UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-KSB/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- -----------
Commission File Number: 33-17229-D
ART CARDS, INC.
-----------------------------
(Name of Small Business Issuer
in its Charter)
Colorado 84-0978589
------------------------------ ---------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
933 Pearl Street
Denver, Colorado 80203
-------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone: (303) 831-9335
Securities registered under Section 12(b) or Section 12(g) of the Act:
None
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. YES[ ] NO [X]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The issuer had no revenues for the fiscal year ended December 31, 1996. The
aggregate market value of the voting stock held as of March 28, 1997, by
nonaffiliates of the Registrant was $0 as there was no bid on that day.
As of March 28, 1997, Registrant had 876,602,000 shares of its $0.0001 par value
common stock outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No {X}
1
<PAGE>
FORM 10-KSB
ART CARDS, INC.
TABLE OF CONTENTS
Item
No. Description Page
PART I
1. Description of Business............................................ 3
2. Description of Property............................................ 5
3. Legal Proceedings.................................................. 5
4. Submission of Matters to a Vote of Security Holders................ 5
PART II
5. Market for the Registrant's Common Equity and Related Stockholder
Matters...................................................... 7
6. Management's Discussion and Analysis or Plan of Operations......... 7
7. Financial Statements............................................... 8
8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure......................................... 8
PART III
9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act............ 9
10. Executive Compensation............................................. 10
11. Security Ownership of Certain Beneficial Owners and Management..... 11
12. Certain Relationships and Related Transactions..................... 12
PART IV
13. Exhibits and Reports on Form 8-K................................... 13
Signatures......................................................... 14
2
<PAGE>
FORM 10-KSB
ART CARDS, INC.
December 31, 1996
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Art Cards, Inc. ("Registrant" or the "Company") was incorporated under the
laws of the state of Colorado on January 30, 1984, as World Greetings, Inc. And
changed its name to Art Cards, Inc. on March 31, 1987. The Company designed,
manufactured, produced and marketed greeting cards.
On November 7, 1993, the Company sold its remaining inventory of greeting
cards, approximately 337,000, for $22,000 and is no longer in the business of
designing, manufacturing, producing and marketing greeting cards. The Company
has been looking for a suitable candidate to merge with or be acquired by. To
date, the Company has not located a suitable candidate.
(b) Financial Information About Industry Segments
Since its inception, the Company's revenues, operating profit or loss and
identifiable assets were attributable to only one industry segment and the
Company has been engaged in only one line of business, which was the designing,
manufacturing, producing and marketing of greeting cards, postcards, poster
grams and similar products.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's executive offices are located at 933 Pearl Street, Denver,
Colorado, which is the home of the Company's President.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the Company's fourth quarter for the fiscal year ended December 31,
1996, no matter was submitted to a vote of the Company's security holders,
either by proxy solicitation or otherwise.
3
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Company's common
stock.
As of March 31, 1997, the Company had approximately 993 shareholders of
record of its common stock.
The Company has not declared cash dividends on its common stock since its
inception and the Company does not anticipate paying a cash dividend in the
foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Liquidity and Capital Resources
During the fiscal year ended December 31, 1996, the Company's working
capital deficit changed slightly from ($72,845) at December 31, 1995 to
($69,793) at December 31, 1994. The decrease was the result of an unsuccessful
merger transaction with Legacy Brands, Inc. The Company is no longer in the
business of designing, manufacturing, producing and marketing greeting cards
although it still accepts special orders for greeting cards. The Company's
auditors have included a qualification in their report as to the Company's
ability to continue as a going concern due to the significant operating losses
and working capital deficit. The Company is currently seeking a business
combination. There are no assurances the Company will be successful in combining
with any other entity.
Results of Operations
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
The results of operations for the year ended December 31, 1996, reflect the
cessation of operations for the Company. Since the Company has ceased operations
the Company has minimal operating expenses, primaily representing legal and
accounting fees. The Company no longer actively markets its greeting cards and
sold its entire inventory in 1993.
Inflation
The management of the Company does not believe that inflation has had any
material effect on the Company during the fiscal year ended December 31, 1996.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are filed as part of this Annual Report on Form
10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(a) On May 16, 1996, the Company retained the firm of Janet Loss, C.P.A.,
P.C. to serve as the Company's principal independent accountants in place of
Mitchell . Finley and Company, P.C., which had served in that capacity for the
two fiscal years ended December 31, 1993. On June 7, 1996, the Company advised
Mitchell . Finley and Company, P.C. that the Company was terminating Mitchell .
Finley and Company, P.C., as the Company's principal independent accountants as
of May 16, 1996.
(b) There was no disagreements during the Company's two fiscal years ended
December 31, 1993, or any interim period subsequent thereto between the Company
and Mitchell . Finley and Company, P.C. on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
which, if not resolved to the satisfaction of Mitchell . Finley and Company,
P.C., would have caused Mitchell . Finley and Company, P.C. to make reference in
its reports to the subject matter of such disagreement.
(c) The opinions of Mitchell . Finley and Company, P.C. on the Company's
financial statements or the fiscal years ended December 31, 1993 and 1992,
contained no adverse opinion or disclaimer of opinion, nor were such opinions
qualified as to uncertainty, audit scope or accounting principles, except that
such opinions raised substantial doubt about the Company's ability to continue
as a going concern.
(d) The decision to change accountants was not approved by the Company's
Board of Directors or any committee thereof.
8
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The present term of office of each director will expire at the next annual
meeting of shareholders. The name, position with the Company and the age of each
director, and the period during which each director has served are as follows:
Name and position, if any,
in the Company Age Director Since
-------------------------- --- --------------
Richard H. Miller
(President and Chairman of the Board) ............ 51 1984
Richard M. Gawlik
(Secretary/Treasurer) ............................ 59 1986
Marilyn R. Goldberg .............................. 51 1984
John W. Rapparlie ................................ 53 1987
There was no arrangement or understanding between any director and any
other person pursuant to which any director was selected as a director.
The executive officers of the Company are elected annually. Each executive
officer shall hold office until his successor duly is elected and qualified or
until his resignation or until he shall be removed in the manner provided by the
Company's Bylaws. The Company's executive officers, their ages, positions with
the Company and periods during which they have served as such are as follows:
Name of Executive Officer and
Position in Company Age Officer Since
----------------------------- --- -------------
Richard H. Miller
(President and Chairman of the Board) ......... 51 1984
Richard M. Gawlik
(Secretary/Treasurer) ......................... 59 1986
There was no arrangement or understanding between any executive officer and
any other person pursuant to which any executive officer was selected as a
executive officer.
There are no family relationships between any officers and directors of the
Company.
9
<PAGE>
The following is a brief account of the business experience during the past
five years of each director and executive officer:
Name of Director Principal Occupation During
or Officer The Last Five Years
---------------- ---------------------------
Richard H. Miller Chairman of the Board and President of
the Company.
Richard M. Gawlik Secretary/Treasurer of the Company since
August, 1986; Independent Consultant
since 1992; President of The Kober
Corporation and of Kober Financial
Corporation where he has also acted a
broker/dealer, from January, 1986 to
March, 1992; sole propri etor of RMG
Enterprises, Inc., which provided
accounting and financial consulting
services to small and medium sized
corporations, from 1981 to 1987.
Marilyn R. Goldberg President of Mari Hube (formerly
Marigold Enterprises, Ltd.), a publisher
and distributor of fine art graphics,
limited edition prints and posters.
John W. Rapparlie Chief Executive Officer since July 1986
and President and Sales Director for
Paper Cargo, Inc., a greeting card sales
and marketing corporation, since August,
1982.
No director is a director of any company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934 or
subject to the requirements of Section 15(d) of such Act or any company
registered as an investment company under the Investment Company Act of 1940.
The Company does not have a class of equity securities registered pursuant
to Section 12 of the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth for the Company's last three fiscal years
ended December 31, 1996, 1995 and 1994, the compensation paid by the Company for
services rendered in all capacities to the Company to Richard H. Miller, who was
the chief executive officer of the Company during the Company's fiscal year
ended December 31, 1996. No person who served as an executive officer of the
Company during the Company's fiscal year ended December 31, 1996, received total
annual salary and bonus in excess of $100,000 from the Company during the
Company's fiscal year ended December 31, 1996:
10
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
------------------------------------ ----------
Year Other Securities All
Name and ended Annual Underlying Other
Principal Position December 31, Salary($) Bonus($) Compensation($) Options(#) Compensation($)
- ------------------ ------------ -------- ------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Richard H. Miller.... 1996 -- -- -- -- --
President 1995 -- -- -- -- --
1994 -- -- -- -- --
</TABLE>
Option Grants in Fiscal Year Ended December 31, 1996
No options were granted by the Company to Richard H. Miller during the
Company's fiscal year ended December 31, 1996.
Options Exercises and Fiscal Year-End Option Values
No options were owned by Richard H. Miller at December 31, 1996, and no
options were exercised by Richard H. Miller during the Company's fiscal year
ended December 31, 1996.
Compensation of Directors
There were no standard or other arrangements for the compensation of the
Company's directors in effect for the Company's fiscal year ended December 31,
1996.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
The following person is the only person known to the Company who on March
28, 1997, owned beneficially more than 5% of the Company's $0.0001 par value
common stock, its only class of outstanding voting securities:
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership(1) Of Class
------------------- ---------------------- --------
Richard H. Miller
933 Pearl Street
Denver, Colorado 80203 .............. 414,315,800 47.3%
(1) Mr. Miller has the sole voting and investment power with respect to the
shares.
11
<PAGE>
(b) Security Ownership of Management.
The following table shows as of March 28, 1997, the shares of the Company's
$0.0001 par value common stock beneficially owned by each director of the
Company and the shares beneficially owned by all the officers and directors of
the Company as a group:
<TABLE>
<CAPTION>
Amount of Shares and Nature Percent
Name of Beneficial Owner of Beneficial Ownership (1) of Class
- ------------------------ --------------------------- --------
<S> <C> <C>
Richard H. Miller ............................. 414,315,800 47.3%
Richard M. Gawlik ............................. 1,350,000 0.15%
Marilyn R. Goldberg ........................... 10,000,000 1.1%
John W. Rapparlie ............................. 100,000 0.01%
All Officers and Directors as a ............... 425,765,800 48.6%
Group (4 Persons)
</TABLE>
(1) The beneficial owners listed have sole voting and investment power with
respect to the shares.
(c) Changes in Control.
There are no arrangements which may result in a change in control of the
Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no transactions that are required to be reported pursuant to this
Item 12.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3.1(a) Articles of Incorporation (incorporated by reference to Exhibit 3.1(a) to
the Company's Annual Report on Form 10-KSB for the year ended December
31, 1994).
3.1(b) Articles of Amendment to the Articles of Incorporation filed March 31,
1987 (incorporated by reference to Exhibit 3.1(b) to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994).
3.1(c) Amendment to Articles of Incorporation filed November 13, 1987
(incorporated by reference to Exhibit 3.1(c) to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994).
3.1(d) Amendment to Articles of Incorporation filed September 30, 1988
(incorporated by reference to Exhibit 3.1(d) to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994).
3.1(e) Certificate of Correction to Articles of Incorporation filed April 11,
1989 (incorporated by reference to Exhibit 3.1(e) to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994).
3.2 Bylaws (incorporated by reference to Exhibit 3.2 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994).
16 Letter on change in certifying accountant (incorporated by reference to
Exhibit 16 to the Company's Current Report on Form 8-K dated May 16,
1996).
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
12
<PAGE>
Janet Loss, C.P.A., P.C.
9101 East Kenyon Avenue, Suite 2000
Denver, Colorado 80237
(303) 220-0227
To the Board of Directors and Shareholders
Art Cards, Inc.
Denver, Colorado
I have audited the accompanying balance sheets of Art Cards, Inc. (the Company)
as of December 31, 1996 and 1995, and the related statements of operations,
shareholders' deficit and cash flows for the years ended December 31, 1996 and
1995. These financial statements are the responsi bility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
These standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 1996
and 1995, and the results of its operations and its cash flows for the years
ended December 31, 1996 and 1995 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As shown in the financial statements, the
Company has incurred net income $3,052 and a net loss of $1,200 for the years
ended December 31, 1996 and 1995, respectively. In addition, the Company has
incurred losses to date in the amount of $1,107,826. The Company's significant
operating losses 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.
/s/ Janet Loss, C.P.A., P.C.
Janet Loss, C.P.A., P.C.
March 26, 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
ART CARDS, INC.
BALANCE SHEETS
December 31, December 31,
1996 1995
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash ................................................................ $ 62 $ 0
----------- -----------
TOTAL CURRENT ASSETS ................................................ 62 0
----------- -----------
OTHER ASSETS:
Organization Costs, ne of
accumulated amortization of
$14,509 .......................................................... 0 0
----------- -----------
TOTAL OTHER ASSETS .................................................. 0 0
----------- -----------
TOTAL ASSETS ................................................................. $ 62 $ 0
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts Payable .................................................... $ 0 $ 3,090
Accrued liabilities, officer ........................................ 69,855 69,755
---------- -----------
TOTAL CURRENT LIABILITIES ........................................... 69,855 72,845
---------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common Stock, $.0001 par value,
3,000,000,000 shares authorized,
876,602,000 and 861,602,000 shares
issued and outstanding as of
December 31, 1996 and 1995,
respectively ........................................................ 87,660 87,660
Additional paid-in capital .......................................... 950,373 950,373
Accumulated deficit ................................................. (1,107,826) (1,110,878)
---------- -----------
TOTAL SHAREHOLDERS' DEFICIT ......................................... (69,793) (72,845)
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT ............................................... $ 62 $ 0
========== ===========
</TABLE>
See independent auditor's report and notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
ART CARDS, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996 and 1995
1996 1995
---- ----
<S> <C> <C>
Sales, net ................................. $ -- $ --
----------- -----------
OPERATING EXPENSES:
Bank charges ...................... 48 --
Legal and accounting fees ......... 12,725 --
Filing fees ....................... 500 --
Freight and handling .............. -- 1,200
Travel expenses ................... 875 --
----------- -----------
TOTAL OPERATING EXPENSES .......... 14,148 1,200
----------- -----------
NET INCOME (LOSS) BEFORE
OTHER INCOME AND EXPENSES .................. (14,148) (1,200)
----------- -----------
OTHER INCOME AND (EXPENSES):
Income from proposed
acquisition payments ........... 17,200 --
----------- -----------
NET INCOME (LOSS) .......................... $ 3,052 $ (1,200)
=========== ===========
NET INCOME (LOSS)
PER SHARE OF COMMON STOCK .................. $ * $ *
=========== ===========
AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING ................ 878,602,000 875,352,000
=========== ===========
</TABLE>
* less than $.01 per share
See independent auditor's report and notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
ART CARDS, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT
For the Years Ended December 31, 1996 and 1995
Additional
Par Paid-In Accumulated
Number of Shares Value Capital Deficit
---------------- ----- ----------- -----------
<S> <C> <C> <C> <C>
Balances,
January 1, 1995 ........................... 861,602,000 $ 86,160 $ 949,473 $(1,109,678)
Common stock issued for
services .................................. 7,500,000 750 450 --
Common stock issued for
settlement of Accounts
Payable ................................... 7,500,000 750 450 --
Net Loss for Year Ended
December 31, 1995 ......................... -- -- -- (1,200)
----------- ----------- ----------- -----------
Balances,
December 31, 1995 ......................... 876,602,000 87,660 950,373 (1,110,878)
Net Income for Year
Ended December 31, 1996 ................... -- -- -- 3,052
----------- ----------- ----------- -----------
Balances,
December 31, 1996 ......................... 876,602,000 $ 87,660 $ 950,373 $(1,107,826)
=========== =========== =========== ===========
</TABLE>
See independent auditor's report and notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
ART CARDS, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996 and 1995
1996 1995
---- ----
<S> <C> <C>
Operating Activities:
Net Income (Loss) ..................................... $ 3,052 $(1,200)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Common stock issued for services .................... 0 1,200
Changes in operating assets and liabilities:
Increase (decrease) in accounts
payable and other current
liabilities ....................................... (2,990) (107)
------- -------
NET CASH USED IN OPERATING ACTIVITIES .......................... (2,990) (107)
------- -------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ......................................... (2,990) (107)
CASH, BEGINNING OF YEAR ........................................ $ 0 $ 107
------- -------
CASH, END OF YEAR .............................................. $ 62 $ 0
======= =======
</TABLE>
See independent auditor's report and notes to financial statements.
F-5
<PAGE>
ART CARDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Art Cards, Inc. (the Company), formerly World Greetings, Inc., was incorporated
in Colorado on January 30, 1984, for the purpose of manufacturing and marketing
greeting cards and similar products. The Company disposed of all its inventory
in 1993 and no longer markets greeting cards and similar products although it
accepts special orders for greeting cards.
The Company's ability to continue as a going concern is dependent upon the
Company's ability to obtain financing. The Company is currently looking for a
suitable candidate to merge with or be acquired by. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles necessarily require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the balance sheet date and reported amounts of revenues and
expenses during the reporting periods.
The Financial Standards Board has recently issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets" and SFAS No. 123, "Accounting for Stock-Based Compensation."
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles be reported at the lower of the carrying amounts or their estimated
recoverable amount and the adoption of this statement by the Company is not
expected to have an impact on the financial statements. SFAS No. 123 encourages
the accounting for stock-based employee compensation programs to be reported
within the financial statements on a fair-value based method. If the fair-value
based method is not adopted, then the statement requires proforma disclosure of
net income and earnings per share as if the fair value based method has been
adopted. The Company has not yet determined how SFAS No. 123 will be adopted nor
its impact on the financial statements. Both statements are effective for fiscal
years beginning after December 15, 1995.
Cash and Cash Equivalents
The Company considers investments in Treasury Bills and certificates of deposits
with maturities of less than three months of the balance sheet date to be cash
equivalents.
F-6
<PAGE>
ART CARDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE B - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109), which changed the
criteria for measuring the provisions for income taxes and recognizing deferred
tax assets and liabilities in the accompanying financial statements. SFAS 109
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined, based upon the difference between the financial
statements and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. The
adoption of SFAS 109 did not have a material impact on the financial statements.
Net Loss Per Common Share
The net loss per share of common stock is determined using the weighted-average
number of shares issued and outstanding during the period, according to rules of
the Securities and Exchange Commission. The Company's common stock equivalents
were not included in the computation because their effect was antidilutive.
NOTE C - LICENSE AGREEMENTS
The Company has entered into several license agreements with various artists and
publishers to use designated graphic images in its manufacture, distribution and
sale of greeting cards, postcards and similar products. Generally, the license
agreements are exclusive and require royalties on net sales of licensed products
by the Company. Certain agreements can be terminated by the licensor, after
specified periods of time, if minimum sales requirements are not met. Under some
license agreements, the Company has made non-refundable advance royalty
payments. The advance royalties are charged to expense as they are earned by the
licensor. The Company no longer uses the license agreements.
F-7
<PAGE>
ART CARDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE D - SHAREHOLDERS' DEFICIT
In connection with the Company's public offering, the Company issued ten
callable Class A common stock purchase warrants. Each Class A warrant consists
of one callable Class B common stock purchase warrant and also entitles the
holder to purchase ten additional shares of common stock at an exercise price of
$.0075 per share until February 9, 1996. Each Class B warrant entitles the
holder to purchase ten shares of common stock at an exercise price of $.01 per
share until February 9, 1996. All of the above-referenced warrants expired on
February 9, 1996.
NOTE E - RELATED PARTY TRANSACTIONS
As of December 31, 1996, $69,855 was owed to the president for expenses.
NOTE F - INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS 109, "Accounting for Income
Taxes." As allowed by SFAS 109, prior years' financial statements have not been
restated.
As of December 31, 1996, the Company had net operating loss carry forwards for
income tax purposes of approximately $1,000,000 to offset future taxable income.
The net operating loss carry forwards expire through 2008. However, the
Company's ability to utilize such losses to offset future taxable income is
subject to various limitations imposed by the rules and regulations on the
Internal Revenue Service.
The tax effects of the temporary differences and operating loss carry forwards
that give rise to significant portions of the deferred tax assets at December
31, 1996, are presented below. The entire valuation allowance was recorded
during 1996.
Net operating loss
carry forwards $ 185,100
Compensation expense not
allowed for income tax
reporting purposes 8,000
Valuation allowance (193,100)
--------
Balance, December 31, 1996 $ 0
========
There is no provision for income taxes in 1996 and 1995 because the Company had
net operating loss carryforwards of $185,100.
F-8
<PAGE>
ART CARDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE G - LETTER OF INTENT
The Company signed a letter of intent with Legacy Brands, Inc. to enter into a
merger which may or may not be tax-free under Internal Revenue Code Section 368.
This acquisition transaction with Legacy Brands, Inc. was not successful.
F-9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ART CARDS, INC.
Dated: March 31, 1997 By: /s/ Richard H. Miller
-------------------------------------
Richard H. Miller, President
Dated: March 31, 1997 By: /s/ Richard M. Gawlik
-------------------------------------
Richard M. Gawlik,
Treasurer and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: March 31, 1997 By: /s/ Richard H. Miller
-------------------------------------
Richard H. Miller, Director
Dated: March 31, 1997 By: /s/ Richard M. Gawlik
-------------------------------------
Richard M. Gawlik, Director
Dated: March 31, 1997 By: /s/ Marilyn R. Goldberg
-------------------------------------
Marilyn R. Goldberg, Director
Dated: March 31, 1997 By: /s/ John W. Rapparlie
-------------------------------------
John W. Rapparlie, Director
Supplement Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.
No annual report to security holders covering the Registrant's last fiscal
year or proxy material was sent to security holders.
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
- ------- ----------- --------
3.1(a) Articles of Incorporation (incorporated by reference to N/A
Exhibit 3.1(a) to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994).
3.1(b) Articles of Amendment to the Articles of Incorporation filed N/A
March 31, 1987 (incorporated by reference to Exhibit 3.1(b) to
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994).
3.1(c) Amendment to Articles of Incorporation filed November 13, N/A
1987 (incorporated by reference to Exhibit 3.1(c) to the
Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994).
3.1(d) Amendment to Articles of Incorporation filed September 30, N/A
1988 (incorporated by reference to Exhibit 3.1(d) to the
Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994).
3.1(e) Certificate of Correction to Articles of Incorporation filed N/A
April 11, 1989 (incorporated by reference to Exhibit 3.1(e) to
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994).
3.2 Bylaws (incorporated by reference to Exhibit 3.2 to the N/A
Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994).
16 Letter on change in certifying accountant (incorporated by N/A
reference to Exhibit 16 to the Company's Current Report on Form
8-K dated May 16, 1996).
27 Financial Data Schedule. 21
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1999
<CASH> 62
<SECURITIES> 0
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<CURRENT-ASSETS> 62
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<CURRENT-LIABILITIES> 69,855
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0
0
<COMMON> 87,660
<OTHER-SE> (157,453)
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