SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
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: 0-24736
Famous Sam's Group, Inc., f/k/a U.S. Flywheel Systems, Inc.
(Exact name of small business issuer as specified in its charter)
Colorado 88-0361701
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
4221 E. Pontatoc Canyon Dr., Tucson, Arizona 85718
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (520) 577-6611
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: As of
April 11, 1997, there were approximately 390,367 shares
outstanding.
I. PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FAMOUS SAM'S GROUP, INC.
(a development stage company)
BALANCE SHEETS
March 31, 1997 December 31, 1996
(unaudited)
ASSETS:
Current Assets $ ---- $ ----
Other Assets $ ---- $ ----
Total Assets $ ---- $ ----
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Current Liabilities
Accounts payable $ 73,949 $ 47,083
Total Current Liabilities:$ 73,949 $ 47,083
Stockholders' Equity
Common stock, $.001 par
value, 390,367 shares
issued and outstanding 3,868,809 3,868,809
Deficit accumulated
during development stage (3,942,758) (3,915,892)
Total Liabilities and
Stockholders'
Equity (Deficit) $ --- $ ---
The accompanying notes form an integral part of these statements.
FAMOUS SAM'S GROUP, INC.
(a development stage company)
STATEMENTS OF OPERATIONS
Three months ended March 31,
(Unaudited)
1997 1996
Revenues $ ---- $ ----
Expenses 26,866 ----
Net Gain (Loss) (26,866) $ ----
Net Gain (Loss)
per common share $.07) *
Weighted average shares:
390,367 - 1997; 12,010,000 - 1996
* - Less than $.01 per share.
The accompanying notes form an integral part of these statements.
FAMOUS SAM'S GROUP, INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
Three Months Ended March 31
(Unaudited)
1997 1996
Cash Flows Provided (Used) by
Operating activities:
Net Loss (Gain) $ 26,866 $ ---
(Increase) in accounts
payable (26,866) ---
Net cash flows provided
(used) by operating
activities $ --- $ ---
Cash Flows Provided by
Investing Activities: $ --- $ ---
Cash Flows Provided by
Financing Activities: $ --- $ ---
Increase (Decrease) in cash: $ --- $ ---
Cash at beginning of the period: $ --- $ ---
Cash at end of period: $ --- $ ---
The accompanying notes form an integral part of these statements.
FAMOUS SAM'S GROUP, INC.
(a development stage company)
Notes to Financial Statements
(Unaudited)
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation
of the financial condition of registrant have been included, and
the disclosures are adequate to make the information presented not
misleading.
Note 1. A summary of significant accounting policies is currently
on file with the U.S. Securities and Exchange Commission in
registrant's Form 10SB.
Note 2. The loss per share was computed by dividing net loss by
the weighted average number of shares of common stock outstanding
during the period.
Note 3. Registrant has not declared or paid dividends on its
common shares since inception.
Note 4. The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-Q and do
not include all information and footnotes required by generally
accepted accounting principles for complete financial statements.
Note 5. Income taxes have not been provided for in that registrant
has not had a tax liability from inception to the date of these
notes.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations:
The Company, previous to 1994, operated solely as a research and
development facility. From October, 1993, until April 23, 1996,
the Company merely held a minority stake in a partnership, which
was transferred to a liquidating trust on this latter date. As a
result of the recision on March 11, 1997, of the acquisition of
Famous Sam's Franchise Corporation which had occurred on July 24,
1996, the Company had no operations during the first quarter of
1997 or during 1996. The Company had no revenues or income in the
first quarter of 1997, or during 1996 or 1995 from any source
whatsoever.
The Company's expenses during the first quarter of 1997 and the
year ended December 31, 1996, as a result of the recision of the
Famous Sam's acquisition, and the year ended December 31, 1995,
were entirely administrative in nature. No meaningful comparison
can be made between 1997 and 1996 since the Company had no
operations during this time and incurred only administrative
expenses.
Liquidity and Capital Resources:
The Company transferred all of its outstanding liabilities to trust
on April 23, 1996, and all other liabilities, to the limited extent
that there were any, during the year and to the date of the
recision of the Famous Sam's acquisition on March 11, 1997, with
the exception of the legal fees of Mr. Pierce, were satisfied by
Famous Sam's. The Company had no other source of liquidity during
the first quarter of 1997 or during 1996, other the largesse of Mr.
Pierce in his extension of credit prior to becoming affiliated with
the Company. The Company had no source of liquidity during 1995,
and, as a result, became delinquent in payments to its creditors,
one of whom sued for payment and obtained a judgement. In
fulfillment of a condition precedent to closing of the Famous Sam's
acquisition, management arranged for the advancement of sums to
satisfy in full these former obligations of the Company, as
previously transferred to the liquidating trust, and assigned in
consideration its claims in this regards against the trust. The
Company presently has no source of liquidity.
PART II - OTHER INFORMATION
Item 1. Litigation
No material legal proceedings to which the Company (or any officer
or director of the Company, or any affiliate or owner of record or
beneficially of more than five percent of the Common Stock, to
management's knowledge) is a party or to which the property of the
Company is subject is pending and no such material proceeding is
known by management of the Company to be contemplated.
Item 2. Change in Securities
This item is not applicable to the Company for the period covered
by this report.
Item 3. Defaults Upon Senior Securities
This item is not applicable to the Company for the period covered
by this report.
Item 4. Submission of Matters to a Vote of Security Holders
There were no meetings of security holders during the period
covered by this report; thus, this item is not applicable.
Item 5. Other Information
There is no additional information which the Company is electing to
report under this item at this time.
Item 6. Exhibits and Reports on Form 8-K
Form 8-KSB dated March 11, 1997.
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 this 17th day of April, 1997.
FAMOUS SAM'S GROUP, INC.
(Registrant)
By: /s/ Mark S. Pierce
Mark S. Pierce, President
and Chief Executive Officer
By: /s/ Mark S. Pierce
Mark S. Pierce, Chief Financial
and Accounting Officer and Treasurer
EXHIBITS: Form 8-KSB dated March 11, 1997 and attached Recision
Agreement
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 15(d) or 13 of the Securities Exchange Act of
1934
March 11, 1997
(Date of Report)
Famous Sam's Group, Inc.
(Exact Name of Registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
0-24736 88-0361701
(Commission File Number) (IRS Employer Identification Number)
4221 E. Pontatoc Canyon Dr., Tucson, AZ 85718
(Address of principal executive offices including zip code)
(520) 577-6611
(Registrant's telephone number including area code)
Not Applicable.
(Former name or former address, if changed since last report)
Item 1. Change in Control of Registrant.
See Item 2, below.
Item 2. Acquisition or Disposition of Assets.
On March 11, 1997 (the "Closing Date"), Registrant, Famous Sam's
Group, Inc., executed, delivered and closed under a Recision,
Release and Final Settlement Agreement (the "Recision Agreement")
with Famous Sam's Franchise Corporation ("FSFC") and the former
shareholders of FSFC, whereby Registrant returned to the
Shareholders all of the outstanding proprietary interest of its
sole wholly-owned subsidiary, FSFC, in exchange for a release of
any and all liabilities between Registrant, FSFC and the
Shareholders. The effect of the Recision Agreement was the
recision of the acquisition of FSFC from the Shareholders on July
24, 1996, as if the acquisition had never been agreed to. The
Recision Agreement was entered into in an effort by Registrant to
avoid what it considered to be otherwise unnecessary litigation if
the disputes which had arisen with the Shareholders had not been
resolved, which litigation Registrant could not have afforded.
The Shareholders transferred the 700,000 common shares of
Registrant issued in the acquisition of FSFC back to the treasury
of Registrant. Concurrent with the recision, the existing board
and officers of Registrant resigned, and counsel to Registrant, Mr.
Mark S. Pierce, was appointed to the board. Mr. Pierce is now the
sole director and executive officer of Registrant.
Item 3. Bankruptcy or Receivership.
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not Applicable.
Item 5. Other Events.
None.
Item 6. Resignation of Registrant's Directors.
Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
Not Required.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
Famous Sam's Group, Inc.
(Registrant)
By: /s/ Mark S. Pierce
Mark S. Pierce, Chief
Executive Officer
DATE: March 13, 1997
EXHIBITS
Exhibit 1. - Recision, Release and Final Settlement Agreement
registrant, Famous Sam's Franchise Corporation and the former
shareholders of Famous Sam's Franchise Corporation
RESCISSION, RELEASE AND FINAL SETTLEMENT
(March 11, 1997)
THIS AGREEMENT is made and entered into this 11th day of March,
1997, by and among Famous Sam's Group, Inc., a Nevada corporation
formerly known as U.S. Flywheel, Inc. ("FSGI"), and Famous Sam's
Franchise Corporation, an Arizona corporation ("FSFC"), and the
former shareholders of FSFC, Mr. Gerald Ross and Ms. Sandra Ross
(collectively, "Mr. and Mrs. Ross").
RECITALS:
The following recitals are true and correct and form an integral
part of this Agreement.
1. FSGI, FSFC and the Rosses entered into an agreement (the "B
Reorg Agreement") on the 24th day of July, 1996, pursuant to which
FSGI acquired from the Rosses all of the outstanding proprietary
interest of FSFC;
2. Dan Hodges ("Hodges") was the subject of two contracts with
FSGI pursuant to which he identified, negotiated and obtained the
agreement of the Rosses to sell their shares in FSFC to FSGI, all
as the authorized agent of FSGI;
3. Hodges, in obtaining the foregoing agreement from the Rosses to
sell their shares of FSFC to FSGI, made many representations and
warranties to, and covenants with, the Rosses on behalf of FSGI,
each of which was material in obtaining their agreement;
4. Hodges specifically represented, warranted and covenanted,
among other matters, to FSGI and Mr. and Mrs. Ross that he would
(i) arrange for the infusion of $2,000,000 in equity capital into
FSGI following the acquisition, (ii) provide a market for the
common equity of FSGI following the acquisition and the infusion of
the foregoing capital so that a $5.00 share price would be
maintained, (iii) guarantee the Rosses the return of their shares
in FSFC and money if he were unable to perform the foregoing;
5. Hodges had no ability whatsoever to provide for the
undertakings he made to the Rosses, each of which was materially
false and misleading and instrumental to the Rosses in their coming
to their decision, and each of which was made by Hodges knowing the
same to be materially false and misleading;
6. Hodges obtained shares in FSGI for his services, liquidated
those shares to his significant economic advantage, and failed to
provide for any of the undertakings which he made, never intending
to do so, and intending only to profit through the loss of FSGI,
FSFC and the Rosses;
7. FSGI, FSFC and the Rosses, after discovering the materially
false and misleading actions of Hodges, as set forth in part above,
have endeavored since October 1, 1996, to resolve the issues with
Hodges which have arisen.
8. Hodges has not even performed under these agreements, the
result of which has been the loss of two separate financing
opportunities to FSGI, FSFC and the Rosses for the business of
FSFC, and the complete collapse of the market for the FSGI equity
shares;
9. The parties have now concluded that Hodges had no intent
whatsoever to fulfill his obligations under his latest set of
agreements, or any of his prior agreements either for that matter,
all to the detriment of the parties;
10. FSFC and the Rosses, as a result of those actions set forth
above, among other actions, have the right under Section 17 of the
Securities Act of 1933, as amended (the "Securities Act"), Sections
10(b), 18 and 29 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the "Arizona Securities Act" to sue FSGI
for recision of the B Reorg Agreement and for their damages in
regards of the same;
11. The parties have now determined that it is in the best
interests of the parties to rescind the B Reorg Agreement, without
the necessity of litigation, and return themselves, as best they
are able, to the position they were in prior to July 24, 1996; and
12. The parties further desire to compromise all claims between
themselves in regards of the aforesaid on the terms and conditions
set forth herein.
COVENANTS:
NOW, THEREFORE, for Ten ($10) Dollars and other good and valuable
consideration, the receipt and sufficiency of which are each hereby
acknowledged, THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
RECISION
1.1 Rescission of B Reorg Agreement. The parties hereby rescind
the B Reorg Agreement nunc pro tunc to the date thereof in
accordance with the provisions of the Securities Act, the Exchange
Act and the Arizona Securities Act, all of which are set forth in
the premises above.
1.2 Return of FSFC Shares by FSGI to the Rosses; Return of FSGI
Shares to Treasury by the Rosses. FSGI hereby delivers to the
Rosses all of its right, title and interest in and to FSFC,
including all its outstanding proprietary interest in FSFC. FSFC
and the Rosses hereby return to FSGI all of their right, title and
interest in and to FSGI, including all of their shares of capital
stock and all options and other rights to acquire shares of FSGI,
whether under FSGI's current Incentive Stock Ownership Plan
("ISOP") or otherwise. FSFC and the Rosses also hereby return to
FSGI all outstanding options and other rights outstanding under the
aforesaid ISOP or otherwise, whether owned by the Rosses or anyone
else.
1.3 Return of FSGI Corporate Records by the Rosses; Resignation of
Rosses and their Employees as Officers and Directors of FSGI;
Appointment of New Director; Assets and Liabilities of FSGI; Change
of Name by FSGI. The Rosses hereby return to FSGI its corporate
record and minute book, as well as any and all other corporate
records of FSGI in their possession or control. The current board
of FSGI has appointed a new director immediately prior to the
execution and delivery hereof, that being Mr. Mark S. Pierce, and
have obtained the resignation of the remaining directors and
officers of FSGI effective immediately prior to the execution and
delivery hereof. The Rosses hereby represent and warrant to FSGI
that there are no assets or outstanding liabilities of FSGI as of
the date hereof. FSGI covenants that it will endeavor as soon as
economically practicable to change its names from Famous Sam's
Group, Inc.
ARTICLE II
MUTUAL AND FINAL RELEASES AND COVENANTS NOT TO SUE
2.1 Release of the FSFC and the Rosses by FSGI. For and in
consideration of the above and foregoing premises and the mutual
covenants, promises and agreements contained herein, FSGI hereby
releases, acquits and forever discharges FSFC and the Rosses, as
well as FSFC's officers, directors, shareholders, affiliates,
successors and assigns, if any, from and against any and all
actions, causes of action, suits, claims, demands, rights,
controversies, debts, agreements, damages, costs, expenses,
liabilities and compensation whatsoever which it now has or may
hereafter have on account of or arising out of any matter, thing or
event which has happened, developed or occurred, whether known or
unknown, at any time at or prior to the execution and delivery of
this Agreement.
2.2 Release of FSGI by FSFC and the Rosses. For and in
consideration of the above and foregoing premises and the mutual
covenants, promises and agreements contained herein, FSFC and the
Rosses hereby release, acquit and forever discharge FSGI, as well
as FSGI's current officer and director, and Joseph Craig & Co., as
well as its officers, directors, shareholders and advisors,
including Messrs. Matthew Milonas and Craig Edelman, from and
against any and all actions, causes of action, suits, claims,
demands, rights, controversies, debts, agreements, damages, costs,
expenses, liabilities and compensation whatsoever which they now
have or may hereafter have on account of or arising out of any
matter, thing or event which has happened, developed or occurred,
whether known or unknown, at any time at or prior to the execution
and delivery of this Agreement.
2.3 FSGI's Covenant Not to Sue. FSGI further covenants and agrees
that it will not bring, commence, institute, maintain, prosecute or
instigate any action at law, proceeding in equity, administrative
proceeding or otherwise, nor prosecute or sue either FSFC and/or
the Rosses and/or FSFC's officers, directors, shareholders,
affiliates, successors or assigns, if any, either affirmatively or
by way of cross-claim, defense or counterclaim, or by any other
manner, for any alleged claim, demand, liability or cause of action
in any way stemming from any claimed action or inaction of either
FSFC and/or the Rosses at or prior to the execution and delivery of
this Agreement.
2.4 FSFC's and the Ross' Covenant Not to Sue. FSFC and the Rosses
each further covenant and agree that they will not bring, commence,
institute, maintain, prosecute or instigate any action at law,
proceeding in equity, administrative proceeding or otherwise, nor
prosecute or sue FSGI, as well as FSGI's current officer and
director, and Joseph Craig & Co., as well as its officers,
directors, shareholders and advisors, including Messrs. Matthew
Milonas and Craig Edelman, either affirmatively or by way of
crossclaim, defense or counterclaim, or by any other manner, for
any alleged claim, demand, liability or cause of action in any way
stemming from any claimed action or inaction of FSGI at or prior to
the execution and delivery of this Agreement.
2.5 Final Settlement. The parties each acknowledge, understand
and agree that they are aware that they or their attorneys may
hereafter discover facts different from or in addition to the facts
which they now know or believe to be true, but that it is their
intention to fully, finally, absolutely and forever settle any and
all claims, disputes and differences which now exist, may exist or
may have existed between them, and that in furtherance of such
intention, the general and other releases given herein shall be and
remain in effect as full and complete releases, notwithstanding any
mistake of fact or the discovery of any different or additional
facts.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 Representations and Warranties of FSGI. FSGI hereby
represents and warrants to FSFC and the Rosses as follows: (i) All
necessary action has been taken to make this Agreement a legal,
valid and binding obligation of the Hodges Group, and this
Agreement is enforceable in accordance with its terms and
conditions; and (ii) The execution and delivery of this Agreement
and the performance by FSGI of its obligations hereunder will not
result in any material breach or violation of or material default
under any material agreement, indenture, lease, license, mortgage,
instrument, or understanding, nor result in any violation of any
law, rule, regulation, statute, order or decree of any kind to
which FSGI is a party.
3.2 Representations and Warranties of FSFC and the Rosses. FSFC
and the Rosses each represent and warrant to FSFC as follows: (i)
All necessary action has been taken to make this Agreement a legal,
valid and binding obligation of FSFC and of the Rosses, and this
Agreement is enforceable in accordance with its terms and
conditions; and (ii) The execution and delivery of this Agreement
and the performance by FSFC and the Rosses of their respective
obligations hereunder will not result in any material breach or
violation of or material default under any material agreement,
indenture, lease, license, mortgage, instrument, or understanding,
nor result in any violation of any law, rule, regulation, statute,
order or decree of any kind to which either FSFC or the Rosses are
a party.
ARTICLE IV
MISCELLANEOUS
4.1 Entire Agreement; Modification. This Agreement sets forth and
constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof, and supersedes any and all
prior agreements, understandings, promises, and representations
made by any party to any other concerning the subject matter hereof
and/or the terms applicable hereto. This Agreement may not be
released, discharged, amended or modified in any manner except by
an instrument in writing signed by duly authorized representatives
of the parties hereto.
4.2 Severability. The invalidity or unenforceabilty of one or
more provisions of this Agreement shall not affect the validity or
enforceability of any of the other provisions hereof, and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provisions are omitted.
4.3 Governing Law. This Agreement shall be deemed to have been
entered into and shall be construed and enforced in accordance with
the laws of the State of Arizona. All parties agree to venue in
the City of Tucson, County of Pima, State of Arizona, and agree to
submit any disagreements hereunder to the appropriate court in said
city and state.
4.4 Waivers. The failure of any party hereto to insist, in any
one or more instances, upon the performance of any of the terms,
covenants or conditions of this Agreement, or to otherwise exercise
any right hereunder, shall not be construed as a waiver or
relinquishment of the future performance of any such term, covenant
or condition or the future exercise of such right, but the
obligations of the party with respect to such future performance
shall continue in full force and effect.
4.5 Headings. The headings of the articles, sections and
paragraphs used in this Agreement are included for convenience only
and are not to be used in construing or interpreting this
Agreement.
4.6 Successor and Assigns. This Agreement, and each and every
provision hereof, shall be binding upon and inure to the benefit of
the parties, their respective successors, successors-in-title,
heirs and assigns, and each and every successor-in-interest to any
party, whether such successor acquires such interest by way of
gift, purchase, foreclosure, or by any other method, who shall hold
such interest subject to all the terms and conditions of this
Agreement.
4.7 Survival of Representations. The representations, warranties
and agreements of the parties hereto which are contained in this
Agreement shall survive the execution hereof, and shall be
unaffected by any investigation made by any party at any time.
4.8 Further Assurances. Each party hereto further agrees that
they shall, either collectively or individually, take such further
and additional action as may be reasonable and necessary to carry
into full effect the intent of this agreement and to otherwise
provide for the fulfillment hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first above written.
Famous Sam's Group, Inc. Famous Sam's Franchise Corporation
By: \s\ Mark S. Pierce By: \s\ Gerald Ross
Mark S. Pierce, President Gerald Ross, President
\s\ Sandra Ross \s\ Gerald Ross
Sandra Ross, Individually Gerald Ross, Individually
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 73949
<BONDS> 0
0
0
<COMMON> 3,868,809
<OTHER-SE> (3,942,758)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
