UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-12G/A
Amendment No. 4
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934
AXIOM MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania | | 25-0918682 |
(State of other jurisdiction of incorporation or organization) | | (IRS Employer Identification Number) |
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14111 Freeway Drive Suite 300 Santa Fe Springs, CA | | 90670 |
(Address of principal executive offices) | | (Zip code) |
(702) 871-8678
(Registrant's telephone number, including area code)
James Clapp
Chief Executive Officer
14111 Freeway Drive, Suite 300
Santa Fe Springs, CA 90670
(562) 986-4460
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company x |
TABLE OF CONTENTS
PART I
Item 1 | Business | 3 |
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Item 1A | Risk Factors | 7 |
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Item 2 | Financial Information | 9 |
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Item 3 | Properties | 14 |
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Item 4 | Security Ownership of Certain Beneficial Owners and Management | 15 |
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Item 5 | Directors and Executive Officers | 15 |
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Item 6 | Executive Compensation | 16 |
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Item 7 | Certain Relationships and Related Transactions, and Director Independence | 16 |
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Item 8 | Legal Proceedings | 17 |
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Item 9 | Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters | 17 |
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Item 10 | Recent Sales of Unregistered Securities | 17 |
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Item 11 | Description of Registrant's Securities to be Registered | 18 |
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Item 12 | Indemnification of Directors and Officers | 18 |
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Item 13 | Financial Statements and Supplementary Data | 19 |
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Item 14 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 19 |
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Item 15 | Financial Statements and Exhibits | 19 |
Information regarding market and industry statistics contained in this registration statement is included based on information available to us that we believe is accurate. We have not reviewed or included data from all sources, and we cannot assure you of the accuracy or completeness of the data as it pertains to market and industry statistics included in this registration statement. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. See the "Risk Factors" section of this registration statement for a more detailed discussion of uncertainties and risks that may have an impact on our future results. The investors can rely on the information in the prospectus.
Summary Financial Data
The data summarized below is not complete. It should be read in conjunction with the Company’s financial statements and accompanying notes contained in this filing and following pages.
| | For the Year Ended December 31, | |
| | 2007 | | | 2006 | |
INCOME STATEMENT DATA: | | | | | | |
Net Revenue | | $ | 7,407,753 | | | $ | 8,112,312 | |
Net Loss | | $ | (1,455,250 | ) | | $ | (886,209 | ) |
Net Loss per Share | | $ | (0.11 | ) | | $ | (0.08 | ) |
Our Company, Axiom Management, Inc.
Axiom Staff Management Inc. was incorporated in Nevada on August 13, 2003. Axiom Staff is a full-service staff recruitment employment services company with business ranging from order fulfillment to human resource management. In 2006, Axiom Staff started to do business in the areas of risk management service provision.
Axiom Management, Inc., a Pennsylvania corporation was initially incorporated in 1946 in Pennsylvania as F&B Woodenware Company and later changed its name successively to Associated Hardware Supply Company, Action Industries, Inc., SkyFrames Communications, Inc. and Princeton Holdings, Inc. Commensurate with its merger with Axiom Staff Management, Inc. on July 30, 2007, Princeton Holdings changed its name to Axiom Management, Inc. As a result of the merger, Axiom Staff became the surviving, operating subsidiary of Axiom Management, Inc. Prior to the merger, Princeton Holdings had no significant business operations and its principle business when it was operational historically was the sale of comprehensive promotional programs to retail stores. While formerly known as Action Industries, Axiom Management, Inc. had sought protection under Chapter 11 of the U.S. Bankruptcy Code, in September 1999.
Our Subsidiaries
On July 30, 2007, the Company entered into an agreement with Axiom Staff Management, Inc. (Axiom Staff) whereby 100% of the issued and outstanding shares of Axiom Staff were exchanged for 11,700,000 shares of the Company. As a result, Axiom Staff became a wholly owned subsidiary of the Company.
For accounting purposes, this transaction has been accounted for as a reverse merger, since the stockholders of Axiom Staff own a majority of the issued and outstanding shares of common stock of the Company, and the directors and executive officers of Axiom Staff became the directors and executive officers of the Company. This acquisition was accounted for at historical cost in a manner similar to that in pooling of interests method since after the acquisition, the former shareholders of Axiom Staff acquired majority of the outstanding shares of the Company. The financial statements of the legal acquirer are not significant; therefore, no pro forma financial information is submitted. Thus, the historical financial statements are those of "Axiom Staff Management, Inc. & Subsidiary".
Axiom Staff Management, Inc. (“Axiom Staff”) was incorporated under the laws of the State of Nevada on August 13, 2003. Axiom Staff is a full-service staff recruitment employment services company with business ranging from order fulfillment to human resource management. During mid-2006, Axiom Staff started to do business in the areas of risk management service provision. In order to avoid potential conflicts of interest arising in the provisions of risk management services to both logistics providers and temporary staffing companies, management of Axiom Staff elected to forego its prior business of employment services. As a result, the Company commenced efforts to build and/or seek to acquire separate operations or unit(s) which could maintain such employment services formerly provided by Axiom Staff.
The Company identified Coastal Employment, Inc. as a full service employment services business, which was owned and operated by a relative of a majority shareholder of the Company. Coastal Employment, Inc. (“Coastal”) was incorporated under the laws of the State of California on September 7, 2006. Coastal’s main clients are logistics providers, clerical, technical, manufacturing, medical and light industries.
On November 1, 2006, the sole shareholder of Coastal entered into an agreement with the Company whereby 100% of the issued and outstanding shares of Coastal were acquired for $25,000 in cash and 500,000 shares of Axiom Management, Inc. As a result, Coastal became a wholly owned subsidiary of Axiom Management Inc. Coastal had insignificant operations as of the date of acquisition, November 1, 2006, and the purchase consideration was treated as a dividend to the Coastal shareholder as such shareholder is related to the officer, director and major shareholder of Axiom Staff. The business purpose of the acquisition of Coastal was to form a complete suite of providers to the logistics industry consisting of a risk management unit (Axiom Staff Management Inc.), and a full service recruitment employment services unit (Coastal Employment Inc.)
Compensation
On December 12, 2007, the Company signed an agreement with Mr. Morales and Axiom Staff and Mr. Morales effectively purchased the stock of Axiom Staff Management, Inc. and certain liabilities related thereto and the Company received the business operations of Axiom Staff in consideration for selling the Axiom Staff equity to Mr. Morales. Pursuant to the agreement with Mr. Morales, Mr. Morales assumed the following potential liabilities: pending or potential Payroll Tax Debt (fines, penalties and lack of payment related to Axiom Staff), and pending or potential Workers Compensation Debt (fines, penalties, lack of payment, if any, in which the officer or Axiom Staff were or became a party. In exchange, Mr. Morales was sold 100% of Axiom Staff’s issued and outstanding stock and the Company retained obligations incurred in the normal course of business described below. As of the date of this filing, we are unaware of any Payroll Tax Debt or Workers Compensation Debt as defined in the agreement with the Axiom Staff officer or with Axiom Staff. There were no lawsuits against the Company or Axiom Staff as of the date of the agreement with Mr. Morales. In this agreement, the Company retained the following liabilities: all loans and credit card debt due to normal business operations and 100% of the actual business operations and clients of Axiom Staff. Effectively, Mr. Morales was sold the stock of Axiom Staff along with the Payroll Tax Debt and Workers Compensation Debt defined above in exchange for certain loans and credit card debt incurred in the normal course of Axiom Staff operations which remain with the Company and in exchange for Mr. Morales’ resignation from the Company. The Company effectively removed certain potential liability in the potential liabilities of the Payroll Tax Debt and Workers Compensation Debt to the extent allowed by law, sold the stock of the Axiom Staff entity and retained the liabilities stated above.
As a result of the December 12, 2007 agreement with Mr. Morales, the Company recorded an approximately $1.2 million increase in additional paid-in capital for the net liabilities disposed. Mr. Morales resigned as officer of the Company subsequent to the completion of the transaction.
The result of the above transaction eliminated the risk management division and has forced the company to outsource such services. The reason for this action was to reduce and/or eliminate potential liability to the Company. Since the nature and extent of any such liability is unknown, the Company has not accounted for the transaction other than as a disposal of the stock of Axiom Staff to Mr. Morales and is not anticipated to have any impact on the Company or its operations other than as described herein.
Our Industry – Employment Services
We are a full-service staff recruitment company that ranges from order fulfillment to human resource management. We focus primarily on logistics providers in the following areas: clerical, technical, light manufacturing, and light industrial. We also handle medical recruitment.
A more detailed description of our services is as follows:
| • | | Permanent, temporary and contract recruitment – We find the best people for all types of jobs in the logistic industry at both the general staffing and professional levels. The positions we fill range from general labor, forklift drivers, and supervisors in the warehouse operations. In the office we fill positions from clerical to accounts receivable; and from data entry to supervisory positions. Our fees for this service are based upon a general mark up that would include the employee’s salary, workers compensation, and our fee. |
| • | | Employee assessment and selection – We provide a wide array of assessments to validate candidate skills and ensure a good fit between the client and the employee, which leads to higher employee retention rates. We provide background checks, document verification, forklift certification and general office skill testing. Our fees for this service are included in the marked up above, but additional services such as extensive background checks for criminal activity, safety training courses for large groups are negotiated with the customer. |
| • | | Human Resource Administration Services – We support and provide solutions to our customers existing human resource departments as it pertains to our temporary employees on assignment with the customer. We provide all employer services such as hiring, training, disciplinary and firing in regards to our temporary staff on assignment with our customers. We also provide payroll services and tax payment services for our employees assigned to our customers. Our fees for this service are included in the mark up above.. |
| • | | Risk Management Solutions –Through our Risk Management services, we help clients maximize the return on their human capital investments while assisting individuals to achieve their full potential. We provide a full range of risk management services ranging from facility walk through, forklift training, and train the trainer on safety. Our facility walk through are designed to help our customers meet all requirements as set by CAL OSHA. Our fees for this service are included in the mark up above. |
We are dependent on 5 major customers. A breakdown of these companies are as follows: Company A is 22% of our business and they are an importer of bicycles; Company B is 20% and they are an importer of shoes and accessories; Company C is 10% and they provide general warehousing services; Company D is 5% and they are a metal recycling company, and Company E is 4% and they are an importer of pet foods. Our customers are in the Los Angeles County regional area.
We, and our predecessors, have been in business since 2003. Axiom Staff Management was incorporated under the laws of the state of Nevada on August 13, 2003. Please see section above under “Our Subsidiaries” for additional - -information.
Competition
Introduction
We compete in the employment services industry by offering a complete range of services, including permanent, temporary, assessment and selection, human resource administrative services and risk management solutions. Our competitive position in the employment services industry is that we provide a one stop shop where we group all services in a bundle for our customers or provide them individually, based on the customer’s particular needs. Additionally, we have a pool of employees that have been prescreened based upon work history, documentation, and skill. Their employment application has been completely processed and have been categorized by skill level. We can draw from them to provide our customers’ special needs. Our systematic approach allows us to correctly classify each employee and match them to a specific customer. We also provide risk management services such as facility evaluation per OSHA standards, safety training, and injury investigation. These services are free or at a low cost to existing customers.
Our industry is large and fragmented, comprised of thousands of firms employing millions of people and generating billions of U.S. Dollars in annual revenues. It is also a highly competitive industry, reflecting several trends in the global marketplace, notably increasing demand for skilled people and consolidation among clients and in the employment services industry itself.
We manage these trends by leveraging established strengths, including our experience in the logistics industry, which gives us an advantage in selecting the right employee for the job; an innovative product mix; and a strong client base. Our management staff has over 40 years of management in the logistics industry. Our product mix consists of general labor, skilled labor, clerical, accounting, and recruitment based upon job specific requirements. While permanent, temporary and contract recruitment is an important aspect of our business, our strategy is focused on providing both the employees our clients need and high-value services such as human resource administrative services and risk management solutions. Simply put our strategy is to permanently place our temporary employees; find good skilled labor for our customers; and by keeping our costs down passing these savings on to our customers.
The company offers full-time and part-time staffing services to its clients in specific domains such as warehouses, logistics, clerical, light manufacturing, medical/hospitals, and branch and corporate administrative positions. The company strives to maintain a large pool of talented workers who are available for immediate dispatch.
Human resource administration services support the existing human resource departments of its clients and include solutions related to compensation administration, payroll processing and delivery, EXEO compliance, immigration, and wage and hour laws.
Risk management solutions support the implementation and administration of client programs with the objective of minimizing losses and claims. These initiatives promote workplace safety through educational programs, consulting, forklift certification, facility inspections and office appraisals. In addition we offer customized safety and training programs covering risk assessment, OSHA compliance, worksite evaluation, MSDS manual review and drug testing.
During the last several years, secular trends toward greater workforce flexibility have had a favorable impact on demand for our services in several markets. As companies attempt to increase the variability of their cost base, contemporary work solutions help them to effectively address the fluctuating demand for their products or services.
Temporary and Contract Recruitment Market
Historically, in periods of economic prosperity, the number of firms providing temporary and contract recruitment has increased significantly due to the combination of a favorable economic climate and low barriers to entry. Recessionary periods generally result in a reduction in the number of competitors through consolidation and closures; however, historically this reduction has proven to be for a limited time as the following periods of economic recovery have led to a return in growth in the number of competitors.
In the recruitment market, competition is often limited to firms with offices located within a client’s particular local market because job candidates for permanent, contract and temporary positions are generally unwilling to travel long distances, resulting in a low barrier to entry. In most major markets, competitors generally include many of the publicly traded companies and numerous regional and local competitors, some of which may operate only in a single market.
Recruitment firms act as intermediaries in matching available permanent, temporary and contract workers to employer assignments. As a result, these firms compete both to recruit and retain a supply of permanent, temporary and contract workers and to attract clients to employ these workers. Competition is generally limited to firms having offices located in a specific local geographic market. Depending on the economy of a particular market at any point in time, it may be necessary for us to place greater emphasis on recruitment and retention of temporary and contract workers or marketing to clients. We recruit permanent, temporary and contract workers through a wide variety of means, including personal referrals, advertisement in traditional mediums such as newspapers, trade periodicals, handouts, job fairs, and certain online resources. Methods used to market recruitment services to clients vary depending on the client’s perceived need for permanent, temporary and contract workers, the local labor supply, the length of assignment and the number of workers required. Depending on these factors, we compete by means of quality of service provided, scope of service offered and price. In the recruitment market, quality is measured primarily by the ability to effectively match an individual worker to a specific assignment, as well as the rate of and promptness in filling an order. Success in providing a high quality service is a function of the ability to access a large supply of available workers, select suitable individuals for a particular assignment and, in some cases, train available workers in skills required for an assignment.
An important aspect in the selection of temporary and contract workers for an assignment is the ability of the recruitment firm to identify the skills, knowledge, abilities, and personal characteristics of a temporary worker and match their competencies or capabilities to an employer’s requirements. We use specific industry tests for identifying and assessing the skill level of our associates, which are used in selecting a particular individual for a specific assignment.
We believe that our assessment systems enable us to offer a higher quality service by increasing productivity, decreasing turnover and reducing absenteeism.
Permanent Recruitment Market
In addition to temporary and contract recruitment, we offer our clients recruitment services for permanent staff. We employ 11 full-time recruiters helping our clients find people with the right skills for their business requirements. Our permanent recruitment recruiters help clients acquire the most relevant information about candidates for a fraction of the time and investment required to create a comparable in-house hiring program. Our permanent placement services include interviewing the associate, back ground checks, and verifying past employment. Our competitors in the permanent recruitment market are often the same as those in the temporary and contract recruitment market.
Regulation
Employment services firms are considered the legal employers of temporary and contract workers. Therefore, laws regulating the employer/employee relationship, such as tax withholding or reporting, social security or retirement, anti-discrimination and workers’ compensation, govern the firm.
Our outplacement and consulting services generally are not subjected to governmental regulation in the markets in which we operate.
Our Website
Our Internet address is www.axiom-management.com. We make available through our Internet website our press releases, our registration statement on Form 10-12b, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. In addition, we also make available through our Internet website:
Documents available on the website are also available in print for any shareholder who requests them. Requests may be made by writing to Mr. Gani Gjonbalaj, Vice President, Axiom Management, Inc. 14111 Freeway Dr. Suite 300, Santa Fe Springs, CA. 90670. We are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K.
Our Management
Our chairman and chief executive officer, James Clapp, is responsible for managing our day-to-day affairs. Our Vice President, Gani Gjonbalaj, is responsible for managing all operations for the company. During the years ended December 31, 2007 and 2006 Mr. Clapp earned and was paid a total of $31,000.00 sand $80,000.00 in compensation, respectively during the years ended December 31, 2007 and 2006. Mr. Gjonbalaj earned and was paid a total of $17,000.00 and $0.00 in compensation, respectively.
We have one director comprising our board. We refer to our executive officers and any directors who are affiliated with them as our management. During the years ended December 31, 2007 and 2006, our directors were compensated a total of $0.00 and $0.00, respectively.
Our Offices and Employees
We lease three office facilities under lease agreements that require monthly payments ranging from $850 to $2,367. Each of our leases have automatically renewed for additional month-to-month terms.
We currently employ 11 full time employees and over 200 part-time employees. We mainly utilize outside services to handle our accounting and other administrative requirements, and commissioned sales personnel to handle the selling and marketing of services. During the next 12 months, we anticipate hiring one or two additional full-time employees to assist in our sales and marketing requirements.
Risks Relating to an Investment in Our Securities
RISK FACTORS
Our independent auditors have expressed a going concern opinion.
We have an accumulated deficit of approximately $3,900,000 and have experienced net losses for the years ended December 31, 2007 and 2006 of approximately $1,500,000 and $900,000, respectively. Our operations do not generate sufficient cash to cover our operating costs. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the company, which in turn is dependent upon our ability to raise additional capital, obtain financing and succeed in its future operations, The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Any significant economic downturn could result in our customers using fewer temporary and contract workers, which would materially adversely affect our business.
Because demand for recruitment services is sensitive to changes in the level of economic activity, our business may suffer during economic downturns. As economic activity begins to slow down, companies tend to reduce their use of temporary and contract workers before undertaking layoffs of their regular employees, resulting in decreased demand for temporary and contract workers. Significant declines in demand, and thus in revenues, can result in expense de-leveraging, which would result in lower profit levels.
Intense competition may limit our ability to attract, train and retain the qualified personnel necessary for us to meet our clients’ staffing needs.
We depend on our ability to attract and retain qualified associates who possess the skills and experience necessary to meet the requirements of our clients. We must continually evaluate and upgrade our base of available qualified personnel through recruiting and training programs to keep pace with changing customer needs and emerging technologies. Competition for individuals with proven professional skills, particularly employees with accounting and technological skills is intense, and we expect demand for such individuals to remain very strong for the foreseeable future. Qualified personnel may not be available to us in sufficient numbers and on terms of employment acceptable to us. Developing and implementing training programs requires significant expenditures and may not result in the trainees developing effective or adequate skills. We may not be able to develop training programs to respond to our clients’ changing needs or retain associates who we have trained. The failure to recruit, train and retain qualified associates could materially adversely affect our business because it may result in an inability to meet our clients’ needs.
We may be exposed to employment-related claims and costs and other litigation that could materially adversely affect our business, financial condition and results of operations.
We are in the business of employing people and placing them in the workplaces of other businesses. Risks relating to these activities include:
| • | | claims of misconduct or negligence on the part of our associates; |
| • | | claims by our associates of discrimination or harassment directed at them, including claims relating to actions of our clients; |
| • | | claims related to the employment of illegal aliens or unlicensed personnel; |
| • | | payment of workers’ compensation claims and other similar claims; |
| • | | violations of wage and hour requirements; |
| • | | retroactive entitlement to employee benefits; |
| • | | errors and omissions of our associates, particularly in the case of professionals, such as accountants; and |
| • | | claims by our clients relating to our associates’ misuse of clients’ proprietary information, misappropriation of funds, other criminal activity or torts or other similar claims. |
We may incur fines and other losses or negative publicity with respect to these problems. In addition, some or all of these claims may give rise to litigation, which could be time-consuming to our management team and costly and could have a negative impact on our business. We cannot assure you that we will not experience these problems in the future.
We cannot assure you that our insurance will be sufficient in amount or scope to cover all claims that may be asserted against us. Should the ultimate judgments or settlements exceed our insurance coverage, they could have a material effect on our results of operations, financial position and cash flows. We also cannot assure you that we will be able to obtain appropriate types or levels of insurance in the future or that adequate replacement policies will be available on acceptable terms, if at all.
If we lose our key personnel, then our business may suffer.
Our operations are dependent on the continued efforts of our officers and executive management. In addition, we are dependent on the performance and productivity of our local managers and field personnel. Our ability to attract and retain business is significantly affected by local relationships and the quality of service rendered. The loss of those key officers and members of management who have acquired significant experience in operating an employment services company may cause a significant disruption to our business. Moreover, the loss of our key managers and field personnel may jeopardize existing client relationships with businesses that continue to use our services based upon past relationships with these local managers and field personnel. The loss of such key personnel could materially adversely affect our operations, because it may result in an inability to establish and maintain client relationships and otherwise operate our business.
Our business is concentrated with a small group of major customers and the loss of any such customer could be detrimental.
As of this filing, we had 5 major customers, 2 of which each account for over 20% of our business respectively. The business of our 2 largest customers is in the bicycle import and shoe/accessory import industries. The loss of either of these customers could be detrimental to our business and our revenue and as a result we rely heavily on the business of each of them.
As of December 31, 2007, our liabilities exceed our assets by approximately $322,000.
As of December 31, 2007 we had approximately $625,000 of total debt and approximately $303,000 of total assets. The level of debt causes us to have a poor financial position. We will be required to use cash flow from current operations to reduce this debt in the near future.
As of December 31, 2007, we had approximately $625,000 of total debt. This level of debt could adversely affect our operating flexibility and put us at a competitive disadvantage.
Our level of debt and the limitations imposed on us by our credit agreements could have important consequences for investors, including the following:
| • | | we will have to use a portion of our cash flow from operations for debt service rather than for our operations; |
| • | | we may not be able to obtain additional debt financing for future working capital, capital expenditures or other corporate purposes or may have to pay more for such financing; |
| • | | some or all of the debt under our current or future revolving credit facilities may be at a variable interest rate, making us more vulnerable to increases in interest rates; |
| • | | we could be less able to take advantage of significant business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions; |
| • | | we will be more vulnerable to general adverse economic and industry conditions; and |
| • | | we may be disadvantaged compared to competitors with less leverage. |
We expect to obtain the money to pay our expenses, to repay borrowings primarily from our operations. Our ability to meet our expenses thus depends on our future performance, which will be affected by financial, business, economic and other factors. We are not able to control many of these factors, such as economic conditions in the markets where we operate and pressure from competitors. The money we earn may not be sufficient to allow us to pay principal and interest on our debt and to meet our other debt obligations. If we do not have enough money, we may be required to refinance all or part of our existing debt, sell assets or borrow additional funds. We may not be able to take such actions on terms that are acceptable to us, if at all. In addition, the terms of our existing or future debt agreements, including the revolving credit facilities and our indentures, may restrict us from adopting any of these alternatives.
Improper disclosure of employee and client data could result in liability and harm our reputation.
Our business involves the use, storage and transmission of information about our employees, our clients and employees of our clients. We and our third party service providers have established policies and procedures to help protect the security and privacy of this information. It is possible that our security controls over personal data and other practices we and our third party service providers follow may not prevent the improper access to or disclosure of personally identifiable information. Such disclosure could harm our reputation and subject us to liability under our contracts and laws that protect personal data, resulting in increased costs or loss of revenue. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions and countries in which we provide services. Our failure to adhere to or successfully implement processes in response to changing regulatory requirements in this area could result in legal liability or impairment to our reputation in the marketplace.
Risks Relating to Private Offering Exemption and Lack of Liquidity
Private placement offering – compliance with exemption requirements.
We have in the past and may continue from time to time to sell our Shares to investors in reliance on the private placement offering exemption from registration under the 1933 Act and applicable state securities laws. Many of these requirements are subjective and must ultimately be determined upon the specific facts and circumstances of the Offering. There is no assurance that the Securities and Exchange Commission, any state securities law administrator, or a Trier of fact in a court or arbitration proceeding would not determine that we failed to meet one or more of these requirements. In the event we cannot rely on an exemption from registration under the 1933 Act and/or the securities laws of any state, we would likely be liable to one or more investors for rescission and possibly damages. If a number of investors were successful in seeking rescission and/or damages, we could face severe financial demands that would adversely affect our business as a whole and our shareholders' investment in our Shares.
There is no public market for our common stock.
A public market for our Shares does not exist. While we plan eventually to have the Shares publicly traded, we do not know and cannot estimate when or if a regular public market for the Shares will develop. When our common stock is registered under the 1934 Act by the filing of this Form 10, we will be a "publicly held company" and, in general, our common stock will be eligible for listing on the OTC bulletin board market. We may also be eligible to file for registration on one or more securities exchanges, including the American Stock Exchange. We have not yet determined when we will endeavor to list or register our Shares for trading in any of these markets. Until we do so, there will unlikely be a regular market for the resale of our common stock. The establishment of and maintaining a registration in these markets is costly and can be a time-consuming process. When we do so depends on a number of factors, including the amount of common stock we sell in this Offering and any subsequent offerings, the number of shareholders we have, the costs and expense of such registration, and the deemed overall benefits of registration to us and to our shareholders. Until a regular public market for the Shares exists, our shareholders may not be able to liquidate their investment in the Shares in the event of emergency or for any other reason, and the Shares may not be readily accepted as collateral for a loan. The purchase of the Shares, therefore, should be considered only as a long-term investment.
ITEM 2. | FINANCIAL INFORMATION |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read this section together with our financial statements and related notes thereto included elsewhere in this report. In addition to the historical information contained herein, this report contains forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are not based on historical information but relate to future operations, strategies, financial results or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. Certain statements contained in this Form 10, including, without limitation, statements containing the words "believe," "anticipate," "estimate," "expect," "are of the opinion that" and words of similar import, constitute "forward-looking statements." You should not place any undue reliance on these forward-looking statements.
You should be aware that our results from operations could materially be effected by a number of factors, which include, but are not limited to the following: economic and business conditions specific to the employment services industry; competition and the pricing and of services offered by us and our competitors; changes in customer attitudes toward the use of staffing services; our ability to control costs and expenses, and access to capital. There may be other factors not mentioned above or included elsewhere in this report that may cause actual results to differ materially from any forward-looking information.
OVERVIEW AND BACKGROUND
We operate as a full service employment services company headquartered in Montebello, California. Our services range from order fulfillment to human resource management. Our main clients are logistics providers, clerical, technical, manufacturing, medical and light industries. We operate our employment services business through our wholly owned subsidiary, Coastal Employment, Inc. Coastal was acquired by us in on November 1, 2006. We had formerly managed our employment services business through another wholly owned subsidiary, Axiom Staff Management, Inc., the stock of which has been sold to Pete Morales, a former officer of the Company.
On December 12, 2007 the Company signed an agreement with Mr. Morales and Axiom Staff and effectively sold the stock of Axiom Staff Management, Inc. and certain liabilities related thereto. Pursuant to the agreement with Mr. Morales, Mr. Morales assumed the following potential liabilities: pending or potential Payroll Tax Debt (fines, penalties and lack of payment related to Axiom Staff), and pending or potential Workers Compensation Debt (fines, penalties, lack of payment, if any, in which the officer or Axiom Staff were or became a party. In exchange, Mr. Morales was sold 100% of Axiom Staff’s issued and outstanding stock and the Company retained obligations incurred in the normal course of business described below. As of the date of this filing, we are unaware of any Payroll Tax Debt or Workers Compensation Debt as defined in the agreement with the Axiom Staff officer or with Axiom Staff. There were no lawsuits against the Company or Axiom Staff as of the date of the agreement with Mr. Morales. In this agreement, the Company retained the following liabilities: all loans and credit card debt due to normal business operations and 100% of the actual business operations and clients of Axiom Staff. Effectively, Mr. Morales was sold the stock of Axiom Staff along with the Payroll Tax Debt and Workers Compensation Debt defined above in exchange for certain loans and credit card debt incurred by Axiom Staff and in exchange for Mr. Morales' resignation from the Company. The Company effectively removed certain potential liability in the potential liabilities of the Payroll Tax Debt and Workers Compensation Debt to the extent allowed by law, sold the stock of the Axiom Staff entity and retained the liabilities stated above.
As a result of the December 12, 2007 agreement with Mr. Morales, the Company recorded an approximately $1.2 million increase in additional paid-in capital for the net liabilities disposed. Mr. Morales resigned as officer of the Company subsequent to the completion of the transaction.
The result of the above transaction eliminated the risk management division and has forced the company to outsource such services. The reason for this action was to reduce and/or eliminate potential liability to the Company. Since the nature and extent of any such liability is unknown, the Company has not accounted for the transaction other than as a disposal of the stock of Axiom Staff to Mr. Morales and is not anticipated to have any impact on the Company or its operations other than as described herein.
Executive level overview of the company.
Axiom Management Inc. was formed to be a holding company for companies providing employee management, risk management, and workers compensation insurance. This is realized by organic growth within the company, future growth through strategically targeted acquisitions such as risk management companies, payroll companies, PEO/ASO companies, and a captive that is self insured for workers compensation.
CRITICAL ACCOUNTING POLICIES
The presentation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Certain accounting policies are considered to be critical accounting policies, as they require management to make assumptions about matters that are highly uncertain at the time the estimate is made, and changes in the accounting estimate are reasonably likely to occur from period to period. Management believes the following critical accounting policies reflect our more significant judgments and estimates used in the preparation of our financial statements. For a summary of all of our significant accounting policies, see Note 2 to our financial statements included elsewhere in this report.
Principles of Consolidation
The consolidated financial statements include the accounts of Axiom Management, Inc. and its wholly-owned subsidiaries, Axiom Staff Management, Inc., (through December 12, 2007) and Coastal Employment, Inc. Subsequent to December 12, 2007, Axiom Staff Management, Inc., as a wholly-owned subsidiary, was divested as discussed in Note 1 of the financial statements. As such, the operations of Axiom Staff Management, Inc., including certain liabilities and customers, were transferred to Coastal Employment, Inc. shortly after Coastal Employment Inc.'s formation and infrastructure build-out and are currently being serviced and maintained by the Company. All material inter-company accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include collectability of accounts receivable, accounts payable, sales returns and recoverability of long-term assets.
Revenue Recognition
Revenue from the sale of services is recognized at the time the service is performed. The Company maintains an allowance for doubtful accounts on accounts receivable for estimated losses. The Company also reserves for billing adjustments, principally associated with overbillings and client disputes, made after year end that relate to services performed during the fiscal year. The estimates are estimated based on historical adjustment data as percent of sales. The Company's revenue is derived from Company-owned operations. Our service offerings are focused primarily on placing clerical/administrative and light industrial personnel into temporary positions.
The Company follows the guidance of Emerging Issues Task Force (EITF) 99-19, "Recording Revenue Gross as a Principal versus Net as an Agent", for its presentation of revenue and direct costs. This guidance requires the Company to assess whether it acts as a principal in the transaction or as an agent acting on behalf of others. Where the Company is the principal in the transaction and has the risks and rewards of ownership, the transactions are recorded gross in the statements of income. Revenue and related costs of services generated by Company-owned offices are included as part of the Company's consolidated revenue and costs of services, respectively, since the Company has the direct contractual relationships with the customers and holds title to the related customer receivables. The Company enters into separate agreement with the legal employer of the temporary employees.
We differ from a Professional Employer Organization (“PEO”) although we frequently utilize the PEO for its services to our clients. A PEO provides payroll processing, workers’ compensation administration, claims administration and human resource assistance. A PEO is an Agent and in most cases is considered a co-employer whereby the PEO becomes the administrative employer to the on-site employee managing payroll and workers compensation and a Staffing Company becomes the on-site employer determining an employees’ work schedule, rate of pay, hiring, firing and direction.
We provide staffing services such as advertising, recruiting, placement, screening, human resources, hiring/firing for our clients. We outsource to the PEO the services of payroll, workers compensation insurance.
Our company is the primary obligor in the arrangement with our clients and staff due to the fact that we are responsible for fulfillment, including the acceptability of the products or services ordered or purchased by the customer. Our customers place orders for temporary labor, and we in turn fill those orders. Our customers are not obligated to keep any records of our employees. If the customer chooses to hire the employee full time, we no longer bill the customer and the employee may then be hired by our customer. The PEO in this transaction acts as a broker in the transaction and earns a commission on the transaction. Given the above, the Company may in many instances be considered the "legal" employer of the staff hired to fulfill client orders and requested services.
Workers' Compensation
The Company is responsible for and pays workers' compensation costs for its regular employees with a coverage limit of $1,000,000 per year. Workers’ compensation for temporary employees is covered by the legal employer of the temporary employees, with whom the Company enters into a separate agreement for hiring the employees. For the first eight months of 2006, the Company employed the temporary employees under its own payroll and insured the temporary employees through State Fund with a coverage limit of $500,000. The Company accrued the estimated costs of workers' compensation claims based upon the expected loss rates within the various temporary employment categories provided by the Company. As of December 31, 2006 the workers' compensation liabilities were $1,091,847 which has been included in net liabilities of subsidiary spun off on the balance sheet for obligations that have been assumed by the ex- officer in exchange for the shares of the subsidiary.
Stock-Based Compensation
In December 2004, the FASB issued SFAS No. 123 (revised 2004), ‘‘Share-Based Payment’’ (‘‘SFAS 123R’’), which requires the measurement of all employee share-based payments to employees, including grants of employee stock options, using a fair-value-based method and the recording of such expense in the consolidated statements of operations. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”) regarding the SEC’s interpretation of SFAS 123R and the valuation of share-based payments for public companies. The Company has adopted SFAS 123R and related FASB Staff Positions (“FSPs”) as of January 01, 2006 and recognizes stock-based compensation expense using the modified prospective method.
Issuance of Shares for Service
The Company accounts for the issuance of equity instruments to acquire goods and services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably measurable.
THE FOLLOWING IS A COMPARISON OF OUR RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
Select Financial Information
| | For the Year Ended December 31, | |
| | 2007 | | | 2006 | |
| | | | | | |
Revenues | | $ | 7,407,753 | | | $ | 8,112,312 | |
Cost of revenues | | | 6,614,974 | | | | 7,009,925 | |
Gross profit | | | 792,779 | | | | 1,102,387 | |
Total expenses | | | 2,248,029 | | | | 1,988,596 | |
Net loss after taxes | | $ | (1,455,250 | ) | | $ | (886,209 | ) |
Net loss per share | | $ | (0.11 | ) | | $ | (0.08 | ) |
| | | | | | | | |
Total assets | | $ | 303,321 | | | $ | 75,967 | |
Total liabilities | | $ | 625,008 | | | $ | 1,727,166 | |
Total shareholder deficit | | $ | (321,687 | ) | | $ | (1,696,199 | ) |
Revenues
Revenues for the year ended December 31, 2007 were $7,407,753 as compared to $8,112,312 during the year ended December 31, 2006. This is a decrease of $704,559. This decrease was primarily the result of re-evaluating existing customers and as a result there were a few that left because of the increase in rates, while a few we asked to leave because it was not cost effective for us to maintain the business.
Cost of Revenues
Cost of revenues for the year ended December 31, 2007 were $6,614,974 or 89% of revenues. This is compared to cost of revenues for the year ended December 31, 2006 were $7,009,925 or 86% of revenues. The decrease in the amount of $394,951 is a direct result of the decrease in revenues. The increase of 3% of revenues is primarily the result of an increase in workers’ compensation expense to $477,137 from $443,393 during the years ended December 31, 2007 and 2006, respectively. The result in the increase of workers’ compensation expense was a result of switching insurance carriers due to the fact that our existing agency closed their doors.
Expenses
General and administrative expenses for the year ended December 31, 2007 were $783,003 as compared to $1,740,559 during the year ended December 31, 2006. This decrease of $957,556 is primarily the result of a decrease in administrative salaries and wages of $476,558 to $497,923 during the year ended December 31, 2007 from $974,481 during the year ended December 31, 2006. This decrease in salaries and wages was the result of our reduction of workforce and the reduction in salaries as we evaluated the direction of the Company and decided to take a conservative approach heading into our new structure. We also incurred $144,332 of penalties and fines relating to a workers’ compensation claim and payroll taxes penalties during the year ended December 31, 2006 that was not repeated during the year ended December 31, 2007. Rent also decreased by $59,694 to $45,361 during the year ended December 31, 2007 from $105,055 during the year ended December 31, 2006. This reduction in rent expense was the result of closing certain office locations in connection with our evaluation of the Company and our decision to take a conservative approach heading into our new structure.
Professional fees for the year ended December 31, 2007 were $1,288,582 as compared to $123,221 for the year ended December 31, 2006. This increase of $1,165,361 is the result of stock issued for services with a total value of $1,087,500. The Company issued stock for services to (1) Mr. Paul Cugno (2) Hayden Financial Corp, (3) Granite Enterprises US, Inc., (4) Mr. Gani Gjonbalaj, our Vice President. Each of these stock for services payments were for services rendered to the Company. We also experienced an increase of $33,625 in our accounting fees to $64,675 during the year ended December 31, 2007 from $31,050 during the year ended December 31, 2006. This increase in accounting fees was due to the requirement to engage in a PCAOB certified auditor.
Interest Expense
Interest expense during the year ended December 31, 2007 was $175,644 as compared to $124,016 during the year ended December 31, 2006. This increase of $51,628 is primarily the result of the increased interest rates and points added to the a loan with Mr. James Clapp, President, in order to extend the due date, as well as a change in our factoring agreement during the year ended December 31, 2007. At December 31, 2007, we owed Mr. Clapp $269,126. At December 31, 2006, we owed Mr. Clapp $307,375.
Net Loss
As a result of the aforementioned, our net loss was $1,455,250 and $886,209 for the years ended December 31, 2007 and 2006, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents
At December 31, 2007, we had $113,691 in cash and cash equivalents compared to $12,976 at December 31, 2006. We expect the funds from operations will not provide us with sufficient capital to fund our continuing operations for the foreseeable future. Instead, we will be required to increase borrowings or raise funds through the offering of private placements, until such time cash flows from operations support current operations as well as servicing our debt. In addition, from time to time we borrow funds from Mr. James Clapp, CEO, to cover current operational requirements. Although Mr. Clapp has been a reliable source of funds required to meet our short term capital needs we may not be able to rely on Mr. Clapp for funds in the future.
Operating Activities
Net cash used by operating activities during the year ended December 31, 2007 was $462,366 compared to net cash used by operating activities of $70,479 for the year ended December 31, 2006. The increase in cash used by operating activities was due to the increase in our net loss to $1,455,250 for the year ended December 31, 2007 from $886,209 for the year ended December 31, 2006. The increase in net loss was mainly a result of our decreased revenues and proportional increase in cost of revenues. The cash used by operating activities during the year ended December 31, 2007 primarily included an increase in due from factor of $95,767 as our receivables held by the factor increased, a decrease in accounts payable and accrued expenses of $65,160 and an increase in payroll liabilities of $97,183 as a result of payment timing at December 31, 2007. The cash used by operating activities during the year ended December 31, 2006 primarily included a decrease in accounts receivable of $174,734 and an increase in payroll liabilities of $622,838.
Investing Activities
Net cash provided from investing activities was $106,993 during the year ended December 31, 2007 as compared to $27,593 during the year ended December 31, 2006. These were primarily the result of cash acquired during the acquisition of two subsidiaries. During the year ended December 31, 2006 we also purchased $1,777 of property and equipment.
Financing Activities
Net cash provided by financing activities was $456,088 during the year ended December 31, 2007 as compared to $55,761 during the year ended December 31, 2006. During the year ended December 31, 2007, we received $420,000 in proceeds from a private placement funding, and $61,751 in proceeds from loans payable, officer with Mr. James Clapp, CEO and we repaid $25,663on a loan payable. During the year ended December 31, 2006, we received $50,100 in capital contributions, $55,149 in proceeds from a loan payable, and repaid $49,488 on loans payable, officer. During the year ended December 31, 2007 we repaid $100,000 of debt from prior periods with stock.
THE FOLLOWING IS A COMPARISON OF OUR RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
Select Financial Information
| | For the Three Months Ended March 31, | |
| | 2008 | | | 2007 | |
| | | | | | |
Revenues | | $ | 1,385,055 | | | $ | 1,184,126 | |
Cost of revenues | | | 1,288,213 | | | | 1,046,503 | |
Gross profit | | | 96,842 | | | | 137,623 | |
Total expenses | | | 329,594 | | | | 258,442 | |
Net loss after taxes | | $ | (232,752 | ) | | $ | (120,819 | ) |
Net loss per share | | $ | (0.02 | ) | | $ | (0.01 | ) |
| | | | | | | | |
Total assets | | $ | 471,975 | | | $ | 33,581 | |
Total liabilities | | $ | 538,914 | | | $ | 1,805,599 | |
Total shareholder deficit | | $ | (66,939 | ) | | $ | (1,772,018 | ) |
Revenues
Revenues for the three months ended March 31, 2008 were $1,385,055 as compared to $1,184,126 during the three months ended March 31, 2008. This is an increase of $200,929. This increase was primarily the result an increase in rates, along with the growth of our customer base.
Cost of Revenues
Cost of revenues for the three months ended March 31, 2008 were $1,288,213 or 93% of revenues. This is compared to cost of revenues for the three months ended March 31, 2007 of $1,046,503 or 88% of revenues. The increase in the amount of $241,710 is a direct result of the increase in revenues. The increase of 5% of revenues is primarily the result of an increase in workers’ compensation expense and related employee benefits.
Expenses
General and administrative expenses for the three months ended March 31, 2008 were $194,163 as compared to $199,771 during the three months ended March 31, 2007. This is a decrease of $5,608
Professional fees for the three months ended March 31, 2008 were $55,321 as compared to $16,928 for the three months ended March 31, 2007. This increase of $38,393 is the result increased legal and accounting services required in fulfilling various reporting requirements.
Interest Expense
Interest expense during the three months ended March 31, 2008 was $80,110 as compared to $41,743 during the three months ended March 31, 2007. This increase of $38,367 is primarily the result of the increased interest rates and points added to the a loan with Mr. James Clapp, President, in order to extend the due date, as well as a change in our factoring agreement
Net Loss
As a result of the aforementioned, our net loss was $232,752 and $120,819 for the three months ended March 31, 2008 and 2007, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents
At March 31, 2008, we had $252,763 in cash and cash equivalents. We expect the funds from operations will not provide us with sufficient capital to fund our continuing operations for the foreseeable future. Instead, we will be required to increase borrowings or raise funds through the offering of private placements, until such time cash flows from operations support current operations as well as servicing our debt. In addition, from time to time we borrow funds from Mr. James Clapp, CEO, to cover current operational requirements.
Operating Activities
Net cash used by operating activities during the three months ended March 31, 2008 was $207,628 compared to net cash used by operating activities of $53,983 for the three months ended March 31, 2007. The increase in cash used by operating activities was due to the increase in our net loss to $232,752 for the three months ended March 31, 2008 from $120,819 for the three months ended March 31, 2007. The cash used by operating activities during the three months ended March 31, 2008 primarily included a decrease in due from factor of $57,304, an increase in accounts receivable of $31,902, an increase in accounts payable and accrued expenses of $81,569 and a decrease in payroll liabilities of $76,863. The cash used by operating activities during the three months ended March 31, 2007 primarily included an increase in due from factor and accounts receivable of $12,336 and $25,121, respectively and an increase in accounts payable and accrued expenses of $33,398.
Investing Activities
Net cash used by investing activities was $50,000 during the three months ended March 31, 2008 due to the deposit paid on the potential purchase of a PEO company. Since the deposit was paid we have terminated discussions with the PEO company and at this time do not foresee the acquisition of a PEO company in the near future. There were no investing activities during the three months ended March 31, 2007.
Financing Activities
Net cash provided by financing activities was $396,700 during the three months ended March 31, 2008 as compared to $45,035 during the three months ended March 31, 2007. During the three months ended March 31, 2008 we received $487,500 in proceeds from the private placement and repaid $90,800 on our note payable, officer. During the three months ended March 31, 2007, we received $45,035 from our note payable officer.
Future Capital Needs
Our total debt March 31, 2008 was $538,914 and we had a working capital deficit of $129,863. At March 31, 2008, our debt consisted of $330,898 of accounts payable and accrued expenses, $29,690 of accrued payroll and payroll taxes and $178,326 loans payable, related party, due to Mr. James Clapp, President. The accounts payable, accrued expenses, accrued payroll and payroll taxes are payable in the near term and we use our current revenues to manage these payments. The loans payable, related party, due to Mr. James Clapp, President, range from interest-free to 25% interest and are due upon demand.
Capital Commitments
We currently have no material commitments at this time to fund development of new videos or to acquire any significant capital equipment.
Off-Balance Sheet Arrangements
As of March 31, 2008, we do not have any off-balance sheet arrangements or obligations, including contingent obligations.
We lease three office facilities under lease agreements that require monthly payments ranging from $850 to $2,367. Each of our leases have automatically renewed for additional month-to-month terms.
ITEM 4. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
Principal Shareholders
The following table sets forth certain information as of the date of this Memorandum, by each person or entity who is known to us to be the beneficial owner of more than 5% of our common stock, the beneficial ownership by each director and the beneficial ownership of all directors and officers as a group at December 31, 2007 in the event all of the Shares are sold.
Name | | Maximum Beneficial Ownership | | Percentage Owned At May 15, 2008(1) |
| | | | |
James Clapp 14111 Freeway Dr. Suite 300 Santa Fe Springs, CA 90670 | | 1 | | 54% |
| | | | |
Gani Gjonbalaj 14111 Freeway Dr. Suite 300 Santa Fe Springs, CA 90670 | | 1 | | 7% |
| | | | |
All Officers and directors as a Group | | 2 | | 61% |
| | | | |
Other five percent beneficial owners | | | | |
| | | | |
Albert Clapp | | 1 | | 6% |
See notes to the table below.
(1) | Based on 18,241,581 common Shares outstanding as of June 30, 2008. |
ITEM 5. | DIRECTORS AND EXECUTIVE OFFICERS |
The following table sets forth information about our directors and executive officers.
Name | | Age | | Position | | Address |
| | | | | | |
James Clapp | | 43 | | Chairman of the Board Chief Executive Officer | | 14111 Freeway Dr. Suite 300 Santa Fe Springs, CA. 90670 |
| | | | | | |
Gani Gjonbalaj | | 43 | | Vice President, Director | | 14111 Freeway Dr. Suite 300 Santa Fe Springs, CA. 90670 |
None of our directors serves as a director of any company reporting under the 1934 Act. "Reporting Companies" include companies with a class of securities registered pursuant to Section 12 of the 1934 Act, or subject to the requirements of Section 15(d) of the 1934 Act, or any company registered as an investment company under the 1940 Act.
Each of our directors serves for a concurrent term of one year or until his or her successor is duly elected and qualified. Set forth below is a description of the business and employment background of each director and executive officer.
James T. Clapp is the Chairman of the Board and CEO of Axiom Management Inc. Mr. Clapp is the Chairman of the Board for Coastal Employment Inc. In November of 2006 Mr. Clapp started Coastal Employment Inc. with Erika Clapp and as the COO of the Coastal Employment from November 2006 to May 2007 Mr. Clapp was responsible for all day to day functions. These functions were and not limited to Accounting/AR, Business Development/Sales, Customer Care/Service. In July of 2006 to October 2006 Mr. Clapp was the CEO of Axiom Staff Management, Inc. Prior to the position of CEO Mr. Clapp held the position of COO for Axiom from July 2005 to July 2006. As the COO Mr. Clapp’s responsibilities were Business Development/ Sales, day to day operations and Customer Care/Service. Mr. Clapp founded AVC Properties Inc. in November of 2001 which Mr. Clapp holds the position of President/ CEO. As of today AVC is profitable and thrives as a company. From November 2003 to December 2004 Mr. Clapp was the COO for USC Intermodal his responsibilities were to grow the company and obtain US Customs Five (5) year Examination contract which we successfully accomplished. Mr. Clapp was one of the first to successfully complete and graduate from the Global Logistics Specialist (GLS) from the California State University of Long Beach.
Gani Gjonbalaj has been the Secretary and Vice President and a member of the Board of Directors of Axiom Management Inc. since May 28, 2007. Before his employment with Axiom Management Inc. Gani Gjonbalaj was the COO of BTSS Corp. in New York from June of 2005 until July of 2007. Gani Gjonbalaj worked there for two years to set up the infrastructure to export electronic merchandise to the Caribbean market. BTSS Corp also had a subsidiary in Trinidad under the name of Electronics Emporium Inc. From February of 2004 until March of 2007 Gani Gjonbalaj was the Operations Manager for Customs Goods LLC in Carson, California. His main job functions were to run the warehousing operation and improve the processes and departments for growth. Eight months into the job Gani Gjonbalaj had obtained Sony Certification for the companies’ contract packaging division and changed the direction of the company. From November of 2003 to February of 2004 Gani Gjonbalaj was the Vice President and General Manager for USC Intermodal. Gani Gjonbalaj was responsible for all operations and for obtaining a US Customs Examination Contract. Once the contract was obtained he was responsible for training the staff, reorganizing the warehouse, rewriting the software to handle the duties and responsibilities of being a Centralized Examination Station for Homeland Security.
ITEM 6. | EXECUTIVE COMPENSATION |
The following table acts forth information concerning the compensation earned by our chief executive officer and our chief financial officer (collectively, the "Named Executive Officers") for the fiscal years ended December 31, 2007 and 2006. There was no non-equity incentive plan compensation or change in pension value and non-qualified deferred compensation earnings paid to the executive officers in 2007 and 2006.
Name and Principal Position | | Year | | Salary | | Bonus (1) | | Stock Awards (2) | | Options Awarded | | All Other Compensation (3) | | Total | |
| | | | | | | | | | | | | | | |
James Clapp | | 2007 | | $ | 31,000 | | $ | - | | $ | - | | - | | $ | - | | $ | 31,000 | |
President/CEO | | 2006 | | $ | 80,000 | | $ | - | | | - | | - | | $ | - | | $ | 80,000 | |
| | | | | | | | | | | | | | | | | | | | |
Gani Gjonbalaj | | 2007 | | $ | 17,000 | | $ | - | | $ | 100,000 | | - | | $ | - | | $ | 117,000 | |
Secretary/Vice President | | 2006 | | $ | - | | $ | - | | | - | | - | | $ | - | | $ | - | |
The following table sets forth distributions paid on restricted stock and the cost of term life premiums paid by us:
Name | | Year | | Distributions Paid on Restricted Stock | | | Group Term Life Insurance Payments | | | Total of All Other Compensation | |
James Clapp President/ CEO | | 2007 | | | 0- | | | | 0- | | | | 0- | |
| | 2006 | | | 0- | | | | 0- | | | | 0- | |
Gani Gjonbalaj | | 2007 | | | 0- | | | | 0- | | | | 0- | |
| | 2006 | | | 0- | | | | 0- | | | | 0- | |
Employment Agreements. We have letters of employment with 13 employees. The material terms of these standardized agreements are:
Employee accepting employment at a specific wage and receiving a general medical package. There are no terms, compensation or termination clauses.
The Company does not have any outstanding equity awards, including option or stock awards to report at this time.
Directors. The Company’s directors, Mr. James Clapp and Mr. Gani Gjonbalaj, are both executive officers and their compensation is fully reflected in the summary compensation table.
ITEM 7. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
On April 2, 2007, the Company entered into a loan agreement with Mr. Albert Clapp, father to Mr. James Clapp, President, and received $100,000. On September 1, 2007, the debt was converted into 100,000 shares of the Company’s common stock. No gain or loss on settlement of debt was recorded as this was a transaction with a related party. The shares were issued in January 2008.
Other than as disclosed in the footnotes to the financial statements, there have been no material transactions between us and our officers or directors, or any of their respective affiliates, during the last two (2) years.
The transactions with the Company and Albert Clapp are separate and apart from those with Mr. James Clapp. In addition to the loans with Albert Clapp, the Company accepted loans from James Clapp.
During the year ended December 31, 2007, the Company accounted for net proceeds from loans from James Clapp, CEO, in the amount of $61,751. These loans were made as non-interest bearing advances to be repaid on receipt by the Company of available funds. James Clapp has loaned monies to the Company as needed to continue operations and the Company has repaid the loans when able. The Company accounts for these loans on an accrual basis and the net amount of loans payable at each year have been disclosed. The calculation made at year-end 2007 resulted from a net increase in payments made during 2007 given the accumulation of prior loans made in previous years by Mr. Clapp to the Company.
During the year ended December 31, 2006, the Company accounted for net repayments of $49,488 in loans payable to James Clapp.
None.
ITEM 9. | MARKET PRICE AND DIVIDENDS ON RGESTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS |
There was no public market for any of the securities of the Company during 2007 and 2006.
Market Information
Our common stock is not currently traded on any stock exchange or electronic quotation system. We do not expect that our common stock will be traded on any stock exchange or electronic quotation system.
Securities Eligible for Resale
Rule 144. Under Rule 144, as recently amended by the SEC, all shares held by non-affiliates that have been issued and outstanding for more than one year are presently eligible for resale and commencing 90 days after the effective date of this registration statement, all shares held by non-affiliates that have been issued and outstanding for more than six months will be eligible for resale. Future sales of large numbers of shares into a limited trading market or the concerns that those sales may occur could cause the trading price of our common stock to decrease or to be lower than it might otherwise be. If an active, stable and sustained trading market does not develop, the market price for our shares will decline and such declines are likely to be permanent. At this time, there is 13,980 shares of stock that could be sold pursuant to Rule 144.
Rule 701. Under Rule 701, as currently in effect, shares of common stock acquired in compensatory transactions by employees of privately held companies may be resold by persons, other than affiliates, beginning 90 days after the date of the effectiveness of this registration statement, subject to manner of sale provisions of Rule 144, and by affiliates in accordance with Rule 144 without compliance with its one-year minimum holding period.
Combined. On the date of this registration statement we had 18,241,581 shares outstanding, including 6,541,581 shares held by persons who are not directors, officers or affiliates of our Company. On the date of this registration, we had 356 shareholders.
ITEM 10. | RECENT SALES OF UNREGISTERED SECURITIES |
Securities Issued in Private Placement Offerings
Set forth below is information regarding securities we have issued within the past three (3) years.
On January 9, 2007, the Company approved a 1:200 reverse stock split. The consolidated financial statements retroactively reflect the reverse split.
On July 30, 2007, the Company entered into an agreement with Axiom Staff Management, Inc. (Axiom Staff) whereby 100% of the issued and outstanding shares of Axiom Staff were exchanged for 11,700,000 shares of the Company. The transaction was made under an exemption from registration under Rule 4 (2) of the Securities Act of 1933, as amended.
On April 2, 2007, the Company entered into a loan agreement with a Albert Clapp and received $100,000. On September 1, 2007, the debt was converted and Mr. Clapp was issued 100,000 shares of the Company’s common stock. No gain or loss on settlement of debt was recorded as this was a transaction with a related party. The shares were issued in January 2008. Such shares of Common Stock were issued without registration under the Securities Act of 1933, as amended, in reliance on Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
During the year ended December 31, 2007, the Company received $525,000 in cash for the sale of 1,050,000 of restricted common stock of the Company under a private placement offering made to 21 investors for common stock at $1 per share. Along with each share purchased in the offering, an investor received one three-year warrant. Expenses related to the offering totaled $63,000. The 1,050,000 shares of common stock were issued on January 11, 2008 and have been recorded as shares to be issued in the accompanying financial statements. The private placement offering and the shares of Common Stock and Warrants that were issued under the private placement were issued without registration under the Securities Act of 1933, as amended, in reliance on Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
The applicable expenses relate to accounting services, audit fees, legal and consulting fees and fund raising.
During the year ended December 31, 2007, the Company agreed to issue 100,000 shares to an officer of the Company. The shares to be issued were valued at the fair market value of $145,000. These shares were issued on January 11, 2008Also, during the year ended December 31, 2007, the prior shareholder of Coastal was awarded 500,000 shares in Axiom for the shares relinquished in Coastal. This was treated as a deemed dividend as the prior shareholder is related to an officer and director of the Company. The shares issued in each of these transactions were issued without registration under the Securities Act of 1933, as amended, in reliance on Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
Throughout the year ended December 31, 2007, the Company issued stock for services to (1) Mr. Paul Cugno (2) Hayden Financial Corp, (3) Granite Enterprises US, Inc., (4) Mr. Gani Gjonbalaj, our Vice President. Each of these stock for services payments were for services rendered to the Company. The issuances of stock for services were made under an exemption from registration under Rule 4 (2) of the Secu ities Act of 1933, as amended and each were placed privately, directly by the Company without solicitation. Each recipient was qualified as having knowledge sufficient to understand the transaction, had access to sufficient information on the Company and agreed not to resell or distribute the stock.
For each of the transactions noted in this Item 10, each offer and sale of securities was private and made to accredited investors or offerees only and at no time was a general solicitation used in connection with any such offer or sale of any such securities.
ITEM 11. | DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED |
Common Stock. We are authorized to issue up to 100,000,000 shares of Common Stock, of which 16,700,581 were outstanding at May 15, 2008. At May 15, 2008, we had more than 356 shareholders of record.
ITEM 12. | INDEMNIFICATION OF OFFICERS AND DIRECTORS |
Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents Limited Liability and Indemnification of Directors, Officers, Employees and other Agents
Under Pennsylvania law, a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which 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.
The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person is liable or did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, or that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.
Under our Bylaws, the corporation shall indemnify any individual made a party to a proceeding because he is or was an officer, director, employee or agent of the corporation against liability incurred in the proceeding.
The expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding shall be paid by the corporation as they are incurred and in advance of the final deposition of the action, suit or proceeding, but only after receipt by the corporation of an undertaking by or on behalf of the officer or director on terms set by the Board of Directors, to repay the expenses advanced if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation.
The indemnification permitted herein is intended to be to the fullest extent permissible under the laws of the State of Pennsylvania, and any amendments thereto.
Insofar as indemnification for liabilities arising under the Securities Act might be permitted to directors, officers or persons controlling our company under the provisions described above, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
ITEM 13. | FINANCIAL STATEMENTS AND SUPPLEMENTING DATA |
Financial Statements are included as exhibit 99.1.
ITEM 14. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING DISCLOSURE |
Not applicable.
ITEM 15. | FINANCIAL STATEMENTS AND EXHIBITS |
An index to and description of the financial statements are filed with this Form 10 in Item 13 hereof. An Index to the Exhibits as filed as part of this Form 10 is set forth below.
Exhibit Number | | Description |
| | |
2.1 | | Acquisition Agreement |
| | |
3.1 | | By-Laws |
| | |
3.2 | | Axiom Incorp 05 22 07 |
| | |
3.3 | | Certificate of Amended Articles |
| | |
4.1* | | Form of Common Stock Certificate |
| | |
15.1* | | Example Employment Contract |
| | |
15.2* | | Agreement between Mr. Pete Morales, Axiom Staff Management, Inc. and Axiom Management, Inc. |
| | |
20.1 | | Good Standing Cert (Penn) |
| | |
23.1 | | Consent of Kabani & Company, Inc. |
| | |
99.1 | | Financial Statements for the years ended December 31, 2007 and 2006 and for the three months ended March 31, 2008 and 2007 |
| | |
99.2 | | CEO Share Purchase Agreement |
| | |
99.3 | | Business Name History |
| | |
99.4 | | Tower Office Lease |
| | |
99.5 | | Pico Office Lease |
| | |
99.6 | | Huffy Contract |
| | |
99.7 | | WSS Contract |
| | |
99.8 | | Granite Cooperative Marketing Agreement |
| | |
99.9 | | Hayden Agreement |
* Filed as an exhibit to the Registration Statement on Form 10-12G/A, filed with the Securities and Exchange Commission on October 29, 2008, and incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
Axiom Management, Inc. Date: January 14, 2008 By: /S/ JAMES CLAPP James Clapp Chief Executive Officer |