IAMG has retained the services of
Kathleen Kirkwood, a QVC executive, Leonard Marshall, former all pro defensive
lineman for the NY Giants and NY Jets, and Lars Karle, Vice President of the
Farnhofer Group, located in Providence, Rhode Island, to help develop its
internet marketing program. No assurances can be given that the Company's
marketing efforts will be sufficient and whether it will be able to penetrate
the market. See "Business-IAMG Holding Inc.'s Marketing Strategy."
CONTROL BY INSIDERS. The management of the Company owns or has the
power to vote, directly and indirectly, 13,182,250 shares of Common Stock, or
approximately 74.35% of the issued and outstanding shares of Common Stock.
Accordingly, the Company's present management may be in a position to influence
the election of the Company's directors and other matters submitted to the
stockholders for approval. See "Principal Stockholders".
LIMITATION ON DIRECTOR LIABILITY. As permitted by Delaware law, the
Company's Certificate of Incorporation limits the liability of directors to the
Company or its stockholders for monetary damages for breach of a director's
fiduciary duty except for liability in certain instances. As a result of the
Company's charter provision and Delaware law, stockholders may have limited
rights to recover against directors for breach of fiduciary duty. See
"Description of Securities - Limitations on Liability of Directors."
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ANTI-TAKEOVER PROVISIONS. Pursuant to the Company's Certificate of
Incorporation, the Board of Directors may issue up to 5,000,000 shares of
Preferred Stock in the future with such preferences, limitations and relative
rights as the Board may determine without stockholder approval. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of delaying or preventing a change in control of the Company without
further action by the stockholders. IAMG has no present plans to issue any
shares of Preferred Stock. In addition, the Company will become subject to the
anti-takeover provisions of Section 203 of the Delaware General Corporation Law,
which will prohibit the Company from engaging in a "business combination" with
an "interested stockholder" for a period of three years after the date of the
transaction in which the persons became an interested stockholder, unless the
business combination is approved in a prescribed manner. The application of
Section 203 also could have the effect of delaying or preventing a change of
control of the Company.
ADDITIONAL AUTHORIZED SHARES OF COMMON STOCK AND PREFERRED STOCK
AVAILABLE FOR ISSUANCE MAY ADVERSELY AFFECT THE MARKET. IAMG is authorized to
issue 100,000,000 shares of its Common Stock, $.001 par value, and 5,000,000
shares of its Preferred Stock, $.01 par value. However, the total number of
shares of Common Stock issued and outstanding does not include 10,000,000 shares
of Common Stock issuable upon exercise of options that may be granted pursuant
to the Employee, Management and Non Employee Directors Incentive Option Plan
(the "Incentive Option Plan") (none of which are outstanding as of the date
hereof). On June 1, 2000, the Company signed an agreement with William Forte and
Robert Lipori to issue 1,050,000 restricted shares of common stock, $.001 par
value in full satisfaction of a $350,000 debt representing two loans made to the
Company by Mr. Forte and Mr. Lipori. On the same date, the Company signed an
agreement with Jahn Avarello, its President and CEO, to issue 3,900,000
restricted shares of common stock, $.001 par value in satisfaction of $1,300,000
out of a total of $1,518,632 in loans made by Mr. Avarello prior to January 21,
2000, leaving a balance of $218,632. Since January 31, 2000, Mr. Avarello has
loaned another $400,000 to the Company. After reserving a total of 10,000,000
shares of Common Stock for issuance upon the exercise under the Incentive Option
Plan, the Company will have at least 69,050,000 shares of authorized but
unissued Common Stock available for issuance without further shareholder
approval. As a result, any issuance of additional shares of Common Stock may
cause current shareholders of the Company to suffer significant dilution which
may adversely affect the market.
In addition to the above-referenced shares of Common Stock which may be
issued without shareholder approval, the Company has 5,000,000 shares of
authorized preferred stock, the terms of which may be fixed by the Board of
Directors. IAMG presently has not issued and outstanding shares of preferred
stock and while it has no present plans to issue any shares of preferred stock,
the Board of Directors has the authority, without shareholder approval, to
create and issue one or more series of such preferred stock and to determine the
voting, dividend and other rights of holders of such preferred stock. The
issuance of any of such series of preferred stock could have an adverse effect
on the holders of Common Stock.
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NO MARKET FOR SECURITIES. IAMG is a publicly trading corporation listed
on the over-the-counter "Pink Sheets" under the symbol "IAMH". Presently, there
are 1,000,000 unrestricted shares available for sale to the public (the
"Float"). There can be no assurance that an active public market for the Shares
will develop or, if developed, that it will be sustained.
NO DIVIDENDS AND NONE ANTICIPATED. To date, the Company has not paid
any cash dividends. The Company does not intend, for the foreseeable future, to
declare or pay any dividends and intends to retain earnings, if any, for the
future operation and expansion of the Company's business. The declaration and
payment of any cash dividends in the future will be determined by the Board of
Directors of the Company in light of conditions and circumstances then existing,
including the Company's financial condition and requirements.
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE. This registration
statement contains forward-looking statements and information that are based on
management's beliefs as well as assumptions made by, and information currently
available to, management. When used in this registration statement (including
Exhibits), words such as "anticipate," "believe," "estimate," "except," and,
depending on the context, "will" and similar expressions, are intended to
identify forward-looking statements. Such statements reflect the Company's
current views with respect to future events and are subject to certain risks,
uncertainties and assumptions, including the specific risk factors described
above. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, believed, estimated or expected. IAMG does not intend to
update these forward-looking statements and information.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
IAMG is a holding company for a group of companies that license,
manufacture and distribute proprietary and private label sportswear apparel,
equipment and accessories, worldwide. Distribution channels include retailers,
wholesalers, catalogs and e-commerce.
THREE MONTHS ENDED APRIL 30, 2000 VERSUS THREE MONTHS ENDED APRIL 30, 1999
RESULTS OF OPERATIONS
Revenues. For the three months ended April 30, 2000, revenues included
all four operating segments as opposed to revenues for the three months ended
April 30, 1999, which consisted of revenues for IAMNY only. Revenues for IAMNY
for the three months ended April 30, 2000, were $477,894 versus $l,232,154 for
the three months ended April 30, 1999, for a decrease of $754,260, or 61%. The
decrease is primarily attributable to a drop in domestic manufacturing primarily
caused by the economy. During the last six months, manufacturers have gone
overseas due to the rising cost of domestic labor. IAMNY has leased its
equipment, machinery and inventory to a third party who will service IAMNY's
customers. The Lessee will be responsible for all fixed and operating
manufacturing expenses, and IAMNY will eliminate its own fixed and operating
expenses in exchange for a percentage of the leasees monthly billings to all
manufacturing customers. Two of IAMG's operating segments, PBA Tour Gear. Inc.
and Pro Star Athletic, Inc., have licensing agreements with the Professional
Bowlers Association ("PBA") and with the National Football League ("NFL"). IAMNY
plans to sell private label (non-branded) goods and complete any orders that
cannot be filled under the NFL and PBA licensing agreements. Additionally. any
new licensing agreements will be contracted within the IAMNY operating segment.
Revenues from the other operating segments contributed approximately $23,000 to
total revenues for the quarter ended April 30,2000.
Costs of Revenues. We have been experiencing a typical profit margins
due to the seasonality of our products. We anticipate our profit margins to
increase dramatically within the next twelve months as football season
approaches and as the PBA Tour Gear catalogue is completed. Management intends
to eliminate IAMNY's fixed overhead and direct labor expenses by leasing its
manufacturing facilities to a third party, in exchange for a percentage of all
billings ranging from ten (10%) to fifteen (15%) percent.
General and Administrative Expenses. During the three months ended
April 30, 1999, general and administrative expenses were $5,575, versus $313,207
for the three months ended March 31, 2000, an increase of $307,632.
Approximately $57,000 of depreciation and amortization and approximately $61,000
of accrued interest was charged to operations for the three months ended April
30, 2000.
Approximately $95,000 represents promotional expenses incurred for
trade shows to promote our product lines and approximately $23,000 in consulting
expenses was incurred to help troubleshoot and start our internet shopping mall.
Additionally, we are partnering with
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Fraunhofer CRCG, sector for research and computer graphics, to provide ongoing
website content development to our e-commerce portal.
Other Income. During January 2000, our warehouse location suffered
water damage and a sizable portion of production patterns and markers used in
the operating segment of IAMNY were permanently damaged. Included in other
income is an insurance claim check received in April 2000 for $99,000.
Provision for Income Taxes. As of April 30, 2000, our accumulated
deficit was approximately $1,500,000. Accordingly, IAMG has recorded a full
variation allowance against any income tax benefit to date.
LIQUIDITY
At April 30, 2000, we had a negative working capital of $2,194,103. A
significant portion of the current liabilities represents related party advance
of approximately $1,800,000 advanced to fund the company during its early stage
of operations. During the three months ended April 30, 2000, we received
additional related party advances of approximately $300,000 and we received an
additional $100,000 from a third party to help fund working capital operations.
To date, we have incurred ongoing operating losses due to costs related
to business development consulting fees, and other costs associated with
establishing the corporate infrastructure necessary to expand our business and
its operating segments. During the next twelve months, we intend to continue
developing our business and we intend to raise additional capital to fund our
operations. At present, we do not have the capital necessary to carry out our
plan of operations. We have relied on advances from private equity sources to
fund our operations. We anticipate our monthly costs associated with operations
to approximate $155,000. We may raise additional funds through public or private
equity investments as necessary, but there can be no assurance that such
additional funds will be available for us to finance our operations on
acceptable terms, if at all.
We have entered into a non-cancelable operating lease for a period of
five years, effective August 1, 2000, for approximately 4,200 square feet of
showroom and office space located at 1400 Broadway, Suite 1907. New York City,
New York, 10018, our new corporate headquarters. For the period August 1, 2000
through July 31, 2003, monthly rent is approximately $12,300. For the period
August 1, 2003 through July 31, 2005, monthly rent is approximately $12,600.
August rent ($12,226.67), together with a security deposit ($27,000) was paid in
June 2000.
ITEM 3. DESCRIPTION OF PROPERTIES
IAMG leases approximately 4,200 square feet on the 19th Floor
of 1400 Broadway, New York, New York which serves as the Company's executive
offices. For the period August 1, 2000 through July 31, 2003, monthly rent is
approximately $12,300. For the period August 1, 2003 through July 31, 2005,
monthly rent is approximately $12,600. August rent ($12,226.67), together with a
security deposit ($27,000) was paid in June 2000.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information, as of the date of
this registration statement with respect to the beneficial ownership of the
outstanding Common Stock by (i) any holder of more than five percent (5%); (ii)
each of the Company's officers and directors; and (iii) the directors and
officers of the company as a group:
NAME OF BENEFICIAL NUMBER OF
OWNER* SHARES OF COMMON STOCK PERCENTAGE OWNERSHIP
------------------ ---------------------- --------------------
Jahn Avarello1 8,800,000 49.0%
Arlene Avarello1 1,950,000 10.9%
Thomas Verola 1,901,250 10.6%
William E. Weber2 531,000 3.0%
Leonard Marshall3 526,000 2.9%
Steve Ciancio 526,000 2.9%
Kathleen Kirkwood 48,750 .3%
Michael S. Weber 25,000 .1%
Mark Gerberich 25,000 .1%
Ross J. Baldari 25,000 .1%
Lawrence Proman 100,000 .5%
All Officers and Directors
as a group (10 persons) 12,508,000 69.7%
----------------------
* Unless otherwise indicated, the address of all persons listed in this
section is c/o IAMG Holdings, Inc., 1400 Broadway, Suite 1907, New York, New
York 10018.
----------------------
1 Arlene Avarello is the wife of Jahn Avarello, the Company's Chief
Executive Officer and President. Mr. Avarello disclaims beneficial
ownership of the shares held by Arlene Avarello.
2 Beneficial owner is Weber & Weber, 300 Rabro Drive, Hauppauge, New York
11788.
3 Beneficial owner is Marshall Family Ltd. Hldgs., Inc., 21756 Margot
Drive, Boca Raton, Fl 33428.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
The names and ages of the directors and executive officers of the Company are
set forth below. All Directors are elected annually by the stockholders to serve
until the next annual meeting of the stockholders and until their successors are
duly elected and qualified. Officers are elected annually by the Board of
Directors to serve at the pleasure of the Board.
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
Jahn Avarello 46 President, Chief Executive Officer and
Chairman of the Board
Thomas Verola 45 Secretary, Chief Operating Officer and Director
Lawrence Proman 54 Chief Financial Officer and Treasurer
William Fisher 50 Executive Vice President and NFL Manager
Stuart Frost 53 Vice President of Merchandising and
Manufacturing
Steven Cianco 44 Vice President and Special Events Coordinator
Ronnie Blaufarb 42 Vice President and National Sales Manager
William E. Weber 60 General Counsel and Director
Leonard Marshall 40 Director
Ross Baldari 41 Director
Mark Gerberich 40 Director
Kathleen Kirkwood 41 Director
Michael S. Weber 36 Director
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BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS
JAHN AVARELLO has served as the President and Chief Executive Officer and a
Director of the Company since its inception. Mr. Avarello is responsible for all
aspects of the strategic planning and day-to-day operations of IAMG. Mr.
Avarello began his career in 1971 as owner of an apparel cutting room in the New
York Garment Center. During this time, Mr. Avarello was a member of the Board of
Directors of the Greater Blouse, Skirt and Undergarment Association. In 1997,
Mr. Avarello founded IAM Group, Ltd. and became President and CEO of IAMG
Holdings, Inc. in March 2000. Mr. Avarello is also a venture capitalist and is
involved in several businesses. He attended Farmingdale University on Long
Island, New York to study veterinary medicine, and the Fashion Institute of
Technology in New York City to learn pattern making and design.
THOMAS VEROLA has served as the Secretary and Chief Operating Officer and a
Director of the Company since its inception. He is also President and CEO of PBA
Tour Gear Inc. Mr. Verola is responsible for the designing, manufacturing and
marketing of bowling apparel and accessories under the PBA Tour Gear and the NFL
Pro Star Athletic logos. With more than 25 years of experience in the
manufacturing field, Mr. Verola brings to the company the ability to manufacture
a large variety of merchandise and to sell via cable to companies such as QVC.
He has traveled throughout the world to more than 20 countries producing
products for the following companies: Liz Clairborne, Jones Apparel Group and
the Krasner Group. As Vice President of Manufacturing and Operations for each of
the mentioned businesses, Mr. Verola was responsible for more than 600 million
dollars per year in apparel and accessory production. As Vice President of
Manufacturing and Operations for the Krasner Group, Mr. Verola manufactured
merchandise in all product categories exclusively for sale at QVC. In 1997, Mr.
Verola joined International Apparel Manufacturing of New York as Vice President
of Manufacturing and Production. In 1999, he became a principal in IAMG and has
been actively engaged in soliciting exclusive license agreements with
professional sports organizations.
LAWRENCE PROMAN has served as the Company's Chief Financial Officer and
Treasurer since its inception. From 1995 through 1998, Mr. Proman served as the
accountant for International Apparel Manufacturing Company. Prior to 1995, Mr.
Proman served as the Chief Financial Officer of Bratique Fashions Inc., as
Comptroller for Forever Yours, Inc. and Senior Vice President and Comptroller
for The New York Institute of Technology. Mr. Proman received his Bachelor of
Science degree in Accounting from Brooklyn College in 1968.
WILLIAM D. FISHER is an IAMG executive vice president and NFL operations
manager. He brings over 20 years of experience in the apparel production and
merchandising industry to the Company. Since 1994, Mr. Fisher has been Executive
Vice President for Pier Connection/Revenge Shirtmakers in New York City, New
York. This company's primary product lines were men's and boy's woven and knit
shirts and shorts. In his capacity as executive vice president, Mr. Fisher was
responsible for all merchandising, marketing, sourcing, and costing for the
company. His duties included handling all major accounts including Wal-Mart,
Kmart, Mervyns and JC Penney.
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STUART FROST is an IAMG vice president of Merchandising and Manufacturing. Mr.
Frost brings over 20 years experience in the apparel production and
merchandising industry to the Company. Mr. Frost began his career in the apparel
industry in 1976 as Vice President of Product Development and Merchandising for
Lord & Taylor. He was responsible for all product development, (domestic and
foreign); directed research, trend & sales analysis for fashion and
classification merchandise and headed all price negotiations overseas. In 1997,
Mr. Frost started his own consulting company specializing in product
development, sourcing, production, and sales for manufacturers. In this
capacity, Mr. Frost has traveled the domestic and overseas markets extensively
for product and product ideas. Mr. Frost received his Bachelor of Science degree
in Marketing from Fairleigh Dickinson University in 1969, and in 1977 he
received his MBA in Marketing from Baruch College.
STEVEN D. CIANCIO is an IAMG vice president and special events coordinator. Mr.
Ciancio brings over 15 years of successful experience in the sports apparel
industry to the Company. Mr. Ciancio began his career in sporting goods apparel
as the owner and manager of George's Sporting Goods in Dobbs Ferry, New York. In
1989, George's retail sales and silk screening operations grossed over
$950,000. The Company specialized in providing all the sports apparel, sports
equipment and stadium operational needs, as well as personal items for players,
owners and VIPs for the New York Yankees, Mets, Giants and Jets, as well as many
of top entertainment companies, major college and high schools in the New York
metropolitan area. In 1989, Mr. Ciancio established Print This Inc., a wholesale
and retail silk screen and embroidery business in Dobbs Ferry, New York. Print
This Inc. produced personalized items including jackets and T-shirts. Accounts
included professional sports teams, corporations, small businesses, colleges and
high schools accounting for sales of over $500,000 annually. Mr. Ciancio holds
an Associate of Science degree from Westchester Community College in Valhalla,
New York.
RONNIE S. BLAUFARB is an IAMG vice president and National Sales manager. Mr.
Blaufarb is personally credited with increasing sales at Majestic Graphics Inc.,
a division of Majestic Athletic from $9,000,000 in 1990 to over $55,000,000 in
1995 and $80,000,000 in 1997. He brings to IAMG personal and professional
relationships throughout the United States in the athletic apparel licensing
industry, ranging from fortune 500 retailers, wholesalers and distributors to
local mom and pop retail outlets. Mr. Blaufarb is married and resides in
Bethlehem, Pa.
WILLIAM WEBER, ESQ. IAMG's Director and General Counsel. William E. Weber, Esq.
has accepted the position as General Counsel for IAMG, and has agreed to work
for the Company on a full time basis. Mr. Weber is a partner of the law firm of
Weber & Weber, having offices in Hauppauge, New York and North Miami Beach,
Florida. He has engaged in the general practice of the law since graduating from
Brooklyn Law School in 1965. He has had significant legal experience and
expertise in securities law, anti-trust litigation in the health care area,
federal and state criminal law, and general corporate law. Mr. Weber was a
founder and promoter of Nastech Pharmaceutical Company, Inc., a public company
engaged in the licensing of nasal applications of existing medications. In 1997,
he represented Capital Beverages Corporation in a SB-2 Registration Statement
under the Act. In addition to his legal experience, in 1967 Mr. Weber founded
and was a principal owner of Ocean Cargo Import and Export Company, Inc., a
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pioneer in the inland container operation business. In 1989 he was the managing
partner in Lakeside Development Company, Ltd. and directed construction of a 43
unit condominium development in Shirley/Mastic, New York. Mr. Weber is married
to Judith D. Weber and resides in Dix Hills, New York.
LEONARD A. MARSHALL has served as a Director to the Company and President of the
Company's ProStar Athletic Division since the Company's inception. Mr. Marshall
was one of the founders of ProStar Athletics and also serves as the President of
AEM Financial Concepts Inc. Mr. Marshall is a former professional football
player having played for the New York Giants from 1983 through 1992, New York
Jets in 1993 and the Washington Redskins from 1993 through 1996. Mr. Marshall
has two super bowl wins to his credit. In 1991, Mr. Marshall earned a Bachelor
of Science degree in Finance from Farleigh-Dickinson University. Mr. Marshall
also serves on the board of numerous charity organizations such as the National
Sports Committee for the leukemia Society of America, League of Education
Awareness, has been named National Spokesman for Kids in Distress and holds a
Lifetime Achievement Award from the United Way.
ROSS BALDARI has served as a Director to the Company since its inception. Mr.
Baldari brings over 18 years of experience as a communications networking
specialist and Internet Solutions provider for Fortune 500 companies including
Morgan Stanley, United Technologies, The New York Hospital/Cornell Medical
Center, Goldman Sachs & Co. and Merrill Lynch. He served as the lead networking
consultant for the Bergen County Prosecutor's Office in converting 70 towns to
SNA SDLC Digital Network. Mr. Baldari has extensive experience in various
technologies, including video conferencing and streaming video products for
multicast deployment. He has designed and implemented global dial-in solutions,
supporting secured, PPP and x.25 dial, as well as high speed, availability TCPIP
access to mainframe data centers.
MARK GERBERICH has served as a Director to the Company since its inception. In
1994, Mr. Gerberich was appointed the Commissioner of the Professional Bowling
Association ("PBA"). Prior to his appointment as Commissioner, Mr. Gerberich was
associated with the PBA for the last 17 years in various positions including
Deputy Commissioner, Membership Services Director and Director of Operations. In
1983, Mr. Gerberich earned a Bachelor of Science degree in Sports Administration
from St. John's University.
KATHLEEN KIRKWOOD serves as a Director to the Company. Ms. Kathleen Kirkwood
started her successful business career in 1983 from a walk up apartment in New
York City. She designed the first Velcro attaching shoulder pad and the rest is
history. Her QVC television show airs several times a month and has grown into a
multi million dollar addition to her other retail businesses. Ms. Kirkwood has
appeared on the Oprah Winfrey Show, Joan Rivers Show, in Cosmopolitan Magazine,
FOX Style News, is a member of the Board of The National Foundation for Teaching
Entrepreneurship.
MICHAEL S. WEBER serves as a Director. Mr. Weber has extensive experience in the
definition, selection, and implementation of systems solutions and enabling
technologies for the supply chain and supporting functions. He holds a M.S. and
B.S. in Mechanical Engineering from the University of Michigan, Ann Arbor. Since
February 2000 Mr. Weber has been Client Services Director for US Interactive, a
public corporation with offices in New York City. His
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responsibilities include defining business and internet strategies for clients
seeking professional internet consulting services. Prior to joining US
Interactive, Mr. Weber was a Senior Manager at KPMG, in the Package Software
Solutions consulting practice. He assisted many fortune 500 companies to improve
operations through the assessment and reengineering of core business processes.
Prior to joining KPMG, he served as a special projects manager for IS service
delivery to the Manufacturing and Production departments at Martin Marietta
Aerospace Corp. While at Martin Marietta, Mr. Weber held various positions in
production, manufacturing, and program management. Mr. Weber's professional
experience includes supervising an international management team for a major
chemicals manufacturer reengineering supply chain functions and systems,
supporting forecasting, inventory management, production planning and
scheduling. He was also responsible for managing the selection and
implementation of distribution software, supporting sales and marketing,
customer service, inventory control, and order management for a major
distributor of fashion watches.
The Directors of the Company are entitled to receive reasonable
out-of-pocket expenses incurred in attending meetings of the Board of Directors
of the Company but are not compensated for services provided in their capacities
as directors. The Company has adopted a Stock Option Plan for employees,
consultants and non employee directors.
ITEM 6. EXECUTIVE COMPENSATION
EMPLOYMENT AGREEMENTS
JAHN AVARELLO, PRESIDENT OF THE COMPANY
Mr. Avarello's contract is for a three year period beginning March 1,
2000. The base salary for Mr. Avarello is $300,000 per year, subject to increase
after negotiation and approval by the Board of Directors on November 1, 2001.
His compensation also includes bonuses and stock options dependent on the
Company meeting specific gross sales and profitability levels as established in
the Company's business plan. Mr. Avarello has agreed to defer a substantial
portion of his compensation and in place thereof to receive shares of the
Company's common stock. The number of shares of common stock of the Company to
be issued to Mr. Avarello will be in the same proportion as will be issued to
all other executives, management and employees who have agreed to defer payment
of salary or other benefits.
THOMAS VEROLA, SECRETARY OF THE COMPANY
Mr. Verola's contract is for a three year period beginning March 1,
2000. The Base Salary for Mr. Verola is $200,000 per year. His compensation also
includes bonuses and stock options dependent on PBA Tour Gear, Inc. meeting
specific gross sales and profitability levels as established in the Company's
business plan. Mr. Verola has agreed to defer a substantial portion of his
compensation and in place thereof to receive shares of the Company's common
stock to be issued in the same proportion as will be issued to all other
executives, management and employees who have agreed to defer payment of salary
or other benefits.
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WILLIAM E. WEBER, VICE PRESIDENT AND GENERAL COUNSEL
On October 1, 1999 Mr. Weber signed a contract with the Company to
provide general corporate legal services including assisting in the development
of the Company's business plan, assisting the Company's securities attorneys in
the preparation of all reports, filings, contracts, and notices. The contract is
for a three year period. His compensation is $150,000 per year, plus benefits of
approximately $20,000.
Mr. Weber has been rendering legal services to the Company since June
1999 and has agreed to defer a substantial amount of the legal fees and expenses
owed to his firm, Weber & Weber, for the period of June 1, 1999 to September 30,
1999, as well as compensation and expenses owed to him since October 1, 1999
pursuant to the terms of his employment contract. All deferred legal fees and
expenses owed to Weber & Weber and Mr. Weber shall be paid with the Company's
shares of common stock to be issued in the same proportion as will be issued to
all other executives, management and employees who have agreed to defer payment
of salary or other benefits.
LEONARD MARSHALL, VICE PRESIDENT AND COO FOR GUARDIAN INTERNET SOLUTIONS, INC.
On April 28, 2000, the Company signed a three year Executive Employment
Contract with Leonard Marshall, at $150,000 per year. Mr. Marshall's
responsibilities include assignment as special spokesman for IAMG and to act as
Chief Operating Officer for GIS. Mr. Marshall agreed to represent IAMG in the
partnership venture with Fraunhofer Research Center for Computer Graphics, to
design and develop the e-commerce shopping malls, and the website for the
children and family entertainment and "edutainment" portals. Upon completion of
the GIS business plan, obtaining of "seed" financing, and reaching specific
annual gross sales income, Mr. Marshall was to receive a 25% equity interest in
GIS. In the event Mr. Marshall's outside business interests, or his primary
responsibility to the Company as spokesman for Pro Star Athletic, Inc.,
prohibited him from fulfilling his contractual obligations to work with
Fraunhofer CRCG and GIS, the Company agreed to amicably renegotiate his contract
to convert it to a consulting agreement. Mr. Marshall has agreed to accept
shares of the Company's common stock to be issued after the Company's common
stock is listed on the NASDAQ market in an amount equal in proportion to shares
of common stock issued to all other executives, management and employees who
have agree to defer payment of salary or other benefits. There can be no
assurance that the Company's securities will ever be listed on the NASDAQ
market.
On July 10, 2000, Leonard Marshall indicated his intent not to act as
COO for Guardian and also indicated he did not want to actively participate in
the management of GIS. As a result, the Company terminated his contract.
Presently, the parties are negotiating a new contract with Leonard Marshall for
him to continue acting as a Member of the Board of Directors and to act as
spokesperson for the NFL licenses and as assistant coordinator for new license
acquisitions of the Sports License Division of IAMG Holdings.
22
<PAGE>
MANAGEMENT EMPLOYMENT CONTRACTS
RONNIE S. BLAUFARB, NATIONAL SALES MANAGER
On March 25, 2000, the Company signed a three year employment contract with
Ronnie S. Blaufarb, an experienced executive who has held positions as National
Sales manager and Vice President of Sales for major corporations. From 1990 to
1997 he was the National Sales Manager for Majestic Graphics, Inc., a division
of Majestic Athletic, Inc., located in Bangor, Pa. Through his efforts, gross
sales increased from $9 million to $80 million dollars. In 1998 he joined The
Weekend Exercise Company, Inc., located in San Diego, CA., as its National Sales
Manager. Mr. Blaubarb's position as IAMG's Vice President and National Sales
Manager will include responsibility for overall management and control of IAMG's
sales relating to the manufacture and marketing of PBA Tour Gear and NFL
Team/Player and Big and Tall Collection Series apparel. Mr. Blaufarb's annual
compensation begins at $175,000 per year plus 1% of gross sales over specific
levels. His continued employment is conditioned on meeting specific annual gross
sales goals. Mr. Blaufarb has agreed to defer a percentage of his compensation
beginning July 1, 2000 and will receive shares of the Company's common stock in
lieu of any compensation owed to him by the Company, in an amount
proportionately equal to the shares given to all other executives, management
and employees.
STOCK OPTION PLANS AND AGREEMENTS.
INCENTIVE OPTION PLAN - On April 24, 2000 the Directors of the Company adopted
and the stockholders of the Company approved the adoption of the IAMG's
Employee, Management and Non-Employee Director Stock Incentive Plan (the
"Plan"). The purpose of the Plan is to enable the Company to encourage key
employees and Directors to contribute to the success of the Company by granting
such employees and Directors incentive stock options ("ISOs").
The Plan will be administered by the Board of Directors or a committee
appointed by the Board of Directors ("Committee") which will determine, in its
discretion, among other things, the recipients of grants, whether a grant will
consist of ISOs or a combination thereof, and the number of shares to be subject
to such options.
The Plan provides for the granting of ISOs to purchase Common Stock at
an exercise price to be determined by the Board or the Committee not less than
the fair market value of the Common Stock on the date the option is granted.
IAMG will reserve up to 10,000,000 shares of its Common Stock, $.001
par value to implement the Plan. At this date, no shares have been issued
pursuant to the Plan.
Upon the exercise of an option, the holder must make payment of the
full exercise price. Such payment may be made in cash or in shares of Common
Stock, or in a combination of both. The Company may lend to the holder of an
option funds sufficient to pay the exercise price, subject to certain
limitations.
23
<PAGE>
The Plan may be terminated or amended at any time by the Board of
Directors, except that, without stockholder approval, the Plan may not be
amended to increase the number of shares subject to the Plan, change the class
of persons eligible to receive options under the Plan or materially increase the
benefits of participants.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 24, 2000, IAMG shareholders approved a stock purchase
agreement, dated April 1, 2000 between Home/Office Express, Inc. (HOMX) and
James, M. Richards, Larry Stout and Steven Hartmann ("Purchasers") for the sale
of Personal Touch Messenger Services, Inc., a wholly owned IAMG subsidiary
corporation operating a messenger service business in the State of Arizona. The
Purchasers paid for this business with 1,000,000 restricted shares of HOMX
common stock. IAMG also gave a non recourse promissory note to the Purchasers in
the amount of $300,000 with payment subject to several conditions, which have
not been met to this date.
On June 1, 2000, the Company signed an agreement with William Forte and
Robert Lipori to issue 1,050,000 restricted shares of common stock, $.001 par
value in full satisfaction of a $350,000 debt representing two loans made to the
Company by Mr. Forte and Mr. Lipori. On the same date, the Company signed an
agreement with Jahn Avarello, its President and CEO, to issue 3,900,000
restricted shares of common stock, $.001 par value in satisfaction of a
$1,300,000 of a total of $1,518,632 in loans made by Mr. Avarello prior to
January 21, 2000, leaving a balance of $218,632. Since January 31, 2000, Mr.
Avarello has loaned another $400,000 to the Company.
On June 1, 2000, IAMNY entered into a Lease Agreement with F&L Apparel,
Ltd. a New Jersey corporation, whose principal place of business is located at
2045 85th Street, North Bergen, New Jersey ("Lessee"). One of the principals of
F&L Apparel, Ltd. is Julius Avarello, a brother of Jahn Avarello, President of
IAMG. The Lessee received the rights to IAMNY's customers, equipment, machinery
and inventory for a five year period, with an option exercisable by IAMNY for an
additional five year period. The Lessee pays IAMNY 15% of all receipts from
IAMNY's customers, including any future customers that the Leasee obtains during
the lease period. This Lease allows IAMG's principals to concentrate their
efforts on the development of the proprietary sports licensing and e-commerce
business. At the same time, IAMNY will receive income without any offsetting
overhead expenses such as renting manufacturing facilities, employee salaries
and other overhead.
On July 24, 2000, IAMG retained International Technologies & Finance,
LLC ("ITF"), as a financial consultant to assist in obtaining debt and equity
financing. IAMG will pay $8000.00 per month for a four month period. ITF will
receive commissions equal to 6% on equity and/or on debt financing obtained by
IAMG during the term of the agreement.
ITEM 8. DESCRIPTION OF SECURITIES
GENERAL
IAMG is authorized to issue up to 100,000,000 shares of Common Stock,
$.001 par value
24
<PAGE>
per share, of which 17,950,000 shares were issued and outstanding as of the date
of this registration statement. IAMG's Certificate of Incorporation authorizes
5,000,000 shares of "blank check" Preferred Stock $.001 par value, none of which
are outstanding.
COMMON STOCK
Subject to the rights of holders of Preferred Stock, if any, holders of
shares of Common Stock of the Company are entitled to share equally on a per
share basis in such dividends as may be declared by the Board of Directors out
of funds legally available therefor. There are presently no plans to pay
dividends with respect to the shares of Common Stock. Upon liquidation,
dissolution or winding up of the Company, after payment of creditors and the
holders of any senior securities of the Company, including Preferred Stock, if
any, the assets of the Company will be divided pro rata on a per share basis
among the holders of the shares of Common Stock. The Common Stock is not subject
to any liability for further assessments. There are no conversion or redemption
privileges nor any sinking fund provisions with respect to the Common Stock and
the Common Stock is not subject to call. The holders of Common Stock do not have
any pre-emptive or other subscription rights.
Holders of shares of Common Stock are entitled to cast one vote for
each share held at all stockholders' meetings including the Annual Meeting, for
all purposes, including the election of directors. The Common Stock does not
have cumulative voting rights.
All of the issued and outstanding shares of Common Stock are fully
paid, validly issued and non-assessable.
PREFERRED STOCK
None of the 5,000,000 "blank check" preferred shares are currently
outstanding. The Board of Directors of the Company have the authority, without
further action by the holders of the outstanding Common Stock, to issue shares
of Preferred Stock from time to time in one or more classes or series, to fix
the number of shares constituting any class or series and the stated value
thereof, if different from the par value, and to fix the terms of any such
series or class, including dividend rights, dividend rates, conversion or
exchange rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price and the liquidation preference of
such class or series.
DELAWARE ANTI-TAKEOVER LAW PROVISIONS
As a Delaware corporation, the Company is subject to Section 203 of the
General Corporation Law. In general, Section 203 prevents an "interested
stockholder" (defined generally as a person owing 15% or more of a Delaware
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with such Delaware corporation for three years
following the date such person became an interested stockholder unless (i)
before such person became an interested stockholder, the board of directors of
the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination, (ii) upon
consummation of the transaction that resulted in the interested
25
<PAGE>
stockholder's becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding stock held by the directors who are
also officers of the corporation and by certain employee stock plans), or (iii)
following the transaction in which such person became an interested stockholder,
the business combination is approved by the board of directors of the
corporation and authorized at a meeting of stockholders by the affirmative vote
of the holders of two-thirds of the outstanding voting stock of the corporation
not owned by the interested stockholder. Under section 203, the restrictions
described above also do not apply to certain business combinations proposed by
an interested stockholder following the public announcement or notification of
one of certain extraordinary transactions involving the corporation and a person
who had not been an interested stockholder during the previous three years or
who became an interested stockholder with the approval of the corporation's
board of directors and if such business combination is approved by a majority of
the board members who were directors prior to any person's becoming an
interested stockholder. The provisions of Section 203 requiring a super-majority
vote to approve certain corporate transactions could have the effect of
discouraging, delaying or preventing hostile takeovers, including those that
might result in the payment of a premium over market price or changes in control
or management of the Company.
LIMITATION ON LIABILITY OF DIRECTORS
IAMG's Certificate of Incorporation provides that a director of the
Company will not be personally liable to the Company or its stockholders for
monetary damages for breach of the fiduciary duty of care as a director,
including breaches which constitute gross negligence. By its terms and in
accordance with the DGCL, however, this provision does not eliminate or limit
the liability of a director of the Company (i) for breach of the director's duty
of loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve international misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, (relating to unlawful payments or
dividends or unlawful stock repurchases or redemptions), (iv) for any improper
benefit or (v) for breaches of a director's responsibilities under the Federal
Securities laws.
SHARES ELIGIBLE FOR FUTURE RESALE
As of July 24, 2000, IAMG had an aggregate of 17,950,000 shares of
Common Stock issued and outstanding, 16,950,000 of which are "restricted
securities," which may be sold only in compliance with Rule 144 under the Act,
as amended. Rule 144 provides, in essence, that a person holding restricted
securities for a period of one year after payment therefor may sell, in brokers'
transactions or to market makers, an amount not exceeding 1% of the outstanding
class of securities being sold, or the average weekly reported volume of trading
of the class of securities being sold over a four-week period, whichever is
greater, during any three-month period. (Persons who are not affiliates of the
Company and who had held their restricted securities for at least two years are
not subject to the volume or transaction limitations.) The sale of a significant
number of these shares in the public market may adversely affect prevailing
market prices of the Company's securities.
26
<PAGE>
TRANSFER AGENT & REGISTRAR
The transfer agent and registrar for IAMG's Common Stock is Holladay
Stock Transfer., 2939 North 67th Place, Scottsdale, Arizona 85251. The telephone
number is 480-481-3940.
27
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
IAMG's shares of Common Stock are currently quoted on the Pink Sheets.
On March 27, 2000, the Company began trading on the OTC under the symbol "HOMX".
In April 2000, the Company traded under the symbol "IAMH". However, the Company
is not aware of any established trading market for its Common Stock nor is there
any record of significant trading in the Company's Common Stock.
The following table sets forth the range of closing high and low bid
quotations for the Common Stock, since October 1, 1999, as reported by the OTC
or Pink Sheets, as applicable. The quotes represent inter-dealer prices without
adjustment or mark-ups, mark-downs or commissions and may not necessarily
represent actual transactions. The trading volume of the Company's securities
fluctuates and may be extremely limited (or non-existent) during certain
periods. As a result, the liquidity of an investment in the Company's securities
may be adversely affected.
COMMON STOCK
HIGH LOW
---- ---
1999
----
Quarter ended
December 31, 1999 1.875 .875
2000
----
Quarter ended
March 31, 2000 5.50 .625
Quarter ended
June 30, 2000 5.50 .25
On August 8, 2000, the closing sale price as reported by the Pink
Sheets was $.25 for each share of Common Stock. As of July 27, 2000, there were
17,950,000 shares of Common Stock, $.001 par value, issued and outstanding held
by 125 holders of record. Except for 1,000,000 unregistered and free-trading
shares of Common Stock, all remaining issued and outstanding shares of Common
Stock are restricted.
DIVIDEND POLICY
It is the policy of the Board of Directors to retain earnings for use
in the maintenance and expansion of the Company's business. The Company has not
declared any cash dividends to the shareholders of its capital stock and does
not intend to declare such dividends in the foreseeable future.
28
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
IAMG is not a party to any material litigation or governmental
proceedings that, management believes, would result in judgments or fines that
would have a material adverse effect on the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On March 27, 2000, Home/Office acquired the assets of IAM Group, Ltd.
and issued 11,000,000 shares of common stock. The issuance was made in reliance
on Section 4(2) of the Act. No commissions were paid.
On June 1, 2000, the Company signed an agreement with William Forte and
Robert Lipori to issue 1,050,000 restricted shares of common stock, $.001 par
value in full satisfaction of a $350,000 debt representing two loans made to the
Company by Mr. Forte and Mr. Lipori. The issuance was made in reliance on
Section 4(2) of the Act. No commissions were paid.
On the same date, the Company signed an agreement with Jahn Avarello,
its President and CEO, to issue 3,900,000 restricted shares of common stock,
$.001 par value in satisfaction of a $1,300,000 of a total of $1,518,632 in
loans made by Mr. Avarello prior to January 21, 2000, leaving a balance of
$218,632. Since January 31, 2000, Mr. Avarello has loaned another $400,000 to
the Company. The issuance was made in reliance on Section 4(2) of the Act. No
commissions were paid.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "GCL")
empowers a corporation to indemnify its directors and officers and to purchase
insurance with respect to liability arising out of the performance of their
duties as directors and officers. The GCL provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of stockholders or otherwise.
Article Seven of IAMG's Certificate of Incorporation eliminates the
personal liability of directors to the fullest extent permitted by Section 102
of the GCL. Article Seven provides for indemnification of all persons whom it
shall have the power to indemnify pursuant to Section 145 of the GCL.
The effect of the foregoing is to require the Company to the extent
permitted by law to indemnify the officers and directors of the Company for any
claim arising against such persons in
29
<PAGE>
their official capacities if such person acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
IAMG does not currently have any liability insurance coverage for its
officers and directors.
PART III
ITEM 1. INDEX TO EXHIBITS
3.1 Certificate of Incorporation of the Company
3.2 By-Laws of the Company
4.1 Specimen Certificate for shares of Common Stock
10.1 License Agreement, dated May 2000, between PBA Tour, Inc. and IAM
Group, Ltd. ("PBA License Agreement")
10.2 Amendment to PBA License Agreement, dated January 26, 2000, between PBA
Tour, Inc. and IAM Group, Ltd.
10.3 Lease Agreement, dated May 5, 2000, between IAMG Holdings, Inc. and F&L
Apparel, Ltd.
10.4 Lease Agreement, dated May 26, 2000, between 1400 Broadway Associates
and IAMG Holdings, Inc.
10.5 Employment Agreement, dated March 25, 2000, between IAM Group, Ltd. and
Ron Blaufarb.
10.6 Employment Agreement, dated October 25, 1999 between IAM Group, Ltd.
and William Weber.
10.7 Employment Agreement, dated March 2000, between IAM Group, Ltd. and
Jahn Avarello.
10.8 Employment Agreement, dated March 2000, between IAM Group, Ltd. and
Thomas Verola.
10.9 Employment Agreement, dated April 28, 2000, between IAMG Holdings, Inc.
and Leonard Marshall.
10.10 Agreement, dated June 1, 2000, between William Forte and Robert Lipori,
as Shareholders and IAMG Holdings, Inc.
10.11 Agreement, dated June 1, 2000, between Jahn Avarello, as Shareholder
and IAMG Holdings, Inc.
10.12 Agreement, dated July 14, 2000, between International Technologies &
Finance, LLC and IAMG Holdings, Inc.
10.13 IAMG Holdings, Inc. Nonstatutory Stock Option Plan.
10.14 Agreement for Purchase and Sale of Assets, dated March 27, 2000, by and
among Home Office Express, Inc. and IAM Group, Ltd.
30
<PAGE>
10.15 Stock Purchase Agreement, dated April 1, 2000, between Home Office
Express, Inc. and James M. Richards, Larry Stout and Steven Hartmann.
10.16 Non Recourse Promissory Note, dated April 17, 2000.
21.1 Subsidiaries of Registrant.
23.1 Consent of Clancy and Co., P.L.L.C., Independent Certified Public
Accountants.
27.1 Financial Data Schedule.
31
<PAGE>
C O N T E N T S
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . 1
Balance Sheets at June 30, 1999 and 1998 . . . . . . . . . . . . . . . .2
Statement of Income and Retained Earnings For the Years Ended
June 30, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . . . . 3
Statement of Cash Flows For the Years Ended June 30, 1999 and 1998 . . .4
Notes to the Financial Statements .. . . . . . . . . . . . . . . . . .5-7
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
International Apparel Manufacturing of New York, Inc.
New York, New York 10018
We have audited the balance sheets of International Apparel Manufacturing of New
York, Inc. (the Company), as of June 30, 1999 and 1998, and the related
statements of operations and retained earnings, and cash flows for the years
then ended. 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits of the financial statements provide a reasonable
basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of June 30, 1999 and 1998,
and the results of its operations and its cash flows for the years then ended,
in conformity with generally accepted accounting principles.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
July 31, 2000
1
<PAGE>
INTERNATIONAL APPAREL MANUFACTURING OF NEW YORK, INC.
BALANCE SHEETS
JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 2,024 $ 15,255
Accounts Receivable 12,970 0
Deferred Tax Asset (Note 5) 12,420 19,396
--------- ---------
Total Current Assets 27,414 34,651
Property and Equipment, Net (Note 3) 698,658 26,133
--------- ---------
Total Assets $ 726,072 $ 60,784
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 44,854 $ 46,002
Income Taxes Payable (Note 5) 36,093 582
Loans From Stockholder (Note 4) 629,645 67,654
--------- ---------
Total Current Liabilities 710,592 114,238
Stockholders' Equity
Common Stock: No Par Value, 200 Authorized; Issued and
Outstanding, 200 shares 20,000 20,000
Retained Earnings (A Deficit) (4,520) (73,454)
--------- ---------
Total Stockholders' Equity (A Deficit) 15,480 (53,454)
--------- ---------
Total Liabilities and Stockholders' Equity $ 726,072 $ 60,784
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
INTERNATIONAL APPAREL MANUFACTURING OF NEW YORK, INC.
STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (A DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
Year Ended June 30: 1999 1998
----------- -----------
Revenues $ 2,764,813 $ 46,884
Cost of Revenues 2,569,965 28,922
----------- -----------
Gross Profit 194,848 17,962
Expenses
General and Administrative 83,427 16,003
----------- -----------
Operating Income 111,421 1,959
Provision (Benefit) For Income Taxes (Note 5) 42,487 (18,814)
----------- -----------
Net Income 68,934 20,773
Retained Earnings, Beginning of Period (73,454) (94,227)
----------- -----------
Retained Earnings (A Deficit), End of Period $ (4,520) $ (73,454)
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL APPAREL MANUFACTURING OF NEW YORK, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
Year Ended June 30: 1999 1998
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ 68,934 $ 20,773
Adjustments to Reconcile Net Income to Net Cash Used In
Operating Activities
Depreciation and Amortization 77,476 4,418
Change in Deferred Income Taxes 6,976 (19,396)
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable (12,970) 0
(Increase) Decrease in Other Assets 0 100
Increase (Decrease) in Accounts Payable and Accrued Liabilities (1,148) (31,647)
Increase (Decrease) in Income Taxes Payable 35,511 582
--------- ---------
Total Adjustments 105,845 (45,943)
--------- ---------
Net Cash Used In Operating Activities 174,779 (25,170)
Cash Flows From Investing Activities -- --
Cash Flows From Financing Activities
Net Advances (Repayments) From Related Party (188,010) 35,655
--------- ---------
Net Cash Provided By Financing Activities (188,010) 35,655
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents (13,231) 10,485
Cash and Cash Equivalents, Beginning of Year 15,255 4,770
--------- ---------
Cash and Cash Equivalents, End of Year $ 2,024 $ 15,255
========= =========
SUPPLEMENTAL INFORMATION:
Cash paid for:
Interest $ 0 $ 0
========= =========
Income taxes $ 0 $ 0
========= =========
NONCASH INVESTING AND FINANCING INFORMATION:
Fixed Assets Acquired in Exchange For Debt $ 750,000 --
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
INTERNATIONAL APPAREL MANUFACTURING OF NEW YORK, INC.
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 1 - ORGANIZATION
International Apparel Manufacturing of New York, Inc. was incorporated
under the laws of the State of New York on July 9, 1993, with an
authorized capital of 200 shares of no par value common stock. The
Company is a domestic manufacturing business that manufactures licensed
and non-licensed sportswear apparel and accessories.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual
method of accounting.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a
maturity of three months or less when acquired to be cash and cash
equivalents.
CONCENTRATION OF CREDIT RISK
The Company maintains bank accounts at financial institutions that are
insured up to $100,000.
PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, is depreciated under the
straight-line method over their estimated useful lives, ranging from
three to seven years.
REVENUE RECOGNITION
Revenue is recognized when earned. Revenue from product sales is
recognized upon shipment to customers.
USE OF ESTIMATES
Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. Actual results may differ from
these estimates.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." Under SFAS No. 109, deferred tax liabilities and assets
are determined based on the difference between the financial statement
and tax bases of assets and liabilities, using enacted tax rates in
effect for the year in which the differences are expected to reverse.
BUSINESS SEGMENT INFORMATION
The Company implemented SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company operates in one
segment, that being the garment and apparel industry.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PENDING ACCOUNTING PRONOUNCEMENTS
It is anticipated that current pending accounting pronouncements will
not have an adverse impact on the financial statements of the Company.
5
<PAGE>
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at June 30:
1999 1998
--------- --------
Furniture and Equipment $ 72,083 $ 4,083
Warehouse and Factory Equipment 682,867 25,867
Leasehold Improvements 5,489 5,489
Vehicles 25,000 0
--------- --------
Total 785,439 35,439
Accumulated Depreciation (86,782) (9,306)
--------- --------
Net Book Value $ 698,657 $ 26,133
========= ========
Depreciation expense charged to operations during 1999 and 1998 was
$77,476 and $4,418, respectively.
NOTE 4 - NOTES PAYABLE, RELATED PARTIES
Notes Payable, Related Parties consists of a notes payable to Jahn
Avarello, dated June 10, 1999, in the original amount of $750,000,
interest at six (6) % per annum payable quarterly, interest only, first
payment commencing on August 10, 1999, and continuing on the 10th day
of November, February, and May 2000, when the entire aggregate, unpaid
principal balance, including accrued and unpaid interest, is due and
payable. Said note was entered into in exchange for the acquisition of
property and equipment of $750,000. See Note 6.
NOTE 5 - INCOME TAXES
The deferred tax consequences of temporary differences in reporting
items for financial statement and income tax purposes are recognized,
as appropriate. Realization of the future tax benefits related to the
deferred tax assets is dependent on many factors, including the
Company's ability to generate taxable income within the net operating
loss carryforward period. Management has considered these factors in
reaching its conclusion as to the valuation allowance for financial
reporting purposes. The income tax effect of temporary differences
comprising the deferred tax assets and deferred tax liabilities on the
accompanying balance sheet is a result of the following:
6
<PAGE>
NOTE 5 - INCOME TAXES (CONTINUED)
The provision (benefit) for income taxes was computed as follows:
1999 1998
-------- --------
Current Federal $ 23,770 $ 0
State and Local 12,323 582
-------- --------
Total 36,093 582
Prior Year Federal Income Taxes (582) 0
Change in Deferred Taxes 6,976 (19,396)
-------- --------
Provision (Benefit)
For Income Taxes $ 42,487 $(18,814)
======== ========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
June 30, 1999 and 1998 are as follows:
Deferred Tax Assets 1999 1998
-------- ----------
Net Operating Loss Carryforwards $ 0 $ 19,396
Depreciation 12,420 0
-------- ----------
Net Deferred Tax Assets $ 12,420 $ 19,396
======== ==========
The net change in the total valuation allowance for the year ended June
30, 1999 was a decrease of $6,976.
For the fiscal year ended June 30, 1999, the Company utilized 100% of
its net operating loss carryforwards of $92,268 to offset taxable
income.
Pursuant to the Tax Reform Act of 1986, annual utilization of the
Company's net operating loss carryforwards may be limited if a
cumulative change in ownership of more than 50% is deemed to occur
within any three-year period.
NOTE 6 - SUBSEQUENT EVENTS
Subsequent to the balance sheet date, the Company has become a
wholly-owned subsidiary of IAMG Holdings, Inc. (formerly known as IAM
Group, Ltd.)
On June 1, 2000, notes payable, related parties was converted to equity
in IAMG Holdings, Inc.
7
<PAGE>
IAM GROUP, LTD.
New York, NY
AUDIT REPORT
JANUARY 31, 2000
<PAGE>
C O N T E N T S
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . .1
Consolidated Balance Sheet at January 31, 2000 . . . . . . . . . . . . . . .2-3
Consolidated Statement of Operations and Retained Earnings (A Deficit)
For the Period From Inception (April 20, 1999) To January 31, 2000 . . . . . . 4
Consolidated Statement of Cash Flows For the Period From Inception
(April 20, 1999) To January 31, 2000 . . . . . . . . . . . . . . . . . . . . 5-6
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . 7-15
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
<PAGE>
[Clancy and Co. P.L.L.C. Letterhead]
INDEPENDENT AUDITORS' REPORT
Board of Directors
IAM Group, Ltd.
Hauppauge, New York 11788
We have audited the accompanying consolidated balance sheet of IAM Group, Ltd.
(the Company), as of January 31, 2000, and the related consolidated statements
of operations, stockholders' equity and cash flows for the period from inception
(April 20, 1999) to January 31, 2000. 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 of the financial statements provides a reasonable
basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the consolidated financial position of the Company as of January 31,
2000, and the consolidated results of their operations and their cash flows for
the period indicated, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has incurred substantial net
losses for the period indicated. These factors raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
March 25, 2000
-1-
<PAGE>
IAM GROUP, LTD.
CONSOLIDATED BALANCE SHEET
JANUARY 31, 2000
ASSETS
Current Assets
Accounts Receivable $ 38,494
Inventory (Note 3) 278,389
Other Assets 11,650
----------
Total Current Assets 328,533
Property and Equipment, Net (Note 4) 721,562
Intangible Assets, License Agreements (Note 11) 106,250
----------
Total Assets $1,156,345
==========
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
IAM GROUP, LTD.
CONSOLIDATED BALANCE SHEET
JANUARY 31, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Checks Issued In Excess of Cash $ 54,310
Accounts Payable 257,786
Accounts Payable, License Agreement (Note 11) 25,000
Notes Payable, Current Portion (Note 5) 21,936
Capital Lease Obligation, Current Portion (Note 6) 12,265
Notes Payable, Related Party (Note 7) 1,518,632
Notes Payable, Other (Note 8) 350,000
Accrued Interest (Note 7, 8) 77,336
-----------
Total Current Liabilities 2,317,265
Long-term Liabilities
Notes Payable, Noncurrent Portion (Note 5)
32,402
Capital Lease Obligation, Current Portion (Note 6) 23,550
-----------
Total Long-Term Liabilities 55,952
-----------
Total Liabilities 2,373,217
Commitments and Contingencies (Note 5, 6, 11)
Stockholders' Equity
Common Stock: No Par Value, 200 Authorized; Issued and
Outstanding, 200*shares 39,352
Retained Earnings (A Deficit) (1,256,224)
-----------
Total Stockholders' Equity (1,216,872)
-----------
Total Liabilities and Stockholders' Equity $ 1,156,345
===========
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
IAM GROUP, LTD.
CONSOLIDATED STATEMENT OF OPERATIONS
AND RETAINED EARNINGS (A DEFICIT)
FOR THE PERIOD FROM INCEPTION (APRIL 20, 1999) TO JANUARY 31, 2000
Revenues $ 2,110,263
Cost of Revenues 2,038,760
-----------
Gross Profit 71,503
Expenses
General and Administrative 1,223,970
-----------
Operating Loss (1,152,467)
Other Expense
Interest Expense (103,757)
-----------
Net Loss $(1,256,224)
===========
Retained Earnings, Beginning of Period 0
-----------
Retained Earnings (A Deficit), End of Period $(1,256,224)
===========
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
IAM GROUP, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (APRIL 20, 1999) TO JANUARY 31, 2000
<TABLE>
<CAPTION>
Cash Flows From Operating Activities
<S> <C>
Net Loss $(1,256,224)
Adjustments to Reconcile Net Loss to Net Cash Used In
Operating Activities
Common Stock Issued For Acquisition of Subsidiary 39,152
Depreciation and Amortization 214,871
Unrealized Loss on Inventory 92,796
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable (38,494)
(Increase) Decrease in Inventory (371,184)
(Increase) Decrease in Other Assets (11,650)
Increase (Decrease) in Accounts Payable and Accrued Liabilities 257,786
Increase (Decrease) in Accrued Interest 77,336
-----------
Total Adjustments 260,613
-----------
Net Cash Used In Operating Activities (995,611)
Cash Flows From Investing Activities
Purchase of Licensing Agreements (100,000)
Purchase of Property and Equipment (77,739)
-----------
Net Cash Flows Used In Investing Activities (177,739)
Cash Flows From Financing Activities
Checks Issued in Excess of Cash 54,310
Issuance of Common Stock 200
Net Advances From Related Party 768,632
Net Advances From Others 350,000
Net Advances Under Factored Receivables 11,952
Principle Payments Under Notes Payable (7,614)
Principle Payments Under Capital Lease Obligations (4,130)
-----------
Net Cash Provided By Financing Activities 1,173,350
-----------
Increase (Decrease) in Cash and Cash Equivalents 0
Cash and Cash Equivalents, Beginning of Year 0
-----------
Cash and Cash Equivalents, End of Year $ 0
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
IAM GROUP, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (APRIL 20, 1999) TO JANUARY 31, 2000
Supplemental Information:
------------------------
Cash paid for:
Interest $ 26,421
==============
Income taxes $ 0
==============
Noncash Investing and Financing Information:
Fixed Assets Acquired in Exchange For Debt $ 800,000
==============
Fixed Assets Financed by Capital Lease Obligation $ 39,944
==============
Common Stock Issued For Acquisition of Subsidiary $ 39,152
==============
Licensing Fee Financed Through Accounts Payable $ 25,000
==============
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
IAM GROUP, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
NOTE 1 - ORGANIZATION
IAM Group, Ltd. (the Company) was incorporated under the laws of the State
of New York on April 20, 1999, with an authorized capital of 200 shares of
no par value common stock.
The Company has acquired a 100% interest in four separate subsidiaries:
International Apparel Manufacturing of New York, Inc., acquired April 21,
1999; PBA Tour Gear Inc., acquired May 6, 1999; Pro Star Athletic, Inc.,
acquired June 1, 1999; and Guardian Internet Solutions, Inc., acquired
December 31, 1999.
The Company is a holding company for a group of companies that license,
manufacture and distribute proprietary sportswear apparel and accessories,
worldwide. Distribution channels include retailers, wholesalers and
catalogs.
The financial statements have been prepared on the basis of accounting
principles applicable to a going concern. Accordingly, they do not purport
to give effect to adjustments, if any, that may be necessary should the
Company be unable to continue as a going concern. The Company has incurred
substantial net losses for the period indicated. These factors raise
substantial doubt about its ability to continue as a going concern. The
continuation of the Company as a going concern is dependent upon the
Company's ability to establish itself as a profitable business. The
Company's ability to achieve these objectives cannot be determined at this
time. It is the Company's belief that it will continue to incur losses for
the next 12 months, and as a result, will require additional funds. The
additional funding will be accomplished by seeking funds from private or
public equity investments to meet such needs. There are no guarantees the
Company will be successful in obtaining these funds.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
-----------------
The Company's financial statements are prepared using the accrual method
of accounting.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid debt instruments with a maturity
of three months or less when acquired to be cash and cash equivalents.
Concentration of Credit Risk
----------------------------
The Company maintains bank accounts at financial institutions that are
insured up to $100,000.
-7-
<PAGE>
IAM GROUP, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include results of
operations, account balances and cash flows of the Company and its wholly
owned subsidiaries. All material intercompany transactions have been
eliminated.
Purchase Method
---------------
Investments in companies have been included in the financial report using
the purchase method of accounting on the basis of the fair value of the
acquired assets less liabilities assumed. The Company retains the acquired
companies as subsidiaries.
Accounts Receivable
-------------------
Certain Accounts Receivable are factored without recourse with respect to
credit risk. An allowance for losses is provided for known and potential
losses and for certain customers not factored based on a periodic review
of these accounts. The allowance for such losses was $0 at January 31,
2000.
Inventory
---------
Inventory is stated at lower of cost or market, on a first-in, first-out
basis, and are shown net of a valuation allowance.
Property and Equipment
----------------------
Property and equipment, stated at cost, is depreciated under the
straight-line method over their estimated useful lives, ranging from three
to seven years.
Revenue Recognition
-------------------
Revenue is recognized when earned. Revenue from product sales is
recognized upon shipment to customers.
Intangible Assets
-----------------
Intangible assets represent license agreements and royalty payments and
are recorded at cost in accordance with Accounting Principles Board (APB)
Opinion No. 17, "Intangible Assets." The Company amortizes the intangible
assets using the straight-line method over the term of the specific
agreements. Continually, the Company evaluates whether the estimated
useful life used to amortize an intangible asset is appropriate due to
changing facts and circumstances resulting in increases or decreases in
the asset's estimated useful life, and records the change prospectively.
Amortization charged to operations was $18,750. See Note 11.
Use of Estimates
----------------
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenue, and expenses. Actual results may differ from these estimates.
-8-
<PAGE>
IAM GROUP, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
------------
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." Under SFAS No. 109, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax
bases of assets and liabilities, using enacted tax rates in effect for the
year in which the differences are expected to reverse. See Note 9.
Comprehensive Income
--------------------
The Company has implemented SFAS No. 130, "Reporting Comprehensive
Income," which requires companies to classify items of other comprehensive
income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid in capital in the equity section of a
statement of financial position. The implementation of SFAS No. 130 had no
effect on the Company's financial statements.
Business Segment Information
----------------------------
The Company implemented SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company operates in the garment
and apparel industry. See Note 10.
Reclassifications
-----------------
Certain prior period amounts have been reclassified to conform to the
current year presentation.
Pending Accounting Pronouncements
---------------------------------
It is anticipated that current pending accounting pronouncements will not
have an adverse impact on the financial statements of the Company.
NOTE 3 - INVENTORY
Inventory at January 31, 2000, of $278,389 consists of finished goods such
as sportswear, hats, jackets, etc. At January 31, 2000, the Company
recorded a valuation allowance of $92,796 due to atypical profit margins
and seasonal merchandise.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at January 31, 2000:
Furniture and Equipment $ 72,083
Computer Equipment and Software 126,880
Warehouse and Factory Equipment 682,867
Leasehold Improvements 10,853
Vehicles 25,000
---------
Total 917,683
=========
-9-
<PAGE>
IAM GROUP, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
NOTE 4 - PROPERTY AND EQUIPMENT (CONTINUED)
Accumulated Depreciation (196,121)
---------
Net Book Value $ 721,562
Depreciation expense charged to operations for the period ended January
31, 2000 was $196,121.
NOTE 5 - NOTES PAYABLE
Notes Payable consists of the following:
(1) Sterling Factors Corporation $ 11,952
(2) Indian River National Bank 42,386
------
Total 54,338
Less Current Portion (21,936)
----------
Noncurrent Portion $ 32,402
==========
(1) Sterling Factors Corporation, dated October 5, 1999, interest at
Sterling National Bank base rate plus 2% per annum as determined on the
first business day of the month (minimum 8.5%), base factoring commission
equal to 1 1/8% of the gross invoice amount of each accounts receivable,
due and payable the day of assignment, secured by substantially all of the
Company's assets, and continuing in effect for one year. Entered into by
the Company's wholly owned subsidiary Pro Star Athletic, Inc.
(2) Indian River National Bank, due in sixty (60) monthly installments of
$832.14, maturing December 10, 2003. Secured by the equipment itself.
Future minimum annual lease payments at January are as follows:
2001 $ 21,936
2002 $ 9,984
2003 $ 22,418
NOTE 6 - CAPITAL LEASE OBLIGATION
Computer equipment and software under capital leases are $39,944 less
accumulated depreciation of $7,767, for net assets under capital lease of
$32,177. Lease term is thirty-six (36) months with a purchase option of
$1.00 at end of lease.
Future minimum payments, by year and in the aggregate, under capital
leases are as follows:
2001 $ 12,265
2002 $ 12,265
2003 $ 11,285
-10-
<PAGE>
IAM GROUP, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
NOTE 7 - NOTES PAYABLE, RELATED PARTIES
Notes Payable, Related Parties consists of the following:
(1) Notes Payable, Jahn Avarello $ 650,328
(2) Advances From Shareholder 668,304
(3) Apparel Management Corp. 200,000
----------
Total $1,518,632
==========
(1) Notes Payable, Jahn Avarello, dated June 10, 1999, in the original
amount of $750,000, interest at six (6) % per annum payable quarterly,
interest only, first payment commencing on August 10, 1999, and continuing
on the 10th day of November, February, and May 2000, when the entire
aggregate, unpaid principal balance, including accrued and unpaid
interest, is due and payable. Said note was entered into in exchange for
the acquisition of property and equipment of $750,000. Accrued interest
was $28,973 at January 31, 2000.
(2) Advances From Shareholder represent net funds advanced to the Company
to fund working capital operations. The funds are unsecured and
noninterest bearing. Interest has been imputed at the rate of eight (8) %
per annum. Accrued interest was $32,502 at January 31, 2000.
(3) Apparel Management Corp., a company owned by the shareholder, advanced
funds of $200,000 to fund working capital operations. The funds are
unsecured and bear interest at twelve (12) % per annum. Accrued interest
was $3,493 at January 31, 2000.
NOTE 8 - NOTES PAYABLE, OTHER
Notes Payable, Other consists of the following:
(1) Infotech Concepts $250,000
(2) Kathleen Kirkwood 100,000
(3) Schlemeyer 18,000
--------
Total $368,000
========
(1) Infotech, funds advanced on August 6, 1999, to fund working capital
operations. Unsecured and interest imputed at eight (8) % per annum.
Accrued interest at January 31, 2000 was $9,754.
(2) Kathleen Kirkwood, funds advanced of $100,000 on September 9, 1999,
convertible into two and one-half (2.5) % of the total amount of shares
issued to Thomas Verola, on March 1, 2001, or the effective date of a
Registration Statement to be filed with the Securities and Exchange
Commission by the Company. If the Company fails to make an initial public
offering on or before March 1, 2001, at the option of Kathleen Kirkwood,
the $100,000 shall be returned plus interest at seven (7) % per annum.
Accrued interest at January 31, 2000 was $1,797.
(3) Fred Schlemeyer, funds advanced of $18,000 on July 8, 1999, to help
fund working capital operations. Unsecured and interest imputed at eight
(8) % per annum. Accrued interest at January 31, 2000 was $817.
-11-
<PAGE>
IAM GROUP, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
NOTE 9 - INCOME TAXES
There is no current or deferred tax expense for period ended January 31,
2000, due to the Company's loss position. The benefits of timing
differences have not been previously recorded. The deferred tax
consequences of temporary differences in reporting items for financial
statement and income tax purposes are recognized, as appropriate.
Realization of the future tax benefits related to the deferred tax assets
is dependent on many factors, including the Company's ability to generate
taxable income within the net operating loss carryforward period.
Management has considered these factors in reaching its conclusion as to
the valuation allowance for financial reporting purposes. The income tax
effect of temporary differences comprising the deferred tax assets and
deferred tax liabilities on the accompanying consolidated balance sheet is
a result of the following:
Deferred Taxes
--------------
Net Operating Loss Carryforwards $ 439,678
Valuation Allowance (439,678)
---------
Net Deferred Tax Assets $ 0
=========
The Company has available net operating loss carryforwards of
approximately $1,250,000 for tax purposes to offset future taxable income,
which expire principally in the year 2021.
Pursuant to the Tax Reform Act of 1986, annual utilization of the
Company's net operating loss carryforwards may be limited if a cumulative
change in ownership of more than 50% is deemed to occur within any
three-year period.
NOTE 10 - SEGMENT INFORMATION
The Company operates in four segments, each of which are strategic
businesses that are managed separately because each business sells
distinct products and services. The segments and a description of their
businesses are as follows:
International Apparel Manufacturing of New York, Inc. (I AM NY) - An
apparel manufacturing business located in New York City and Bergen, New
Jersey, offering faster service for merchandise where time is critical,
manufacturing items in-house saving sixty to ninety days delivery time
over merchandise from other foreign countries.
PBA Tour Gear, Inc. (PBA) - Exclusive licensing label for the Professional
Bowlers Association to market bowling apparel and accessories under the
PBA logo and PBA player brand names. An Internet shopping mall is
available for purchase of these goods at website, PBATour.com.
Pro Star Athletic, Inc. (Pro Star) - License to distribute sportswear
apparel and accessories of the National Football League. Joint venture
signed with Leonard Marshall, founder of Pro Star Athletic, LLC of Florida
and owner of licenses from the National Football League.
-12-
<PAGE>
IAM GROUP, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
NOTE 10 - SEGMENT INFORMATION (CONTINUED)
------------------------------
Guardian Internet Solutions, Inc. (Guardian) - Internet Service Provider
headquartered in Vero Beach, Florida, provides high-speed connections to
the Internet and will service the Company's e-commerce needs.
Management evaluates the performance of its segments and allocates
resources to them primarily based on pretax income along with cash flows
and overall economic returns. The accounting policies of the segments are
substantially the same as those described in the summary of significant
accounting policies, as discussed in Note 2.
Certain items are maintained at the Company's corporate level and are not
allocated to the segments. They primarily include most of the Company's
debt and cash and cash equivalents and related net interest expense and
corporate headquarters costs. Intersegment revenues and expenses are
eliminated.
<TABLE>
<CAPTION>
Loss From Capital
Net Sales Operations Depreciation Assets Expenditures
--------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
I AM NY $1,506,638 $ 98,500 $ 174,592 $ 623,712 $ 785,439
PBA 33,675 110,045 0 148,011 0
PRO STAR 528,376 522,110 709 259,105 4,253
GUARDIAN 41,574 222,799 16,505 92,438 102,098
OTHER 0 302,770 4,315 33,079 25,893
--------- ---------- ---------- ---------- -----------
TOTAL 2,110,263 $1,256,224 $ 196,121 $1,156,345 $ 917,683
========= ========== ========== ========== ==========
</TABLE>
NOTE 11 - LICENSE AGREEMENTS
National Football League Properties, Inc. (NFLP)- original license
agreement dated October 26, 1998, between Pro Star LLC and the NFLP, for a
term of April 1, 1999 to March 31, 1999.
On June 2, 1999, the Company, and its wholly owned subsidiary Pro Star
Athletic, Inc., entered into a joint venture agreement with Pro Star Inc.
of Florida (Florida Pro Star), Leonard Marshall, Steve Ciancio, Julian
Desouza, and Susan Guerrero, (the Florida Shareholders) to assign to the
Company all tangible and intangible assets, rights, licenses, and property
that Florida Pro Star has now or in the future may have for the exclusive
right to license for commercial purposes the trademarks of the National
Football League ("NFL"), and the thirty-one (31) professional football
teams that comprise the NFL ("Member Club"), subject to the approval of
the NFL, for a one year period beginning April 1, 1999 and renewable for
one year periods thereafter subject to
-13-
<PAGE>
IAM GROUP, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
NOTE 11 - LICENSE AGREEMENTS (CONTINUED)
payment of royalties and meeting performance levels. A minimum royalty fee
of $87,500 was due for the end of fiscal year March 31, 1999, as a
condition precedent for the NFL License Agreement to be valid and in
effect for the period of April 1, 1999 to March 31, 2000, which was paid
by the Company and charged to operations for the period ended January 31,
2000. In the event additional financing is required prior to a Private
placement offering being available, the
Company agrees to contribute up to $600,000. Licensed products include
headwear, fleece tops, t-shirts, outerwear, knits, and bottoms. Licensed
marks are NFL, National Football Conference (NFC), and American Football
Conference (AFC). Royalty rate of 8.5 % of net sales or $0.25 per unit,
whichever is greater is due on all headwear. All other categories are 8.5%
of net sales. Advance royalty payment of $7,500 is due and a minimum
royalty payment of $15,000 is due per annum. Territories are the United
States and U.S. Military Bases.
On February 1, 2000, the Florida shareholders assigned their interest in
the joint venture above to Pro Star LLC.
On March 3, 2000, an agreement between Pro Star Athletic, Inc., Florida
Pro Star L.L.C., Leonard Marshall, Leonard Marshall on behalf of Julian
DeSouza and Susan Guerrero, IAM Group, Ltd., Jahn Avarello, and Tom
Verola, was entered to clarify that wherever the name Florida Pro Star
appears in the original contract dated June 2, 1999, it is intended to be
Pro Star LLC.
National Football League Players Incorporated (Players Inc.) - dated March
5, 1998, between Pro Star, Inc. and Players Inc., effective January 1,
1998 to February 28, 1999. Second license period can be renewed from March
1, 1999 to February 28, 2000. Third license period can be renewed from
March 1, 2000 to February 28, 2001. Fourth license period can be renewed
from March 1, 2001 to February 28, 2002. Royalty payment of nine (9) % of
the gross sales of the licensed products, calculated on a quarterly basis
and due as of the last day of each May, August, November, and February,
due no later than thirty (30) days after each date. Interest at one and
one-half (1 1/2) % monthly on all royalty payments not timely made.
Non-exclusive right to license and privilege of using trademarks and names
of Players Inc. which may be amended from time to time by Players Inc. and
the names, likenesses, pictures, photographs, voices, facsimile signatures
and or biographical information of certain NFL players, for the product in
the form of "Legends of the Game" and "Big Time Player" headwear, t-shirts
and polos, sweat wear, synthetic activewear, jackets, ties and simulated
leather and nylon duffel bags, and golf bag covers featuring one player
signature and/or likeness per product design. Territory is worldwide.
PBA Tour, Inc. (PBA) - In May 1999, the Company entered into an agreement
with PBA for the exclusive license to use PBA Tour trade names and
trademarks for the purpose of placing them on products and packaging for
marketing and sales literature and other materials promoting the products.
Territory is worldwide. The Company is entitled to eight (8) thirty (3)
second commercial spots on ESPN each calendar year during the term at no
charge for purposes of promoting the products. Royalty fee of eight (8) %
of all fees received. Agreement terminates on June 30, 2004. Additional
five (5) year term commencing on July 1, 2004 and terminating on June 30,
2009, contingent upon the Company having paid PBA a minimum aggregate
amount of $450,000 during the period commencing January 1, 2000 and ending
December 31, 2002. Guaranteed minimum payment of $125,000 is due and paid
as follows: upon execution of agreement, $50,000; August 1, 1999, $25,000;
December 1, 1999, $25,000; and April 1, 2000,
-14-
<PAGE>
IAM GROUP, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
NOTE 11 - LICENSE AGREEMENTS (CONTINUED)
$25,000. As of the date of issuance of these financial statements,
$100,000 has been paid and $25,000 is included in accounts payable at
January 31, 2000.
Future guaranteed minimum annual payments, payable in equal quarterly
installments no later than July 1, October 1, January 1, and April 1 are
as follows:
July 1, 2000 to June 30, 2001 $ 100,000
July 1, 2001 to June 30, 2002 $ 150,000
July 1, 2002 to June 30, 2003 $ 175,000
July 1, 2003 to June 30, 2004 $ 200,000
Additionally, the Company shall pay a royalty fee of equal to eight (8) %
of the Net Sales made during the period, payable no later than thirty (30)
days following the end of the quarter, to the extent the amount of net
sales exceeds the following.
Date of agreement to June 30, 2000 $ 1,562,500
July 1, 2000 to June 30, 2001 $ 1,250,000
July 1, 2001 to June 30, 2002 $ 1,875,000
July 1, 2002 to June 30, 2003 $ 2,187,500
July 1, 2003 to June 30, 2004 $ 2,500,000
Should the Company exercise the additional renewal period for a five-year
term, guaranteed minimum payments for each twelve month period would apply
as set forth in the agreement.
-15-
<PAGE>
HOME/OFFICE EXPRESS, INC.
Phoenix, Arizona
AUDIT REPORT
JANUARY 31, 2000
<PAGE>
C O N T E N T S
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Balance Sheet at January 31, 2000 and 1999 . . . . . . . . . . . . . . 2
Consolidated Statement of Operations For the Years Ended January 31, 2000
and 1999, and For the Period From Inception (July 22, 1996) to January 31, 2000 . . 3
Consolidated Statement of Stockholders' Equity For the Period From Inception
(July 22, 1996) To January 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows For the Years Ended January 31, 2000
and 1999, and For the Period From Inception (July 22, 1996) to January 31, 2000 . . 5-6
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . 7-13
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
</TABLE>
<PAGE>
[Clancy and Co. P.L.L.C. Letterhead]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Home/Office Express, Inc.
Phoenix, Arizona 85016
We have audited the accompanying consolidated balance sheet of Home/Office
Express, Inc. (formerly Telequipment, Inc.) (A Development Stage Company), (the
Company), as of January 31, 2000, and 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years then
ended, and for the period from inception (July 22, 1996) to January 31, 2000.
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 of the financial statements provides a reasonable
basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the consolidated financial position of the Company as of January 31,
2000 and 1999, and the results of its operations and its cash flows for the
years ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company is a development stage Company as defined in Financial
Accounting Standards Board Statement No. 7. The Company is devoting
substantially all of its present efforts in establishing a new business and
although planned principal operations have commenced, no significant revenues
have been derived therefrom. These factors raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
April 6, 2000
-1-
<PAGE>
HOME/OFFICE EXPRESS, INC.
(FORMERLY TELEQUIPMENT, INC.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
JANUARY 31, 2000 AND 1999
<TABLE>
<CAPTION>
ASSETS 2000 1999
--------- ---------
Current Assets
<S> <C> <C>
Cash $ 8,647 $ 0
Accounts Receivable 442 0
--------- ---------
Total Current Assets 9,089 0
Property and Equipment (Note 3) 14,400 0
Other Assets
Covenant Not To Compete, Net (Note 4) 30,938 0
--------- ---------
Total Assets $ 54,427 $ 0
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts Payable $ 6,057 $ 0
Notes Payable, Current Portion (Note 5) 9,504 0
Related Party Advances (Note 6) 85,615 0
--------- ---------
Total Current Liabilities 101,176 0
Long-Term Liabilities
Notes Payable, Noncurrent Portion (Note 5) 23,733 0
--------- ---------
Total Liabilities 124,909 0
Stockholders' Equity
Common Stock: $0.001 Par Value, 100,000,000 Shares
Authorized; Issued and Outstanding, 2,350,000 and 1,000,000,
at January 31, 2000 and 1999, respectively 2,350 1,000
Additional Paid In Capital 5,734 4,000
Loss Accumulated During The Development Stage (78,566) (5,000)
--------- ---------
Total Stockholders' Equity (A Deficit) (70,482) 0
--------- ---------
Total Liabilities and Stockholders' Equity $ 54,427 $ 0
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
HOME/OFFICE EXPRESS, INC.
(FORMERLY TELEQUIPMENT, INC.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED JANUARY 31, 2000 AND 1999, AND FOR
THE PERIOD FROM INCEPTION (JULY 22, 1996) TO JANUARY 31, 2000
<TABLE>
<CAPTION>
Inception
Year Ended Year Ended (July 22, 1996)
January 31, January 31, to January 31,
2000 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ 8,093 $ 0 $ 8,093
Cost of Revenues (12,880) 0 (12,880)
----------- ----------- -----------
Gross Margin (4,787) 0 (4,787)
Expenses
General and Administrative 35,678 0 40,678
---------- ----------- -----------
Operating Loss (40,465) 0 (45,465)
Other Income (Expense)
Cumulative Effect Adjustment-Goodwill (Note 8) (33,101) 0 (33,101)
Net Loss Available to Common Stockholders $ (73,566) $ 0 $ (78,566)
=========== =========== ===========
Basic Loss Per Common Share $ (0.06) Nil $ (0.07)
=========== =========== ===========
Basic Weighted Average Common Shares Outstanding 1,170,500 1,000,000 1,170,500
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
HOME/OFFICE EXPRESS, INC.
(FORMERLY TELEQUIPMENT, INC.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JULY 22, 1996) TO JANUARY 31, 2000
<TABLE>
<CAPTION>
Preferred Preferred Common Common
Stock Stock Stock Stock
Shares Amount Shares Amount
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Common Stock Issued For Services Rendered at
$1.00 Per Share, July 22, 1996 1,000,000 $ 1,000
Loss From Inception (July 22, 1996) to January 31, 1997
--------- --------- --------- ---------
Balance, January 31, 1997 0 0 1,000,000 1,000
Loss, Year Ended January 31, 1998
Loss, Year Ended January 31, 1999
--------- --------- --------- ---------
Balance, January 31, 1999 0 0 1,000,000 1,000
Common Stock Issued Under 504 Offering /
Offering Canceled / Shares Still Outstanding,
November 12, 1999 350,000 350
Common Stock Issued In Exchange For 100%
Acquisition of Subsidiary, January 31, 2000 1,000,000 1,000
Loss, Year Ended January 31, 2000
--------- --------- --------- ---------
Balance, January 31, 2000 0 $ 0 2,350,000 $ 2,350
========= ========= ========= =========
</TABLE>
HOME/OFFICE EXPRESS, INC.
(FORMERLY TELEQUIPMENT, INC.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JULY 22, 1996) TO JANUARY 31, 2000
<TABLE>
<CAPTION>
(Table continued)
Loss Accumulated
Additional During the
Paid In Development
Capital Stage Total
-------- ----------------- --------
<S> <C> <C> <C>
Common Stock Issued For Services Rendered at
$1.00 Per Share, July 22, 1996 $ 4,000 $ 5,000
Loss From Inception (July 22, 1996) to January 31, 1997 (5,000) (5,000)
-------- -------- --------
Balance, January 31, 1997 4,000 (5,000) 0
Loss, Year Ended January 31, 1998 0 0
Loss, Year Ended January 31, 1999 0 0
-------- -------- --------
Balance, January 31, 1999 4,000 (5,000) 0
Common Stock Issued Under 504 Offering /
Offering Canceled / Shares Still Outstanding,
November 12, 1999 (350) 0
Common Stock Issued In Exchange For 100%
Acquisition of Subsidiary, January 31, 2000 2,084 3,084
Loss, Year Ended January 31, 2000 (73,566) (73,566)
-------- -------- --------
Balance, January 31, 2000 $ 5,734 $(78,566) $(70,482)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
HOME/OFFICE EXPRESS, INC.
(FORMERLY TELEQUIPMENT, INC.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 2000 AND 1999, AND FOR THE
PERIOD FROM INCEPTION (JULY 22, 1996) TO JANUARY 31, 2000
<TABLE>
<CAPTION>
Inception
Year Ended Year Ended (July 22, 1996)
January 31, January 31, to January 31,
2000 1999 2000
-------- -------- -------------
Cash Flows From Operating Activities
<S> <C> <C> <C>
Net Loss $(73,566) $ 0 $(78,566)
Common Stock Issued for Services 0 0 5,000
Depreciation and Amortization 1,438 0 1,438
Write-Offs 25,264 0 25,264
Cumulative Effect Adjustment - Goodwill 33,101 0 33,101
Other Noncash Items
Adjustments to Reconcile Net Loss to Net Cash Used
In Operating Activities
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable 3,891 0 3,891
Increase (Decrease) in Accounts Payable 2,363 0 2,363
-------- -------- --------
Total Adjustments 66,057 0 71,057
-------- -------- --------
Net Cash Used In Operating Activities (7,509) 0 (7,509)
Cash Flows From Investing Activities - - -
Cash Flows From Financing Activities
Cash Received in the Acquisition of Subsidiary 6,831 0 6,831
Advances From Related Parties 10,500 0 10,500
Principal Payments on Notes Payable (1,175) 0 (1,175)
-------- -------- --------
Net Cash Provided By Financing Activities 16,156 0 16,156
-------- -------- --------
Increase (Decrease) in Cash and Cash Equivalents 8,647 0 8,647
Cash and Cash Equivalents, Beginning of Year 0 0 0
-------- -------- --------
Cash and Cash Equivalents, End of Year $ 8,647 $ 0 $ 8,647
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
HOME/OFFICE EXPRESS, INC.
(FORMERLY TELEQUIPMENT, INC.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 2000 AND 1999, AND FOR THE
PERIOD FROM INCEPTION (JULY 22, 1996) TO JANUARY 31, 2000
<TABLE>
<CAPTION>
Inception
Year Ended Year Ended (July 22, 1996)
January 31, January 31, to January 31,
2000 1999 2000
--------- --------- ----------------
Supplemental Information:
------------------------
Cash paid for:
<S> <C> <C> <C>
Interest $ 408 $ 0 $ 408
========= ========= =========
Income taxes $ 0 $ 0 $ 0
========= ========= =========
Noncash Supplemental Information:
---------
Issuance of Common Stock For Services Rendered $ 0 $ 0 $ 5,000
========= ========= =========
Issuance of Common Stock For 100% Acquisition of
Subsidiary $ 3,084 $ 0 $ 3,084
========= ========= =========
Details of Acquisition:
Assets Acquired $ 109,474 $ 109,474
Liabilities Assumed (113,221) (113,221)
--------- ---------
Net Book Value of Company (3,747) (3,747)
Cash Received 6,831 6,831
--------- ---------
Total Acquisition, Net of Cash Received $ 3,084 $ 3,084
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
HOME/OFFICE EXPRESS, INC.
(FORMERLY TELEQUIPMENT, INC.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 1 - ORGANIZATION
Home/Office Express, Inc. (formerly Telequipment, Inc.) (the
Company) was incorporated under the laws of the State of Nevada on
July 22, 1996, with an authorized capital of 25,000 shares of $1.00
par value common stock.
On January 25, 1999, the Company amended its articles of incorporation to
increase the authorized capital to 100,000,000 shares of $0.001 par value
common stock. On January 25, 1999, the Board of Directors authorized a
forward split on a 200:1 ratio, of the outstanding common shares of the
Company.
On September 2, 1999, the Company filed Articles of Merger in the
State of Nevada merging Telequipment, Inc. (a Nevada Corporation)
into Green Dolphin Systems Corp. (a Nevada Corporation), with Green
Dolphin Systems Corp. being the surviving corporation.
On January 15, 2000, the Company entered into a Cancellation and Recission
Agreement to cancel and rescind the Articles of Merger filed with the
State of Nevada on September 2, 1999. Additionally, a 504 Offering,
originally approved by the Board of Directors on November 12, 1999, and
the 5,000,000 shares issued thereunder were canceled and rescinded, with
the exception of 350,000 shares which are in the process of being canceled
and rescinded. With the exception of the permission to change the name to
Green Dolphin Systems Corp., any and all claims arising from the merger
filed with the State of Nevada on September 2, 1999, were released. (See
Note 9)
On February 23, 2000, the Company filed Articles of Merger in the State of
Nevada merging Home/Office Express, Inc. (a Nevada Corporation) into Green
Dolphin Systems Corp. (a Nevada Corporation), changing the name of the
corporation to Home/Office Express, Inc. and increasing its authorized
capital to 105,000,000 shares of which 100,000,000 shares are $0.001 par
value common stock and 5,000,000 shares are $0.01 par value preferred
stock. All per share and per share information are adjusted retroactively
to reflect stock splits and changes in par value.
The Company has adopted a year end of January 31.
On July 22, 1996, the Company issued 5,000 (1,000,000 current equivalent)
shares of common stock for services rendered at $1.00 per share, or
$5,000.
On January 31, 2000, the Company issued 1,000,000 shares of common stock
for the merger of Home/Office Express, Inc. into Green Dolphin Systems
Corp. The acquisition was accounted for at net book value, or $3,084. The
merged corporations conduct business under the name Home/Office Express,
Inc. The subsidiary has adopted a year end of December 31, and included in
operations is the one month ended January 31, 2000 only.
-7-
<PAGE>
HOME/OFFICE EXPRESS, INC.
(FORMERLY TELEQUIPMENT, INC.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 1 - ORGANIZATION (CONTINUED)
The Company is a development stage company, as defined in the Financial
Accounting Standards Board No. 7. The Company is devoting substantially
all of its present efforts in securing and establishing a new business,
and although planned principal operations have commenced, there have been
no significant revenues derived therefrom. These factors raise substantial
doubt about its ability to continue as a going concern.
The financial statements have been prepared on the basis of accounting
principles applicable to a going concern. Accordingly, they do not purport
to give effect to adjustments, if any, that may be necessary should the
Company be unable to continue as a going concern. The continuation of the
Company as a going concern is dependent upon the Company's ability to
establish itself as a profitable business. The Company's ability to
achieve these objectives cannot be determined at this time. It is the
Company's belief that it will continue to incur losses for the next 12
months, and as a result, will require additional funds. The additional
funding will be accomplished by seeking funds from private or public
equity investments to meet such needs. There are no guarantees the Company
will be successful in obtaining these funds.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
-----------------
The Company's financial statements are prepared using the accrual method
of accounting.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid debt instruments with a maturity
of three months or less when acquired to be cash and cash equivalents.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary Personal Touch Messenger, Inc.
Intercompany transactions have been eliminated in consolidation.
Purchase Method
---------------
Investments in companies have been included in the financial report using
the purchase method of accounting on the basis of the fair value of the
acquired assets less liabilities assumed. The Company retains the acquired
companies as subsidiaries.
Intangible Assets
-----------------
Intangible assets are recorded at cost in accordance with Accounting
Principles Board (APB) Opinion No. 17, "Intangible Assets." The
Company amortizes the intangible assets using the straight-line
method over the term of the specific agreements. Continually, the
Company evaluates
-8-
<PAGE>
HOME/OFFICE EXPRESS, INC.
(FORMERLY TELEQUIPMENT, INC.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
whether the estimated useful life used to amortize an intangible asset is
appropriate due to changing facts and circumstances resulting in increases
or decreases in the asset's estimated useful life, and records the change
prospectively.
Use of Estimates
----------------
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenue, and expenses. Actual results may differ from these estimates.
Income Taxes
------------
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." Under SFAS No. 109, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax
bases of assets and liabilities, using enacted tax rates in effect for the
year in which the differences are expected to reverse.
Per Share of Common Stock
-------------------------
Effective January 1, 1997, basic earnings or loss per share has been
computed based on the weighted average number of common shares
outstanding. All earnings or loss per share amounts in the financial
statements are basic earnings or loss per share, as defined by SFAS No.
128, "Earnings Per Share." Diluted earnings or loss per share does not
differ materially from basic earnings or loss per share for all periods
presented. Diluted weighted average shares outstanding exclude the
potential common shares from warrants and stock options because to do so
would have been antidilutive. All per share and per share information are
adjusted retroactively to reflect stock splits and changes in par value.
Stock-Based Compensation
------------------------
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Compensation cost for stock
options, if any, is measured as the excess of the quoted market price of
the Company's stock at the date of grant over the amount an employee must
pay to acquire the stock. SFAS No. 123, "Accounting for Stock-Based
Compensation," established accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee
compensation plans. The Company has elected to remain on its current
method of accounting as described above, and has adopted the disclosure
requirements of SFAS No. 123, effective January 1, 1997.
Capital Structure
-----------------
The Company has implemented SFAS No. 129, "Disclosure of Information about
Capital Structure," effective January 1, 1998, which established standards
for disclosing information about an entity's
-9-
<PAGE>
HOME/OFFICE EXPRESS, INC.
(FORMERLY TELEQUIPMENT, INC.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
capital structure. The implementation of SFAS No. 129 had no effect
on the Company's financial statements
Comprehensive Income
--------------------
The Company has implemented SFAS No. 130, "Reporting Comprehensive
Income," effective January 1, 1998, which requires companies to classify
items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid in capital in
the equity section of a statement of financial position. The
implementation of SFAS No. 130 had no effect on the Company's financial
statements.
Business Segment Information
----------------------------
The Company has implemented SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," effective
January 1, 1998. The implementation of SFAS No. 131 had no effect
on the Company's financial statements.
Reclassifications
-----------------
Certain prior period amounts have been reclassified to conform to the
current year presentation.
Pending Accounting Pronouncements
---------------------------------
It is anticipated that current pending accounting pronouncements will not
have an adverse impact on the financial statements of the Company.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at January 31, 2000:
Computer and Equipment $ 7,518
Office Equipment 9,982
--------
Total 17,500
Accumulated Depreciation 3,100
--------
Net Book Value $ 14,400
========
Depreciation expense charged to operations during 2000 was $200.
NOTE 4 - INTANGIBLE ASSETS
The Company's wholly owned subsidiary, Personal Touch Messenger,
Inc., purchased its current line of business for $85,000, allocated
as follows: Equipment and Fixtures $17,500, Goodwill
-10-
<PAGE>
HOME/OFFICE EXPRESS, INC.
(FORMERLY TELEQUIPMENT, INC.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 4 - INTANGIBLE ASSETS (CONTINUED)
$33,750, and Covenant Not to Compete $33,750. The subsidiary paid cash of
$41,000 and financed the balance through two notes payable of $35,000 and
$9,000. See Note 3, 5 and 8.
At January 31, 2000, intangible assets of $30,938 represents a Covenant
Not to Compete. The sellers of Personal Touch Messenger, Inc. agreed to,
directly or indirectly, not : (1) engage in a similar business within
Maricopa County, Arizona, nor aid or assist anyone else to do so within
these limits; (2) solicit in any manner any past or present accounts of
the business; and (3) have any interest, directly or indirectly, in such a
business, excepting as employee of the buyer, for a period of three (3)
consecutive years commencing November 1, 1999. Amortization is charged to
operations over a period of three (3) years, or $938 per month.
Amortization expense for the one month ended January 31, 2000, was $938.
NOTE 5 - NOTES PAYABLE
Notes Payable of $33,236 represent a balance due for the acquisition of
Personal Touch Messenger, Inc., the Company's wholly owned subsidiary,
payable in fifty-two (52) monthly installments of $792.05, interest at 7%
per annum, due on the first day of every month beginning on December 1,
1999, including interest on all unpaid principal from November 1, 1999
until paid at the rate of seven (7) % per annum payable monthly, the
interest to be first deducted from the regular monthly installment and the
balance to be applied to principal.
Future annual minimum payments are as follows:
2001 $ 9,504
2002 $ 9,505
2003 $ 9,505
2004 $ 4,723
NOTE 6 - RELATED PARTY ADVANCES
The Company has received advances from a related party of $85,615 to fund
working capital operations. The advances are noninterest bearing,
unsecured, and due on demand. There is no guarantee any future advances
will be made to the Company.
NOTE 7 - INCOME TAXES
There is no current or deferred tax expense for the years ended January
31, 2000 and 1999, due to the Company's loss position. The benefits of
timing differences have not been previously recorded. The deferred tax
consequences of temporary differences in reporting items for financial
statement
-11-
<PAGE>
HOME/OFFICE EXPRESS, INC.
(FORMERLY TELEQUIPMENT, INC.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 7 - INCOME TAXES (CONTINUED)
and income tax purposes are recognized, as appropriate. Realization of the
future tax benefits related to the deferred tax assets is dependent on
many factors, including the Company's ability to generate taxable income
within the net operating loss carryforward period. Management has
considered these factors in reaching its conclusion as to the valuation
allowance for financial reporting purposes. The income tax effect of
temporary differences comprising the deferred tax assets and deferred tax
liabilities on the accompanying consolidated balance sheet is a result of
the following:
Deferred Taxes 2000 1999
-------------- --------- --------
Net Operating Loss Carryforwards $ 27,498 $ 1,750
Valuation Allowance (27,498) (1,750)
--------- --------
Net Deferred Tax Assets $ 0 $ 0
========= ========
The Company has available net operating loss carryforwards of
approximately $79,000 for tax purposes to offset future taxable income,
which expire principally in the year 2015.
Pursuant to the Tax Reform Act of 1986, annual utilization of the
Company's net operating loss carryforwards may be limited if a cumulative
change in ownership of more than 50% is deemed to occur within any
three-year period.
NOTE 8 - CUMULATIVE EFFECT ADJUSTMENT - GOODWILL
The Company charged $33,101 to operations during the year ended January
31, 2000, representing goodwill previously recorded by its subsidiary,
Personal Touch Messenger, Inc.
NOTE 9 - SUBSEQUENT EVENTS
(1) On March 27, 2000, the Company entered into an agreement with IAM
Group, Ltd. for the purchase and sale of substantially all of the assets
used in the business of IAM Group, Ltd. and its subsidiaries, and to
assume certain agreements and/or other rights and liabilities in
connection with their business, as set forth in the agreement. The
purchase price is 11,000,000 common shares of the Company's common stock.
(2) On April 17, 2000, the Company entered into an agreement with certain
shareholders (the buyers), to sell all of the outstanding common and/or
preferred stock the Company owns in Personal Touch Messenger, Inc. (the
Company's wholly owned subsidiary), and all related property and inventory
used in the business. The Buyers agree to transfer their 1,000,000 shares
of the Company's common stock to the Company. The Company executed a
sixty-day nonrecourse promissory note payable to Personal Touch Messenger,
Inc., in the amount of $300,000, plus simple interest at 6% per annum,
payable within sixty (60) days from April 17, 2000, with an additional
thirty (30) day extension period at the option of the Company, subject to
satisfactory proof of payment of all
-12-
<PAGE>
HOME/OFFICE EXPRESS, INC.
(FORMERLY TELEQUIPMENT, INC.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
NOTE 9 - SUBSEQUENT EVENTS (CONTINUED)
Federal, State and Local business and employment taxes owed by Personal
Touch Messenger, Inc., as well as other conditions as outlined in the
promissory note.
(3) Per the Company's transfer agent, on April 5, 2000, a stop
order was placed on 350,000 shares of stock registered to Cede &
Co., due to a recision of a merger by the Company. (See Note 1)
-13-
<PAGE>
<TABLE>
<CAPTION>
IAMG HOLDINGS, INC.
(FORMERLY HOME/OFFICE EXPRESS, INC.)
CONSOLIDATED BALANCE SHEET
APRIL 30, 2000 AND JANUARY 31, 2000
April 30, January 31,
2000 2000
------------ ------------
ASSETS
Current Assets
<S> <C> <C>
Cash $ 126,445 $ 0
Accounts Receivable 21,975 38,494
Inventory, net of valuation allowance of $92,796 307,462 278,389
Other Current Assets 54,458 11,650
Advances To Officer 7,500 0
------------ ------------
Total Current Assets 517,840 328,533
Property and Equipment, Net 685,427 721,562
Intangible Assets, License Agreement, net of amortization of
$25,000 and $18,750, at April 30, 2000 and January 31, 2000 100,000 106,250
------------ ------------
Total Assets $ 1,303,267 $ 1,156,345
============ ============
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
<TABLE>
<CAPTION>
IAMG HOLDINGS, INC.
(FORMERLY HOME/OFFICE EXPRESS, INC.)
CONSOLIDATED BALANCE SHEET
APRIL 30, 2000 AND JANUARY 31, 2000
April 30, January 31,
2000 2000
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Checks Issued In Excess of Cash $ 0 $ 54,310
Accounts Payable 284,727 257,786
Accounts Payable, License Agreement 0 25,000
Notes Payable, Current Portion 10,983 21,936
Capital Lease Obligation, Current Portion 12,265 12,265
Notes Payable, Related Party 1,815,632 1,518,632
Notes Payable, Other 450,000 350,000
Accrued Interest 138,336 77,336
----------- -----------
Total Current Liabilities 2,711,943 2,317,265
Long-Term Liabilities
Notes Payable, Noncurrent Portion 29,906 32,402
Capital Lease Obligation, Current Portion 21,517 23,550
----------- -----------
Total Long-Term Liabilities 51,423 55,952
----------- -----------
Total Liabilities 2,763,366 2,373,217
Stockholders' Equity
Common Stock: $0.001 Par Value, 100,000,000 Shares
Authorized; Issued and Outstanding, 13,350,000 and 2,350,000 at April 30,
2000 and January 31, 2000, respectively 13,350 2,350
Additional Paid In Capital 26,002 37,002
Accumulated Deficit (1,499,451) (1,256,224)
----------- -----------
Total Stockholders' Equity (A Deficit) (1,460,099) (1,216,872)
----------- -----------
Total Liabilities and Stockholders' Equity $ 1,303,267 $ 1,156,345
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
IAMG HOLDINGS, INC.
(FORMERLY HOME/OFFICE EXPRESS, INC.)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 2000 AND 1999
For the Three For the Three
Months Ended Months Ended
April 30, 2000 April 30, 1999
-------------- --------------
Revenues $ 500,716 $ 1,232,154
Cost of Revenues 468,011 1,245,120
----------- -----------
Gross Profit 32,705 (12,966)
Expenses
General and Administrative 313,207 5,575
----------- -----------
Operating Loss (280,502) (18,541)
Other Income (Expense)
Insurance Refund 99,000 0
Interest Expense (61,725) 0
----------- -----------
Other Income (Expense) 37,275 0
----------- -----------
Net Loss Available to Common Stockholders $ (243,227) $ (18,541)
=========== ===========
Basic Loss Per Common Share $ (0.03) $ (0.02)
=========== ===========
Basic Weighted Average Common Shares Outstanding 9,683,333 1,000,000
=========== ===========
The accompanying notes are an integral part of
these financial statements.
<PAGE>
<TABLE>
<CAPTION>
IAMG HOLDINGS, INC.
(FORMERLY HOME/OFFICE EXPRESS, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 30, 2000 AND 1999
For the Three For the Three
Months Ended Months Ended
April 30, 2000 April 30, 1999
-------------- --------------
Cash Flows From Operating Activities
<S> <C> <C>
Net Loss $ (243,227) $ (18,541)
Adjustments to Reconcile Net Loss to Net Cash
Provided By (Used In) Operating Activities
Depreciation and Amortization 56,800 0
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable 16,520 64,712
(Increase) Decrease in Inventory (29,073) 0
(Increase) Decrease in Other Assets (42,808) 0
Increase (Decrease) in Accounts Payable
and Accrued Liabilities 1,941 (224)
Increase (Decrease) in Accrued Interest 61,000 0
------------ ------------
Total Adjustments 64,380 64,488
------------ ------------
Net Cash Provided By (Used In) Operating Activities (178,847) 45,947
Cash Flows From Investing Activities
Acquisition of Property and Equipment (14,415) --
------------ ------------
Net Cash Flows Used In Investing Activities (14,415) --
Cash Flows From Financing Activities
Checks Issued in Excess of Cash (54,310) 0
Advances To Officer (7,500) (23,080)
Advances From Related Party 297,000 0
Advances From Others 100,000 0
Repayments Under Factored Receivables (10,953) 0
Principle Payments Under Notes Payable (2,497) 0
Principle Payments Under Capital Lease Obligations (2,033) 0
------------ ------------
Net Cash Provided By (Used In) Financing Activities 319,707 (23,080)
------------ ------------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
<TABLE>
<CAPTION>
IAMG HOLDINGS, INC.
(FORMERLY HOME/OFFICE EXPRESS, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 30, 2000 AND 1999
For the Three For the Three
Months Ended Months Ended
April 30, 2000 April 30, 1999
-------------- --------------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents 126,445 22,867
Cash and Cash Equivalents, Beginning of Period 0 (21,790)
------------ ------------
Cash and Cash Equivalents, End of Period $ 126,445 $ 1,077
============ ============
SUPPLEMENTAL INFORMATION:
Cash paid for:
Interest $ 725 $ 0
============ ============
Income taxes $ 0 $ 0
============ ============
NONCASH SUPPLEMENTAL INFORMATION:
Reverse Acquisition, March 27, 2000, Home/Office
Express, Inc., 2,350,000 shares of common stock $ 3,084 $ 0
============ ============
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
IAMG HOLDINGS, INC.
(FORMERLY HOME/OFFICE EXPRESS, INC.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2000
NOTE 1. STATEMENT OF INFORMATION FURNISHED
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with Form 10QSB instructions and in the opinion of
management contains all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of April 30,
2000, the results of operations for the three months ended April 30, 2000, and
the statement of cash flows for the three months ended April 30, 2000. These
results have been determined on the basis of generally accepted accounting
principles and practices and applied consistently with those used in the
preparation of the IAMG Holdings, Inc. (IAMG) Annual Report on Form 10-SB.
Certain information and footnote disclosure normally included in the financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that the accompanying financial
statements be read in conjunction with the accompanying financial statements and
notes thereto incorporated by reference in the Company's 1999 Annual Report on
Form 10-SB.
NOTE 2. NAME CHANGE
On April 24, 2000, the Company amended its articles of incorporation and changed
its name to IAMG Holdings, Inc.
NOTE 3. REVERSE ACQUISITION
On March 27, 2000, Home/Office Express, Inc. (a Nevada corporation) (HOMX)
completed an asset purchase and sale agreement with IAM Group, Ltd. (a New York
corporation) for the purchase and sale of substantially all of the assets used
in the business of IAM Group, Ltd. and its subsidiaries, and assumed certain
agreements and/or other rights and liabilities in connection with their
business, as set forth in the agreement. HOMX is the surviving corporation and
continuing in existence under the laws of the State of Nevada for legal
purposes. On the closing date, HOMX changed its name to IAM Group, Ltd.,
currently IAMG Holdings, Inc. The purchase price was 11,000,000 shares of the
IAMG's common stock. On May 10, 2000, IAMG changed its domicile by filing a
certificate of incorporation in the State of Delaware with authorization to
issue 100,000,000 shares of common stock, $0.001 par value and 5,000,000 shares
of preferred stock, $0.01 par value.
The merger is treated as a reverse acquisition as prescribed by Accounting
Principles Board No. 16 "Business Combinations," because the shareholders of the
company being acquired retained actual control of the resulting combined
company. IAM Group, Ltd. (currently IAMG Holdings, Inc.) is the continuing
reporting entity for accounting purposes and HOMX is the acquirer for legal
purposes. Included in the equity section is the recapitalization of the merger:
retirement of old shares and issuance of new shares for the net equity of HOMX,
with no goodwill being recorded.
NOTE 4. SALE OF SUBSIDIARY/CONTINGENT LIABILITY
On April 17, 2000, HOMX entered into an agreement with three of its shareholders
(the Buyers), to sell all of the outstanding common and/or preferred stock the
Company owned in Personal
<PAGE>
IAMG HOLDINGS, INC.
(FORMERLY HOME/OFFICE EXPRESS, INC.)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2000
Touch Messenger, Inc. (the Company's wholly owned subsidiary), and all related
property and inventory used in the business. The contract provides for the
buyers to transfer their 1,000,000 restricted shares of the Company's common
stock to the Company, and for the Company to execute a sixty-day nonrecourse
promissory note payable to Personal Touch Messenger, Inc., in the amount of
$300,000, plus simple interest at 6% per annum, payable within sixty (60) days
from April 17, 2000, with an additional thirty (30) day extension period at the
option of the Company, subject to satisfactory proof of payment of all Federal,
State and Local business and employment taxes owed by Personal Touch Messenger,
Inc., as well as other pre-conditions as outlined in the promissory note.
Sale of Operations is summarized as follows:
Total Assets $ 54,427
Total Liabilities (124,909)
----------
Retained Earnings (Deficit) $ (70,482)
==========
The consolidated statement of operations for the three months ended April 30,
2000, does not include any activity for the subsidiary.
NOTE 5. COMMON STOCK
On May 10, 2000, 350,000 shares of common stock held in the name Cede and Co.
were canceled.
NOTE 6. SEGMENT INFORMATION
The Company operates in four segments, each of which are strategic businesses
that are managed separately because each business sells distinct products and
services. The segments and a description of their businesses are as follows:
INTERNATIONAL APPAREL MANUFACTURING OF NEW YORK, INC. (I AM NY) - An apparel
manufacturing business that sells both to wholesale and retail markets, offering
faster service for merchandise where time is critical, manufacturing items
domestically, saving sixty to ninety days delivery time over merchandise from
foreign countries. IAMG intends to reduce its fixed and operating manufacturing
expenses by leasing its equipment, machinery and inventory to a third party in
exchange for a percentage of the third party billings.
PBA TOUR GEAR, INC. (PBA) - Exclusive worldwide licensing label for the
Professional Bowlers Association to market bowling apparel and accessories under
the PBA logo and PBA player brand names. An Internet shopping mall is under
construction for purchase of these goods at website, PBATourGear.com.
PRO STAR ATHLETIC, INC. (Pro Star) - License to distribute sportswear apparel
and accessories of the National Football League. An Internet shopping mall is
under construction for purchase of these goods at website, BigSportsMall.com.
<PAGE>
GUARDIAN INTERNET SOLUTIONS, INC. (Guardian) - Internet Service Provider
headquartered in Vero Beach, Florida, which provides high-speed connections to
the Internet and control the Company's e-commerce needs. IAMG is working with
the Fraunhofer Center for Research in Computer Graphics to expand their Web
presence into a national children and family "edutainment" and shopping portal.
Management evaluates the performance of its segments and allocates resources to
them primarily based on pretax income along with cash flows and overall economic
returns. The accounting policies of the segments are substantially the same as
those described in the summary of significant accounting policies.
Certain items are maintained at the Company's corporate level and are not
allocated to the segments. They primarily include most of the Company's debt and
cash and cash equivalents and related net interest expense and corporate
headquarters costs. Intersegment revenues and expenses are eliminated.
During the first quarter of 1999, the Company engaged in only one operating
segment, IAM NY. During the first quarter of 2000, the Company had four
operating segments as follows:
SEGMENT TOTAL
QUARTER ENDED APRIL 30, 2000 REVENUES LOSS ASSETS
IAM NY $ 477,894 $ 50,059 $ 671,132
PRO STAR 0 98,369 249,599
PBA 19,128 60,895 171,123
GUARDIAN 3,694 60,444 105,893
CORPORATE 0 (26,540) 105,520
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
IAMG HOLDINGS, INC.
By: /s/ JAHN AVARELLO
-----------------------------------------
Name: Jahn Avarello
Title: President, Chief Executive Officer
and Director
By: /s/ LAWRENCE PROMAN
-----------------------------------------
Name: Lawrence Proman
Title: Chief Financial Officer
and Treasurer
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Signature Title Date
--------- ----- ----
/s/ JAHN AVARELLO President, Chief Executive Officer August 11, 2000
----------------------- and Director
Jahn Avarello
/s/ THOMAS VEROLA Secretary, Chief Operating Officer August 11, 2000
----------------------- and Director
Thomas Verola
/s/ WILLIAM WEBER Director and General Counsel August 11, 2000
-----------------------
William Weber
/s/ ROSS BALDARI Director August 11, 2000
-----------------------
Ross Baldari
/s/ KATHLEEN KIRKWOOD Director August 11, 2000
-----------------------
Kathleen Kirkwood
32
<PAGE>
Director
-----------------------
Leonard Marshall
Director
-----------------------
Mark Gerberich
Director
-----------------------
Michael S. Weber
33
