AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 7, 2003
REGISTRATION NO. 333-59726
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
AMENDMENT NO. 8
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
ARTWORK AND BEYOND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 5900 11-3507594
- ---------------- ----------- -----------
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE) IDENTIFICATION NO.)
ARTWORK AND BEYOND, INC.
331 DANTE COURT
HOLBROOK, NEW YORK 11741
(631) 471-0065
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
HOWARD BLUM
CHIEF EXECUTIVE OFFICER
331 DANTE COURT
HOLBROOK, NEW YORK 11741
(631) 471-0065
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE OF AGENTS FOR SERVICE)
------------------------------------
COPIES TO:
MICHAEL D. DIGIOVANNA, ESQ.
599 LEXINGTON AVENUE
29TH FLOOR
NEW YORK, NEW YORK 10022
(212) 549-0251
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS
SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
[IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE
OFFERED ON A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE
SECURITIES ACT OF 1933, CHECK THE FOLLOWING BOX. |X|]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN
OFFERING PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE
FOLLOWING BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE
EARLIER EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. |_|
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE
462(C) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES
ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION
STATEMENT FOR THE SAME OFFERING. |_|
IF THIS FORM IS POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE
462(D) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES
ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION
STATEMENT FOR THE SAME OFFERING. |_|
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE
434, PLEASE CHECK THE FOLLOWING BOX. |_|
CONTINUED OVERLEAF
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------------
==================================== =================== ======================== ===================== ==========================
PROPOSED MAXIMUM PROPOSED MAXIMUM
* OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF REGISTRATION
AMOUNT TO BE SECURITY (1) PRICE FEE
TITLE OF EACH CLASS OF SECURITIES REGISTERED
TO BE REGISTERED
- ------------------------------------ ------------------- ------------------------ --------------------- --------------------------
- ------------------------------------ ------------------- ------------------------ --------------------- --------------------------
- ------------------------------------ ------------------- ------------------------ --------------------- --------------------------
- ------------------------------------ ------------------- ------------------------ --------------------- --------------------------
Common Stock (2) 1,000,000 .05 $50,000 3.60
Common Stock (3) 180,000 .05 $ 9,000 $.648
- ------------------------------------ ------------------- ------------------------ --------------------- --------------------------
- ------------------------------------ ------------------- ------------------------ --------------------- --------------------------
Total $4.250
- ------------------------------------ ------------------- ------------------------ --------------------- --------------------------
- ------------------------------------ ------------------- ------------------------ --------------------- --------------------------
Previously paid $375.00
- ------------------------------------ ------------------- ------------------------ --------------------- --------------------------
- ------------------------------------ ------------------- ------------------------ --------------------- --------------------------
- ------------------------------------ ------------------- ------------------------ --------------------- --------------------------
<FN>
(1) Estimated solely for purposes of calculating registration fee pursuant to
Rule 457(c) under the Securities Act of 1933, as amended.
(2) These shares relate to the offering by Artwork and Beyond, Inc.
(3) These shares are offered by a selling stockholder.
(4) Included in the above amounts are fees relating revised or terminated
offerings.
</FN>
Pursuant to Rule 416 of the Act, this registration statement also
covers such indeterminate additional shares of common stock as may become
issuable as a result of stock splits, stock dividends or other similar events.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
EXPLANATORY NOTE
This registration statement contains two prospectuses: one relating
to the offering by Artwork and Beyond of 1,000,000 shares of its common stock,
par value $.001, per share, for cash and another prospectus relating to the
offering of 180,000 shares of common stock held by a selling securityholder who
may wish to sell its common stock. The prospectus relating to the selling
securityholder is referred to as the selling securityholder prospectus.
Following the prospectus are substitute pages of the selling securityholder
prospectus, including alternate pages, front outside and back cover pages, an
alternative "The Offering" section of the "Prospectus summary" and section
entitled "Plan of distribution." Each of the alternate pages for the selling
securityholder prospectus is labeled "Alternate page for selling securityholder
prospectus" and is consecutively numbered beginning with page A1. All other
sections of the prospectus are to be used in the selling securityholder
prospectus. In addition, cross-references in the prospectus will be adjusted in
the selling securityholder prospectus to refer to the appropriate sections.
PROSPECTUS SUBJECT TO COMPLETION; DATED JANUARY 6, 2003
1,000,000 SHARES OF COMMON STOCK
OF
ARTWORK AND BEYOND, INC.
We are registering 1,000,000 shares of our common stock for sale on a
"best efforts" basis. There is no requirement that we sell a minimum number of
shares. If all 1,000,000 shares are not sold within 60 days from the date
hereof, (which may be extended an additional 30 days in the sole discretion of
Artwork and Beyond, Inc.), the Offering for the balance of the shares will
terminate and no further shares will be sold. Our shares are presently not
traded on any market.
Concurrently with this offering, we are registering 180,000
additional shares of common stock for sale by selling a securityholder who may
wish to sell its shares in the open market or in privately negotiated
transactions.
Per Share Total
Public Offering Price............................... $.05 $50,000
Underwriting Discount ..................... None None
Proceeds to Artwork and Beyond(1) $.05 $50,000
(1) Before expenses of the offering estimated at $95,000, which is in
excess of the proceeds but a portion of these fees has been paid prior to the
offering.
No public trading market for our common stock exists and the offering
price of our common stock has been arbitrarily determined by Artwork and Beyond.
We have not taken any steps to obtain a market maker for our common stock.
------------------------------------
Our principal executive offices are located at 331 Dante Court,
Holbrook, New York 11741. Our telephone number is (631) 471-0065.
------------------------------------
THE COMMON STOCK BEING OFFERED, BY THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK. YOU SHOULD READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 6
BEFORE YOU DECIDE TO PURCHASE ANY COMMON STOCK.
------------------------------------
Neither the Securities and Exchange Commission nor any state
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Nor have they made, nor will they make,
any determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
The date of this Prospectus is _________, 2003
TABLE OF CONTENTS
PROSPECTUS SUMMARY ................................................. 3
Risk factors ....................................................... 6
Forward Looking Information ............................. 7
Use of proceeds .................................................... 7
Dilution ........................................................... 7
Concurrent Offering ................................................
Directors, Executive Officers, Promoters and Control Persons ....... 10
Security ownership of certain beneficial owners and management ..... 16
Our business ....................................................... 17
Property ........................................................... 24
Legal Proceedings .................................................. 24
Plan of Operations ................................................. 25
Management Discussion and Analysis ................................. 25
Certain relationships and related transactions ..................... 28
Description of securities .......................................... 28
Disclosure of commission position on indemnification
for securities act liabilities .................................. 30
Plan of distribution ............................................... 31
Legal matters ...................................................... 32
Experts ............................................................ 32
Available Information .............................................. 32
Financial Statements
You should rely only on the information contained in this document. We have not
authorized anyone to provide you with information that is different. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.
[INSIDE FRONT COVER]
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in
this prospectus. You should read the following summary together with the more
detailed information regarding Artwork and Beyond and our financial statements
and the related notes appearing elsewhere in this prospectus.
ARTWORK AND BEYOND, INC.
Artwork and Beyond is a Delaware corporation, formed on August 5,
1999. Our primary business is the sale of art, in two major areas: online retail
sales and online auctions.
Artwork and Beyond's online retail division, ARTinaClick.com,
provides the consumer with a "one-stop" shopping experience for the purchase of
art online. ARTinaClick.com offers a vast selection of images ranging from
originals, lithographs, serigraphs, limited editions, prints and posters, to
sports memorabilia and collectibles. Items range in price from $5.00 to $1500
with the average sale of approximately $85.00. Items offered are at substantial
savings from traditional retail galleries. We believe that our business strategy
combined with targeted marketing when funding is available will make the site a
premiere Internet site for art buying in the e-commerce space.
Artwork and Beyond's emphasis for the consumer is ease-of-use,
separating artwork into five unique galleries, coupled with a sophisticated and
powerful search engine. It is management's belief that the consumer will not
feel intimidated by lack of taste or knowledge and Artwork and Beyond will
provide the consumer with a highly satisfying shopping experience.
Artwork and Beyond's Internet based charity art auction division,
ArtAuctionFundraiser.com., provides online charity art auctions. There are
numerous organizations including, alumni groups, religious organizations,
schools, and health care organizations whose members are geographically
dispersed. These organizations are constantly looking to raise funds to meet
their operating budgets. We believe that an online auction would enable
organizations to raise funds from their members no matter how geographically
dispersed they may be.
Artwork and Beyond, Inc. is referred to in this prospectus as
"Artwork and Beyond," "we," "us," or "our."
Our principal place of business is located at331 Dante Court,
Holbrook, New York, 11741. Our general telephone number is (631) 471-0065.
-3-
THE OFFERING
Shares outstanding before offering (1) (2)1........................... 9,671,664 shares of common stock.
Shares offered by Artwork and Beyond.................................. 1,000,000 shares of common stock.
Plan of distribution.................................................. Artwork and Beyond will offer and sell up to 1,000,000
shares for cash at a price of $.05 per share. The
offering of our shares of common stock in the
current offering is being made through one of our
officers.
Use of Proceeds....................................................... Artwork and Beyond will receive the proceeds to be
derived from the sale of an aggregate of 1,000,000
shares of common stock.
CONCURRENT OFFERING
Selling Securityholder......................................................Dutchess Partners
Shares offered by Selling securityholder....................................180,000 shares of common stock
Plan of distribution........................................................The Shares will be offered at five cents per share
prior to our common stock being quoted on the
bulletin board or other exchange. After quotation,
the shareholder may make sales on the open market
or in privately negotiated transactions at prices
greater or less than five cents. The stockholder
has indicated that it does not intend to sell the
shares until they are quoted on the bulletin board.
Use of Proceeds.............................................................We.will not receive any of the proceeds from the
sale of the shares owned by the selling
securityholder.
<FN>
(1) Unless otherwise indicated information in this prospectus including
the above information and information under "Dilution":
*assumes all the shares offered by us will be sold;
*gives retroactive effect to a stock split of 3.7917519 to one in
April 2001;
- --------
As of August 22, 2001.
</FN>
-4-
SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to,
and should be read in conjunction with, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus. The financial information set forth below is audited with respect to
the annual period ended December 31, 2001, December 31, 2000 as derived from
Artwork and Beyond's financial statements.
FISCAL FISCAL NINE MONTH* NINE MONTH*
YEAR ENDED YEAR ENDED ENDED ENDED
12/31/00 12/31/01 9/30/02 9/30/01
STATEMENT OF OPERATIONS DATA:
Revenues ....................................................... $ 158,491 $ 15,915 $ 122,582 $ 148,044
Costs of goods sold ............................................ 103,135 9,331 58,351 72,337
Commission income, net ......................................... 37,310 -- 16,935
Operating expenses ............................................. 1,149,040 779,039 262,194 997,993
Loss from operations ........................................... (1,056,374) (772,455) (181,028) (922,286)
Interest and other income ...................................... 15,200 10,542 4,890 14,388
----------- ----------- ----------- -----------
Net loss ....................................................... (1,041,174) (761,913) (176,138) (907,898)
AS OF AS OF*
12/31/01 9/31/02
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents .................................. $ 134,802 $ 31,084
Working capital ............................................ 20,880 (70,117)
Total assets ............................................... 176,079 68,848
Total liabilities .......................................... 123,582 106,339
*UNAUDITED
We will not receive any of the proceeds from the sale of the shares
owned by the selling securityholder.
-5-
RISK FACTORS
You should carefully consider the following risk factors and all
other information contained in this prospectus before investing in our common
stock. We believe this section addresses all material risks specific to us.
Investing in our common stock involves a high degree of risk. Any of the
following risks could adversely affect our business, financial condition and
results of operations and could result in a complete loss of your investment.
RISKS RELATED TO OUR BUSINESS
WE ARE A START-UP COMPANY AND WE EXPECT TO ENCOUNTER RISKS AND DIFFICULTIES
FREQUENTLY FACED BY START-UP COMPANIES IN NEW AND RAPIDLY EVOLVING MARKETS.
We were founded in August 1999 by Howard Blum and Jay Camina and
commenced operations on December 1, 2000. Prior to that date, our operations
consisted of the development of our business plan, negotiating a fulfillment
agreement with Ross Galleries, Inc., completion of our web sites,
www.ARTinaClick.com and Artauctionfundraiser.com, and otherwise organizing our
operations. While we have been operating for nearly two years, the scope of our
business has been limited and we are still essentially a start-up. An investor
in our shares must consider the risks and difficulties frequently encountered by
start-up companies in new and rapidly evolving markets. These challenges include
our need to establish our brand name awareness, and our need to attract and
retain customers at a reasonable cost.
Although we have substantial data concerning which specific works of
art may sell, we may have limited insight into other trends that may emerge and
affect our business. Because we are a start-up company and our market is in an
early stage of development, we cannot be certain that our business strategy will
be successful or that we will successfully address these risks. Any failure to
do so would seriously harm our business and operating results.
AS A RESULT OF OUR RECURRING LOSSES, WE MAY BE UNABLE TO CONTINUE AS A GOING
CONCERN
Our independent auditors issued a qualified report on their audit of
our financial statements for the years ended December 31, 2001 and 2000. Their
report contains as explanatory paragraph and footnote in which they state that
our history of recurring losses and lack of revenues raise substantial doubt
regarding our ability to continue as a going concern.
ADDITIONAL FINANCING IS REQUIRED FOR US TO CONTINUE IN BUSINESS.
The proceeds will not be sufficient to provide any working capital or
to implement our marketing plan. We need funds for general corporate purposes
and to implement our plans. After the offering, we hope to obtain additional
financing for these purposes. Our efforts may be impaired by our inability to
receive enough proceeds to pay all the expenses of this offering, the payment of
legal expenses of a lawsuit commenced against us and others as well as the
repayment of loans of $45,000 due in February 2003. We cannot assure you that we
will obtain sufficient capital for these purposes or to fund operations,
including salaries to pay employees, in order to stay in business or to
implement our marketing plans.
-6-
CONSUMERS MAY NOT ADOPT THE INTERNET AS A WAY OF BUYING ARTWORK, WHICH WOULD
PREVENT US FROM BECOMING PROFITABLE.
If we do not attract and retain a high volume of online customers to
our web site at a reasonable cost, our business will not succeed. We may not be
able to convert a large number of consumers from traditional shopping methods to
online shopping for artwork and as a result may never achieve widespread
customer acceptance of shopping for artwork online. Specifically, consumers may
not wish to change the way they purchase art and may feel it is necessary to
view the actual works of art rather than pictures before purchasing them. In
addition, Consumers may not be willing to make orders online due to perceived
difficulty of placing complex orders online or pricing that does not meet
customer expectations of "finding competitive prices on the internet." As a
result we may never drive sufficient revenues from our operations in order to
become a profitable enterprise.
A STOCKHOLDER HAS A POSSIBLE RIGHT TO RESCIND THE PURCHASE OF ITS SHARES AND AS
A RESULT WE MAY BE REQUIRED TO REFUND HIS PURCHASE PRICE AT A TIME WHEN WE DO
NOT HAVE THE FUNDS.
In the view of the Securities Exchange Commission, our sale to
Dutchess Partners, the selling stockholder, may not have been an offering exempt
from the registration requirements under the Securities Act of 1933. Dutchess
Partners may have the right to rescind the purchase of its shares and obtain
repayment of the purchase price. If Dutchess Partners obtains rescission we
would be required to return the purchase price of up to $50,000 at a time when
funds may not be available for this purpose. Prospective investors in this
offering therefore could be adversely effected by the return of any funds which
may result in our inability to operate or to pursue our business plans. In
addition, because the purchase price since may be deemed contingent, this amount
was not counted as equity in our balance sheet.
INCREASING OUR SALES WILL DEPEND LARGELY ON INCREASING OUR CUSTOMER BASE, RATHER
THAN MAKING SALES TO REPEAT CUSTOMERS.
We expect our on-line customers initially to be individuals and
families purchasing artwork for home and office decoration and, to a lesser
extent, as gifts. Unlike consumer products, which are used and repurchased art
is purchased for long-term use. Therefore, while we expect that we will have
repeat customers if they have a favorable experience in purchasing from our web
site, we expect that sales to repeat customers will be limited. Accordingly, we
will have to attract new customers in order to expand our revenues and achieve
profitability.
WE DEPEND ON ROSS GALLERIES, LLC FOR FRAMING SERVICES IF ROSS GALLERIES LLC DOES
NOT PERFORM, WE MAY NOT BE ABLE TO SHIP ORDERS EFFECTIVELY.
To generate the significant customer traffic, volume of purchases and
repeat purchases that we believe are crucial to obtaining sufficient revenues,
we must develop and maintain customer trust in the timing and accuracy of our
product deliveries. Presently, Ross Galleries, LLC frames all of the artwork
that we sell. Our business could be significantly disrupted if Ross Galleries,
LLC were for any reason unable or unwilling to frame products for us and in a
timely manner. In this event we may not be able to secure alternative framing
services on acceptable terms in a timely manner, or at all.
-7-
WE DEPEND ON INDEPENDENT VENDORS FOR SUPPLY OF ARTWORK FRAMING AND OTHER
SERVICES; IF THEY DO NOT PERFORM, WE WILL NOT BE ABLE TO EFFECTIVELY SHIP
ORDERS.
We rely on third parties to supply art and framing and fulfill and
ship orders. We, therefore, will be subject to the risks that these providers
will not be able to deliver products or perform services. If for any reason any
of these providers fails to perform we may not be able to service our customers
and thereby may loss customers or damage our reputation. While we believe there
are alternatives for most of our third party providers, we may not replace a
provider in a timely fashion or the pricing or quality of services of a
substitute may not be commensurate with that previously available.
WE DEPEND UPON THE CONTINUED AVAILABILITY OF OUR TWO FOUNDERS, AND THEIR LOSS OR
UNAVAILABILITY COULD PUT US AT A COMPETITIVE DISADVANTAGE.
Our success depends largely on the skills, experience and reputation
of our two founders Howard Blum and Jay Camina. Mr. Blum devotes substantially
all his professional time to the business affairs of Artwork and Beyond and Mr.
Camina devotes approximately one half of his professional time to our affairs.
Neither founder has executed an employment agreement. There is no assurance that
these individuals will continue to provide services within the foregoing time
parameters or that they will provide any services at all. The loss or
unavailability of either of these individuals for any significant period of time
could have a material adverse effect on our business, prospects, financial
condition and results of operations. There can be no assurance that we will be
able to replace these key individuals in the event their services become
unavailable. See "Management."
WE MAY BE FOUND TO INFRINGE PROPRIETARY RIGHTS OF OTHERS, WHICH COULD RESULT IN
DAMAGE TO ARTWORK AND BEYOND.
Third parties may claim infringement by us with respect to past,
current or future technologies. We expect that participants in our markets will
be increasingly subject to infringement claims as the number of services and
competitors in our industry grows. Any claim, whether meritorious or not, could
be time-consuming, and result in costly litigation. Any uncertainty could cause
service and upgrade delays. If a claim were made we may be required to seek to
enter into royalty or licensing agreements which may not be available on terms
acceptable to us or at all.
WE HAVE BEEN SUED AND IF A JUDGEMENT IS OBTAINED OR WE INCUR SUBSTANTIAL LEGAL
FEES WE MAY NOT BE ABLE TO FULFILL OUR BUSINESS PLAN.
We have been named a defendant in an action, together with our
principal shareholders and Ross Galleries, Inc. The plaintiff is a business
finder seeking compensation in the amount of $125,000. As a result of this
action we may incur substantial legal fees. The payment of legal fees and any
adverse judgement could divert funds from operations, if any, and effect our
ability to operate or fulfill our business plan.
RISKS ASSOCIATED WITH OUR SECURITIES
PENNY STOCK REGULATIONS MAY IMPOSE CERTAIN RESTRICTIONS ON MARKETABILITY OF OUR
SECURITIES.
The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price (as defined) of less than $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. As a result, our common
stock is subject to rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
-8-
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a risk
disclosure document mandated by the Commission relating to the penny stock
market. The broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell our securities and may affect the
ability of investors to sell our securities in the secondary market and the
price at which such purchasers can sell any such securities.
Shareholders should be aware that, according to the Securities and
Exchange Commission, the market for penny stocks has suffered in recent years
from patterns of fraud and abuse.
Our management is aware of the abuses that have occurred historically
in the penny stock market. Although we do not expect to be in a position to
dictate the behavior of the market or of broker-dealers who participate in the
market, management will strive within the confines of practical limitations to
prevent the described patterns from being established with respect to our common
stock.
LACK OF A PUBLIC MARKET FOR OUR COMMON STOCK MAY MAKE IT DIFFICULT TO SELL OUR
COMMON STOCK.
There is no public market for our common stock and no assurance can
be given that a market will develop or that any shareholder will be able to
liquidate his investment without considerable delay, if at all. There is no
underwriter engaged in connection with this transaction and there can be no
assurance that any brokerage firm will act as a market maker of our securities.
If a market should develop, the price may be highly volatile. In addition, an
active trading market for our common stock may not develop or be sustained. Our
sale of an aggregate of 1,000,000 shares for cash and the sale by the selling
securityholder of 180,000 shares of our common stock in the public market may
cause the market price of our common stock to fall. Factors such as those
discussed in this "Risk factors" section may have a significant impact on the
market price of our common stock. Due to the anticipated low price of our common
stock, many brokerage firms may not be willing to effect transactions in our
common stock. Even in a purchaser finds a broker willing to effect a transaction
in our common stock, the combination of brokerage commissions, state transfer
taxes, if any, and other selling costs may exceed the selling price.
WE DO NOT INTEND TO PAY DIVIDENDS TO OUR STOCKHOLDERS.
We have never paid any dividends to our stockholders. We currently
intend to retain any future earnings for funding growth and, therefore, do not
expect to pay any dividends in the foreseeable future. If we determine that we
will pay dividends to the holders of our common stock, there is no assurance or
guarantee that such dividends will be paid on a timely basis.
WE MAY SELL ADDITIONAL SHARES OF OUR COMMON STOCK WITHOUT STOCKHOLDER CONSENT,
WHICH WILL DILUTE THE INVESTORS' PERCENTAGE INTEREST IN ARTWORK AND BEYOND.
After completion of the offering, purchasers of the securities in
this offering will own 1,000,000 shares, or less than 10% of our issued and
outstanding shares. We may raise additional capital after completion of the
offering by issuing additional shares of common stock. Our management will have
the right to determine the number of shares that we will offer and the purchase
price per share without the consent or approval of the investors. In addition,
the investors will have no right to purchase shares in any subsequent offering
in order to maintain their percentage ownership interest in Artwork and Beyond.
-9-
FORWARD-LOOKING INFORMATION
This prospectus contains forward-looking statements that involve
risks and uncertainties. We use words such as "anticipates", "believes",
"plans", "expects", "future", "intends", and similar expressions to identify
these forward-looking statements. Prospective investors should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this prospectus. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risk faced by Artwork and Beyond described in "Risk factors" and elsewhere in
this prospectus.
USE OF PROCEEDS
Even if all shares are sold the gross proceeds from the sale of the
1,000,000 shares of common stock will exceed the costs of the offering estimated
at approximately $95,000. Approximately $35,000 of these expenses have been
paid. This latter amount includes $10,000 paid on our behalf by Dutchess
Partners as part of the purchase price for its shares and deferred for
accounting purposes. Therefore, there is a balance of $60,000 owed for offering
expenses. If all the shares are sold we would receive $50,000 which is $10,000
less than the unpaid expenses. The amount of unpaid expenses of the offering
would increase if less than all the shares offered by us are sold. All offering
proceeds will go to pay offering expenses and proceeds will be inadequate to pay
these expenses. The payment of these offering expenses with funds we may receive
from other sources, if available, would reduce funds available for operations.
We may also face claims from vendors if these fees remain unpaid.
DILUTION
As of September 30, 2002, Artwork and Beyond had a negative net
tangible book value of approximately $67,491 or ($.007 per share) (assuming that
Artwork and Beyond had 9,671,664 shares outstanding as of that date), derived
from Artwork and Beyond's balance sheet as of that date. Net tangible book value
per share means the tangible assets of Artwork and Beyond less all liabilities,
divided by the number of Shares outstanding. After giving effect to the sale of
all the shares offered by us hereby at a price of $.05 per share negative net
tangible book value as adjusted would be approximately $17,491 or ($.002) per
share. The result will be an immediate reduction in negative net tangible book
value per share of ($.005) to existing shareholders and an immediate dilution to
new investors of ($.052) per share (more than 100% per share) per share.
"Dilution" is determined by subtracting net tangible book value per share after
the offering from the offering price to investors. If we sold only 500,000 of
the shares offered the net tangible book value as adjusted would be ($42,491) or
($.004 per share). As a result there would be an immediate reduction in negative
net tangible book value of ($.003) to existing shareholders and dilution to the
investor hereby of $.054 (more than 100% per share). If we sold only 100,000
shares net tangible book value as adjusted would be ($62,491) or $($.006) per
share. As a result, there would be an immediate reduction in negative net
tangible book value of $.002 to existing shareholders and an adjusted dilution
to the investor hereby of $.056 (more than 100%). The following tables
illustrate this dilution.
-10-
SALE OF SHARES
Assumed value of Shares offered hereby...................................................... $.05
Negative Net tangible book value per share, before the offering........................... (.007)
Increase (reduction in negative net tangible assets) per share attributable to the sale .005
of the Shares offered hereby................................................................
Pro forma net tangible book value per share, after the offering............................. (.002)
Dilution per Share to new investors......................................................... .052
SALE OF 500,000 SHARES
Assumed value of Shares offered hereby...................................................... $.05
Net tangible book value per Share, before the offering.................................... (.007)
Increase (reduction in negative net tangible assets) per share attributable to the sale .003
of the Shares offered hereby by us..........................................................
Pro forma net tangible book value per Share, after the offering............................. (.004)
Dilution per Share to new investors......................................................... .054
SALE OF 100,000 SHARES
Assumed value of Shares offered hereby...................................................... $.05
Net tangible book value per Share, before the offering.................................... (.007)
Increase (reduction in negative net tangible assets) per share attributable to the sale (.001)
of the Shares offered hereby by us..........................................................
Pro forma net tangible book value per Share, after the offering............................. (.006)
Dilution per Share to new investors......................................................... .056
The following table summarizes the investments of all existing
shareholders and new investors after giving effect to the sales of the
Securities offered:
Shares Purchased Percentage of Aggregate Percentage of Average Price
Total Shares Consideration Paid Total Invested Per Share
Existing Shareholders....... 9,671,664 90.5% $1,985,653 97.5% $ .18
Public Shareholders......... 1,000,000 9.5% 50,000 2.5% $.05
---------- ---- -------- ----
Total 10,600,000 100% 2,035,653 100%
========== ==== ========= ====
-11-
CONCURRENT OFFERING
The registration statement of which this prospectus is a part also
includes a prospectus with respect to an offering of up to 180,000 shares of our
common stock, offered at five cents per share prior to our common stock being
quoted on the OTCBB. After quotation the shareholder may make sales in the open
market, in privately negotiated transactions or otherwise at prices above or
below five cents per share.
We will not receive any proceeds from the sale of such 180,000 shares
of common stock. Sales of the 180,000 shares of common stock by the selling
securityholder or the potential of such sales may have a material adverse effect
on the market price of the common stock offered hereby.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Officers and directors
The names and ages of the directors and executive officers of Artwork
and Beyond are set forth below. The by-laws of Artwork and Beyond provide for
three (3) Directors. Until the appointment of J.P. LeShufy, we had two (2)
directors. All Directors are elected annually by the stockholders to serve until
the next annual meeting of the stockholders and until their successors are duly
elected and qualified. Officers are elected annually by the Board of Directors
and serve at the pleasure of the Board.
NAME AGE POSITION(S) WITH ARTWORK AND BEYOND
- ----------- --- -----------------------------------
Howard Blum 41 Chief Executive Officer,
Chairman of the Board
Steven Friefeld 46 Director
J. R. LeShufy 76 Director
Background of Executive Officers, Directors and Significant Employees
HOWARD BLUM Mr. Blum has served as Chief Executive Officer and Co-Chairman of
the Board of Artwork and Beyond since August 1999. Howard Blum has spent 17
years in the investment industry. He has worked for firms such as Schroder
Wertheim, Oppenheimer, Bluestone Capital and Global Emerging Markets, North
America, a U.K.-based investment group and venture capital firm. Mr. Blum spent
the early part of his career managing funds for high net-worth individuals and
corporations. He has managed funds in excess of $50 million dollars. Mr. Blum
has been involved in structuring various investment and merchant banking
transactions and has raised over $100 million dollars for companies in
technology, entertainment, and industrial manufacturing. From December 2000 to
December 2001 Mr. Blum was an officer and director of Heritage Productions, a
company which was formed initially for the purpose of developing, producing and
financing music albums but which is still a development stage company that has
not undertaken any projects. Heritage's securities trade on the OTC Bulletin
Board, from December 2000 to present. Mr. Blum did not devote any substantial
time to Heritage. Mr. Blum graduated with a BA in Economics from New York
University.
-12-
STEVEN FREIFELD Mr. Freifeld is Chief Executive Officer of Janssen Partners,
Inc. since May 2001 Janssen Partners is a New York based private Investment
Banking Firm, which specializes in financing high technology, communications,
healthcare and biotechnology companies. Prior to his employment by Janssen
Partners, Inc., Mr. Freifeld was the Managing Director of Robb Peck McCooey
Clearing Corporation's Investment Banking Division from November 1998 to May
2001. Robb Peck, one of the largest NYSE specialist firms for the past 90 years,
was recently purchased by LaBranche & Co., a firm. From June 1997 to November
1998 he was Executive Vice President of Trautman Kramer & Co., a firm
specializing in private equity financing. Mr. Freifeld has in excess of 15 years
experience on Wall Street with an expertise in raising capital and developing
both private and public companies.
J.R. LESHUFY Mr. LeShufy has served as Director since September 2000. J.R.
LeShufy was founder of Collectors' Guild Ltd. and Consolidated Fine Arts, the
country's largest club for collectors of limited editions of graphics and
sculpture. He was privileged to work with and publish some of the leading
artists of the 20th Century, such as: Picasso, Chagall, Miro, Calder, Dali,
Manzu, Siquieros, Tamayo, Soyer and Ben Shahn, amongst others. He has served as
the Vice President of Investor Relations of Inkine Pharmaceuticals from
September 1994 to November 1997. Since February 2002, Mr. LeShufy has been
serving as Senior Vice President of Global Hedging Solutions, LLC(a private
technology company). Prior to that, Mr. LeShufy served as President and Chairman
of the Board of Trilenium Corporation (a private technology company) for
approximately six years ending in May 2001. Mr. LeShufy has been an independent
investor and a business consultant for more than five years. He has been a
director of Inkline Pharmaceutical since 1997 and was a director of Teleservices
Internet from June 2000 to December 2001.
Significant Consultant
JAY CAMINA - Mr. Camina had served as Co-Chairman of the Board of the Artwork
and Beyond from August 1999 to May 2002. Jay Camina has spent his entire career
in the art and picture framing industry. From 1979-1981 Mr. Camina was manager
of a 30,000 square foot custom framing facility for Frame King, a franchise of
28 custom frame shops. From 1981 to 1988 Mr. Camina worked for a fund- raising
art auction company where he became familiar with all aspects of the art auction
industry and was responsible for managing the manufacturing facility. From 1988
to July 2001 Mr. Camina has been sole owner and President of Ross Galleries,
Inc. Since July 2002 he has been a consultant to this firm.
ADVISORY BOARD
Artwork and Beyond has an Advisory Board of individuals who serve for a term of
one year. The members of the advisory board are chosen by Howard Blum, Artwork
and Beyond's Chief Executive Officer. The Advisory Board assists Artwork and
Beyond in forming strategic relationships, and identifying potential customers.
Each member of the Advisory Board is entitled to receive options to purchase
2500 shares of common stock at an exercise price of $1.50 per share for one year
of service on the Advisory Board Options for a total of 7,500 shares have been
issued to these individuals for the first year of service. Members of the
Advisory Board have not yet received the options. The Advisory Board is
comprised of the following individuals:
TODD LINDSLEY - Todd Lindsley is a national fund raising consultant. He has over
18 years of direct fund-raising and consulting experience, during which he has
organized or overseen 30 national campaigns, which raised over $1 billion
cumulatively in charitable gift support. Earlier in his career he served
Hartwick College, Glimmerglass Opera, and The University of North Carolina at
Chapel Hill as Director of Alumni Relations, Director of Development/Campaign
Director, and Assistant Dean for Development and External Affairs. He currently
serves as President for his own fund-raising consulting firm where he serves as
counsel to museums, hospitals, colleges, and other non-profit organizations. He
holds a B.A. in Government from the College of William and Mary in Virginia.
-13-
KAREN LESHUFY - Karen LeShufy has been a fine art publisher/distributor for 20
years and is President of Editions Des Legendes, which has an exclusive
agreement with the Toulouse-Lautrec family to recreate the works of Henri de
Toulouse-Lautrec. Ms. LeShufy has been a consultant and worked on joint ventures
with The Rockefeller Collection, American Express, Diners' Club, Fox
Broadcasting and The New York Daily News. Karen has created and marketed
programs for direct sale to galleries and the public, as well as direct
marketing/mail order via television and print media. Ms. LeShufy has published
for artists such as Dali, Tamayo, Siquieros, Manzu, Burton Morris, Bill Gallo,
Gartner, Charon, Noyer and Salinas.
CYNTHIA KACAR - Ms. Kacar, President and founder of CircaVentures, has been a
strategic growth and investment banking advisor and consultant to numerous
Internet technology and content companies in Silicon Valley and throughout the
U.S. She has worked with a range of companies from technology start-ups to large
Internet portal companies. She has been an investment banking advisor and
liaison with major venture capital and investment banking groups for Internet
companies that span from content and technology start-ups in pre-IPO mode to
public companies seeking secondary financing on the public equity markets or M &
A strategies. Ms. Kacar was formerly a consultant with McKenna High Tech
Strategies, where she worked on Internet strategies for companies such as
Matsushita and Motorola. Ms. Kacar is the owner/founder/board advisor of several
Internet companies including TENonline, a travel Internet company and
SuperTuner, a company pioneering a video aggregation technology. She holds a BA
in Biology from Lehigh University and an MBA in Finance and Marketing from the
University of St. Thomas in Houston, Texas.
-14-
COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth for each of the last three fiscal
years ended December 31, 2001, and December 31, 2000 the remuneration paid by
Artwork and Beyond to its Chief Executive Officer and one other most highly
compensated executive officers in the year 2000:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
NAME AND FISCAL AWARDS OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(1)
COMPENSATION
Howard Blum 2001 none
Chief Executive Officer 2000 $37,500 none none
and Chairman of the Board
Jason Norbeto (2) 2000 $75,000 $180,000 none
Chief Operating Officer
(1) Options to purchase shares of Common Stock.
(2) Mr. Norbeto's appointment as an officer of Artwork and Beyond terminated on
December 31, 2000.
Officers are eligible to participate in the Incentive Option Plan and
as of the date hereof, the only options issued were granted to Mr. Norbeto on
September 30, 2000 for the purchase of 180,000 shares of common stock, at an
exercise price of $0.92 per share. The options are now fully vested and expire
in September 2005. The exercise price equaled the fair value of the stock on the
date of grant and, accordingly, Artwork and Beyond has not recorded any
compensation expense related to these options. While Mr. Norbeto was terminated
as an officer on December 31, 2000, he still provides services the to us
periodically as a consultant. Mr. Norbeto's options remain outstanding.
Each independent director of Artwork and Beyond is entitled to
receive reasonable out-of-pocket expenses incurred in attending meetings of the
Board of Directors of Artwork and Beyond but do not receive compensation for
services as directors. There is no compensation committee and no compensation
policies have been adopted. Artwork and Beyond may elect to pay non-cash
consideration in the form of options to directors and officers in the future or
it may elect a cash payment as well as a non-cash consideration.
EMPLOYMENT AGREEMENTS
Artwork and Beyond does not have any employment agreements with any
of its employees.
-15-
STOCK OPTION PLANS AND AGREEMENTS
INCENTIVE OPTION PLAN - In January 2000, our Directors adopted and
the stockholders of Artwork and Beyond approved the adoption of Artwork and
Beyond 2001 Incentive Stock Option Plan ("Incentive Option Plan"). The purpose
of the Incentive Option Plan is to enable us to encourage key employees,
officers and directors to contribute to the success of Artwork and Beyond by
granting such employees, officers and directors incentive stock options
("ISOs").
The Incentive Option Plan will be administered by the Board of
Directors or a committee appointed by the Board of Directors ("Committee") which
will determine, in its discretion, among other things, the recipients of grants,
whether a grant will consist of ISOs or a combination thereof, and the number of
shares to be subject to such options.
The Incentive Option Plan provides for the granting of ISOs to
purchase Common Stock at an exercise price to be determined by the Board or the
Committee not less than the fair market value of the Common Stock on the date
the option is granted.
The total number of shares with respect to which options may be
granted under the Incentive Option Plan is 450,000 shares of common stock. ISOs
may not be granted to an individual to the extent that in the calendar year in
which such ISOs first become exercisable the shares subject to such ISOs have a
fair market value on the date of grant in excess of $100,000. No option may be
granted under the Incentive Option Plan after January 2011 and no option may be
outstanding for more than ten years after its grant. Additionally, no option can
be granted for more than five (5) years to a stockholder owning 10% or more of
our outstanding Common Stock and such options must have an exercise price of not
less than 110% of the fair market value on the date of grant.
Upon the exercise of an option, the holder must make payment of the
full exercise price. Such payment may be made in cash or in shares of common
Stock, or in a combination of both. We may lend to the holder of an option funds
sufficient to pay the exercise price, subject to certain limitations.
The Incentive Option Plan may be terminated or amended at any time by
the Board of Directors, except that, without stockholder approval, the Incentive
Option Plan may not be amended to increase the number of shares subject to the
Incentive Option Plan, change the class of persons eligible to receive options
under the Incentive Option Plan or materially increase the benefits of
participants.
The only options outstanding under the Incentive Option Plan were
issued to the Company's former Chief Operating Officer on September 30, 2000, to
purchase 180,000 shares of common stock, exercisable at a purchase price of
$0.92 per share. The options have vested, and expire in September 2005. The
exercise price equaled the fair value of the stock on the date of grant and,
accordingly, Artwork and Beyond has not recorded any compensation expense
related to these options.
There were no stock option transactions during the initial period
ended December 31, 1999.
-16-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of September 30, 2002
with respect to the beneficial ownership of the outstanding shares of our common
stock, $.001 par value, as of such date plus, where relevant for particular
beneficial owners, shares which such beneficial owner has the right to acquire)
by (i) any holder known to us owning more than five percent (5%) of the
outstanding shares; (ii) our officers and directors; and (iii) the directors and
officers of Artwork and Beyond as a group:
Name of Beneficial Owner* Number of Shares Percentage of
Ownership
- --------------------------------------------------------------------------------
Howard Blum (1) 3,791,752 42%
Jay Carmina (2) 3,791,752 42%
J.R. LeShufy (3) 0 0
Steven Freifeld 0 0
Giltner B. Stevens 1,477,346 14.8% (4)
Dutchess Partners (5) 600,000 6.67%
All Officers and Directors as
a group (one person) 3,791,752 42%
* The address of all persons listed in this section is c/o Artwork and Beyond,
Inc., 331 Dante Court, Holbrook, New York 11741.
(1) Howard Blum is the Chief Executive Officer and Chairman of the Board of
Directors.
(2) Jay Camina is a consultant to the Company.
(3) Messrs. Le Shufy and Freifeld are Directors of Artwork and Beyond.
(4) Includes 379,175 shares subject to warrants exercisable within sixty days.
(5) Dutchess Partners is a real estate partnership of Lawrence Corrier and
Lucille Corrier.
-17-
OUR BUSINESS
BUSINESS HISTORY
Artwork and Beyond was formed as a Delaware corporation on August 5,
1999 by Jay Camina principal of Ross Galleries, Inc. and Howard Blum. Ross
Galleries, Inc. operated by Jay Camina was engaged in the charity art auction
business. It was also a framer of art and had expertise in obtaining and
marketing art products. The plan of the founders was to establish an internet
site for the sale of sub-luxury art products. The plan was to establish two
sites, one for the sale of retail artwork in general and the other to provide a
site for on-line art auctions for charities. Howard Blum would take
responsibility for running Artwork and Beyond as its chief executive officer.
Mr. Camina would provide assistance for the charity art auction business and we
would engage Ross Galleries to provide various services. We initiated our online
retail art site in December 2000 and the charity auction site May 2001.
In 2002 Gottesman & Co. commenced a lawsuit against us, Ross
Galleries and Messrs. Blum and Camina claiming that each of us are liable to it
for finders fees. The fee is due pursuant to agreements entered into between
Gottesman and each of the parties. We believe we have no liability to Gottesman
since transaction in which the finder is alleging a fee occurred before July
2001 the time Gottesman claimed we entered into an agreement with it.
SUMMARY
Our primary business is the sale of art, in two major areas:
1. Online retail sale of art which is conducted through its
online retail division, ARTinaClick.com; and
2. Internet based charity art auctions, which are conducted
through our internet based charity art auction division,
ArtAuctionFundraiser.com.
The E-commerce division's sales plan is based on the idea that there
is a pervasive frustration with the normal channels for buying art, as the
industry still functions mainly as a cottage industry. Through careful marketing
and strategic alliances, we will intend to aggregate demand and drive traffic to
our site. We believe that there is significant unrealized demand for art in the
sub-luxury category and it is a product area that is highly suitable for web
purchases. We believes that the online shopping experience has significant
advantages over the traditional method of purchasing art. Once at the site,
visitors will be transformed into buyers through the value proposition
articulated above.
Artwork and Beyond's internet based charity art auction division,
ArtAuctionFundraiser.com intends to continue to capitalize on the expertise of
one of our founders Jay Camina relating to charity art auctions. There are
numerous organizations including, alumni groups, religious organizations,
schools, and health care organizations whose members are geographically
dispersed. These organizations are constantly looking to raise funds to meet
their operating budgets. We believe that an online auction would enable
organizations to raise funds from their members no matter how geographically
dispersed they may be.
-18-
In November 1, 1999 we entered into a fulfillment agreement with Ross
Galleries, Inc. located in Holbrook, NY. Ross Galleries, Inc. had been in the
charity art business for 13 years and had worked with 1700 different
organizations, and conducted over 4000 land-based auctions. The agreement
provided that Ross Galleries, Inc. would supply Artwork and Beyond with its
framed and unframed art, including lithographs, serigraphs, artagraphs and
photographs. The agreement contained various restrictions limiting our ability
to deal with third parties. It also limited the ability of Ross Galleries, Inc.
to operate on the internet and/or deal with any firm selling art on the
internet. Ross Galleries, Inc. ceased business and sold its assets in July 2001.
The successor, called Ross Galleries, LLC continues to do business with us and
has entered into a non-exclusive arrangement to sell us art and framing. Ross
Galleries, LLC supplies us with all of the Art featured on our website's "Art
Express" gallery, one of the five galleries featured on our retail website. Ross
Galleries, LLC also provides all of the framed artwork that we sell. In the
event Ross Galleries, LLC is no longer able to service us, we believe there are
other competitive framers and fulfillment houses. There is no assurance that we
will find a substitute supplier upon favorable terms or that we might not
experience disruption resulting from a change of framing suppliers.
RETAIL ONLINE SALES OF ART
Our retail website, WWW.ARTINACLICK.com commenced full operation on
December 1, 2000. This website was designed to provide consumers with the ideal
"one-stop shop" online art experience. We have expended approximately $133,000
in the development and construction of this website. The site carefully focuses
potential buyers on product selection via virtual galleries that are
thematically organized, as well as education and consultation to supplement the
galleries. The following features are offered to prospective consumers:
PRODUCT SELECTION
The e-commerce retail site consists of five unique galleries:
o Collector's Gallery -- This gallery consists of customized framed
originals limited edition lithographs and serigraphs by well known as well
as up-and-coming artists. Among the featured artists are Thomas McKnight,
Michel Delacroix, Bev Doolittle, Leroy Neiman, and Thomas Kinkade.
o Great Masters -- This gallery consists of elegantly framed copies of works
by the great masters such as Renoir, Monet, Rembrandt and Chagall in
various media such as etchings, serigraphs and artagraphs.
o Print Shoppe -- This gallery currently consists of approximately 15,000
images available with a choice of three decorator framing selections.
Artists include names such as Ansel Adams, Howard Behrens, and Tarkay.
o Sports Expo -- This gallery consists of custom-framed autographed photos
by sports heroes and celebrities. A Certificate of Authenticity
accompanies all items sold from a handwriting expert guaranteeing each
signature.
o "Art Express" -- This gallery contains a subset of selected merchandise
from the above galleries that can be shipped the next business day.
Artwork and Beyond has approximately 500 pieces of art that are featured
in this gallery. The relationship with Ross Galleries enables Artwork and
Beyond to implement this service, because the inventory will be culled
from Ross Galleries offline inventory. Ross Galleries in conjunction with
Artwork and Beyond has carefully selected the artwork in Art Express based
on items sold over twelve years at Ross Galleries. Management believes
that this data will permit us to determine consumer preferences and
increase inventory turnover.
-19-
Consumer Service: Artwork and Beyond offers customer-care services to
assist with consumer questions such as the status of orders and shipments,
upcoming events, and questions about site offerings and navigation. Questions
are presented through e-mail and telephone and generally responded to within
twenty-four (24) hours. Additionally, if a customer is concerned about placing
an order over the Internet, we will take an order over our toll free telephone
hotline or fax provided that the customer provide us with the artist, title and
item number listed on our website as well as the frame description listed on the
website.
Site Specific Features: The Artwork and Beyond site offers the user
an internal search engine giving shoppers the ability to search by keyword,
subject, artist, style, price range, title, size and medium. This helps create
an easy-to-use, shopping environment and enhance the buying experience. The "My
Gallery" pages will allow online users to track their purchases as well as save
favorite selections for later viewing.
Education: Artwork and Beyond anticipates having educational
components, such as interactive tutorials, will help users to understand
contemporary art and to gain confidence in their own preferences. Feature
articles on art collecting, museum and gallery exhibits as well as other
art-related events will keep art lovers up to date on the events, opinions and
controversies animating the art world. Moreover, customers will get information
on featured artists, providing insights into the creative development process.
All this will help aggregate consumer demand by creating the "stickiness" that
accompanies successful online community building.
MARKETING AND SALES STRATEGY
Technology creates not only great opportunities but also many risks
for online merchants. Low barriers to entry encourage competitors to quickly
replicate successful e-offerings, literally overnight. Artwork and Beyond
recognizes this ever-present danger and believes that the first step in
preserving site identity is to offer non-technical benefits that are difficult
to imitate - primarily a high level of service, since service that exceeds
consumer expectations will always be appreciated. Artwork and Beyond intends to
attract its potential customers through the adoption of an aggressive online and
offline marketing strategy which, when combined with strategic partnerships and
joint venture opportunities we believe will help to position us as the market
leader. In addition, Artwork and Beyond has a storefront as a z merchant in
Amazon.com. We believe that our primary customer will be the average American
consumer.
PRESENT MARKETING
Our marketing and promotional efforts has been limited by a lack of
funds. We now promote our site by:
o Having the site listed on as many Internet search engines as
possible under as many different categories as possible;
o Special offerings to identified groups consisting of former
customers and others;
o An affiliate program through an online clear-housing.
-20-
We are a participating advertiser with an online clearinghouse
operation. The clearinghouse consists of numerous advertisers who desire to have
their advertisement placed on websites of other participants, known as
publishers. The approved publishers place a banner or other material of the
advertiser on their website and receive commissions of 15% based on sales
generated through a publisher's site. The advertiser is required to deposit
funds with the clearing house operator, which is replenished periodically. The
deposit is used to pay the publisher's commission and a 3% commission to the
clearing-house operator for actual sales made through a publisher. We have paid
a total of 9,833.41 in above described commissions. There are over 4,500
publishers who may use our banner, although we have no idea of the actual number
placing our banner on a site at any given instance.
On March 21, 2001, we entered into a one year sales and distribution
agreement with Ivana Haute Couture & Company, Inc. providing that we will
provide designated art for the Ivana World website. This art will be framed and
matted in a unique manner, which we will only use for the site. Pursuant to the
sales and distribution agreement, Ivana Haute will purchase the art from Artwork
and Beyond at a discount of 40% off of the retail price as displayed on the
Ivana Haute web site. Sales made through the Ivana Haute website have not been
material. The sales and distribution agreement may be renewed or extended by the
mutual written consent of both parties.
FUTURE MARKETING PLANS
If we obtain additional capital we will proceed with additional
marketing plans as described below.
We are intent on building an online community, building trust and
brand loyalty, thereby facilitating sales revenue and repeat visits. Customers
at the e-commerce site will be given several incentives to join Artwork and
Beyond's growing family - from loyalty-based coupons to contests and redeemable
points. Thus, we believe, the site will build a large demographic database, from
which it will be able to "mine" relevant marketing information.
In the e-commerce sphere, direct marketing to the target audience
will be the key to the site's success. One aspect of Artwork and Beyond's
marketing strategy will be to co-brand its product line with top regional and
national home furnishing outlets. We believe that these strategic alliances will
enable Artwork and Beyond to attract both male and female shoppers. Artwork and
Beyond will then strive to differentiate between male and female shoppers by
creating gender and lifestyle-specific product lines. For example, Sports
Memorabilia will be targeted towards the male segment and posters towards
college students. We believe that women's purchases dominate the home decor
market and therefore will be a primary target audience of our marketing efforts.
The diversity of Artwork and Beyond's appeal should be beneficial to its brand
equity, long-term sales and profits. In short, we will follow the time-honored
prescription of "get big, get niche, or get out," reducing marketing costs
through a selective focus on the most profitable niches.
In addition, the site will employ direct mail campaigns; opt in
e-mail campaigns and revenue sharing agreements. This will help leverage the
brand, allowing for other sales opportunities and the creation of strategic
alliances with key players in related industries. There will in general be 3
types of affiliates:
o sites (profit and non-profit) where we will advertise, returning
a commission of up to 20% of revenue generated to that site;
-21-
o affiliate membership groups and sites, whose members will get up
to a 20% discount on the our art with no commissions paid to that
group (like buyers' clubs); and
o private-label/co-branded sites, which we will design for other
outlets, collecting a percentage of sales.
We will also employ limited strategic media planning techniques, such
as regional advertising. Thus, Artwork and Beyond will be able to track
responses and use targeted marketing messages. Art sites are particularly suited
to this type of Internet advertising since viewers are usually browsers looking
through numerous pages and eliciting multiple exposures.
Other marketing approaches will include:
CROSS MARKETING - Create strategic alliances with resellers such as
national and regional home furnishing firms decorators, museum stores, and
office and hospitality markets. Artwork and Beyond will accomplish this in the
following manner:
o We will attempt to private-label web sites for resellers
leveraging the Artwork and Beyond name and expertise. The site
will contain custom-framed images that would be exclusive to the
reseller. We believe the reseller would induce their consumer to
purchase art at opportune times, such as when purchasing. The
images, frames, and mattes can be selected by the reseller or an
Artwork and beyond consultant. Artwork and Beyond intends to hire
regional sales representatives to offer private label services to
chain stores. The salesperson will demonstrate the private label
service using a laptop and a mock-customized web site. The
benefit to the affiliated chain store would be to eliminate
tangible inventory, increase convenience and have more extensive
offerings for their clients. If the stores have their own web
sites, Artwork and Beyond will create a link connecting both
sites. In addition, Artwork and Beyond intends to engage sales
representatives to make presentations to businesses in their
respective markets.
o We could also work with representatives that are supplying
complimentary products to hotels, hospitals, restaurants, etc
enhancing their ability to offer them additional product to their
clients. Revenue-sharing agreements with related companies (for
instance, home furnishings stores) will leverage the brand,
allowing for increased sales opportunities and the creation of
strategic alliances with key players in related industries.
PROFESSIONAL MARKETS (Interior decorators and corporate market) -
Artwork and Beyond intends to include decorators in its marketing effort by
providing them with password-protected access to a special "trade-only" section
of the site. Interior decorators working with Artwork and Beyond would have the
ability to immediately select appropriate images together with their clients
from the web site. Decorators would save a tremendous amount of time and effort
by not having to shop from gallery to gallery. Affiliated decorators could
promote corporate sales in a similar manner.
-22-
JOINT VENTURE ALLIANCES -We intend to create alliances with other
online sites that do not offer prints as well as online sites that offer prints
but do not offer on-site custom framing.
o Generate online announcements to trade publications o
Announcements to offline gallery and print consumers
o Registration with search engines and directories
o Carefully designed HTML metatags
o Announcements to artists and related trades with promotional
offers
o PRESS RELEASES IN INDUSTRY JOURNALS -- Artwork and Beyond will
advertise in trade journals that cater to physicians, attorneys,
hotels, etc. All of these represent potential business for
Artwork and Beyond.
o Encourage links to the Artwork and Beyond site from other key
sites which appeal to Artwork and Beyond's target consumer base
o Direct mail to art enthusiasts identified by mailing lists of
traditional competitors, as well as art magazines and other
sources.
o The development of an aggressive on- and offline advertising
campaign that will build brand awareness
-23-
INTERNET BASED CHARITY ART AUCTIONS
It is estimated that total charitable contributions in the US are in
the billions of dollars on an annual basis. While figures do not exist for the
size of the charity art auction market, given the enormous number of
universities, hospitals, healthcare organizations clubs and other community
organizations, it is management's belief that online charity art auctions will
work extremely well with members of a particular organization. Our art auction
division ArtAuctionFundraiser.com, commenced operation in September 2001. We
have developed an easy-to-use online method that allows constituents and guests
of organizations to bid online for the highest quality, custom framed artwork
with a percentage of the revenues generated from the auction going back to that
particular organization. ArtAuctionFundraiser.com plans, organizes and conducts
the online auction in a manner that is very easy to understand by all
participants, regardless of their Internet proficiency. All that is required for
organizations constituents or guests to participate are a computer with Internet
access. No special technical expertise or online auction experience is required.
ArtAuctionFundraiser provides organizations with a turn- key service
at no cost, enabling them to conduct online charity art auctions. Services
include:
1. Custom online invitations and traditional invitations.
2. Customized press release.
3. A customized homepage for organizations to welcome constituents
and guests.
4. A professional fund-raising consultant to guide organizations in
preparing and promoting for the auction.
5. Display at least 1000 custom-framed works of art ready to hang.
6. Free processing of all M/C, Visa, Discover, and AmEx payments.
7. A full accounting of all purchases and bidders.
8. Certificate of authentication on all artwork.
9. A commission of 10% to organizations on all sales that result
from an affiliate program with ARTinaClick.com.
10. A banner link from organizations website to the auction.
HOW AN ON-LINE CHARITY ART AUCTION WORKS
Artwork and Beyond solicits organizations that it believes would
benefit from on online charity art auction. Once an organization has signed up
for an event, ArtAuctionFundraiser.com will send out custom online invitations
to the organizations constituents and guests via e-mail. The invitation will
detail the dates of the event, the online address (URL) to enter the auction,
and a unique password to the organizations private auction. If the organization
prefers to handle the e-mailing itself, ArtAuctionFundraiser.com will customize
an online invitation for them. In the event the organization only has mailing
addresses, ArtAuctionFundraiser.com will provide them with custom printed
invitations and a press release that can be included in their next mailing.
-24-
When a bidder arrives at the ArtAuctionFundraiser.com home page,
there will be simple instructions on how to navigate the auction site as well as
bidding instructions. From here, the constituents and guests of an organization
will click on their organization's name or logo, which will take them to a
welcome page that we have designed especially for that organization. This
special welcome page is designed for the group at no cost, and may feature the
colors and logo associated with the organization. This page will allow a space
where a special message from an organization's president, chairperson(s) or any
other appropriate individual may appear. The message will welcome the group's
constituents and guests to the auction and may contain other information the
organization may want to convey. It's now time to enter the auction.
Once inside the actual auction site, an organizations patrons can
peruse the wide variety of custom framed artwork and authentic sports
memorabilia. Each auction item is displayed using the finest digital imagery
available on the world wide web. Organizations supporters will have the ability
to browse through the items up for auction or use a simple search function to
locate just what they desire. Once a piece of artwork or memorabilia is found,
bidding may begin. Bidding instructions are clearly written and easy to follow.
When bidding on an item, there is immediate notification by e-mail that the bid
has been received. Additionally, the bidder is always notified if they have been
outbid, thereby enabling the opportunity to bid again. At the end of the
auction, the successful bidders are notified by e-mail. Method of payment by the
highest bidders will be secured by credit card. ArtAuctionFundraiser.com will
accept American Express, Master, Visa and Discover credit cards. The sold works
of art are then prepared for shipment directly to the successful bidders. Once
the auction has ended and all financial settlements are complete, the
organization will receive its entire commission along with a complete accounting
of all bidders names, e-mail addresses, and purchases. Through September 30,
2002 we paid gross commissions of approximately $6,348 in connection with our
charity auctions.
ADDITIONAL REVENUE SOURCES FOR CHARITY CLIENT
ArtAuctionFundraiser.com offers a program that can produce revenues
for organizations in addition to the commission from the online auction. Under
this program ArtAuctionFundraiser.com will e-mail auction participants notifying
them of specials or promotions available at Artwork and Beyond's retail art
site. Should these participants make a purchase, the organization will earn a
commission on these purchases.
Another program we will offer would enable organizations to become an
affiliate partner with ARTinaClick.com With this program an ARTinaClick.com
banner is placed discreetly on an organization's web site. The banner ad would
inform visitors that ARTinaClick.com is a fundraising affiliate of the
organization. When a visitor to that organization site clicks on our banner ad,
he/she will be taken to our site. Whenever a purchase is made the organization
will receive a commission on that sale.
ART SUPPLY
We have an agreement with Ross Galleries, LLC (which is described
above), for the sale of art, Ross Galleries, LLC supplies us with its existing
inventory of art for "Art Express". Presently approximately fifty percent of our
Art is purchased through the efforts of Lieberman's Galleries LLP, a distributor
and consolidator which purchases the art from independent art publishing firms.
In May 2002 we entered into a three year agreement with Lieberman to supply us
with our art requirements. Lieberman charges us prices based upon the suggested
prices of art publishers and suppliers. Under this agreement we are permitted to
obtain art from several specified publishers or any other supplier if Lieberman
can not fulfill an order which enables us to continue using Ross Galleries, LLC.
We still obtain our framed art from Ross Galleries LLC. We believe the
utilization of Lieberman is advantageous as we experience substantial cost
savings in consolidating shipments of art from several different firms. We
utilized the same sources in obtaining art for our online auction. If necessary,
we believe we can purchase our prints directly from the publisher at the same
prices but will have to pay shipping costs separate.
-25-
COMPETITION
ARTinaClick's retail online business competes in a market that is
highly competitive and expects competition to intensify in the future. We
currently or potentially compete with a variety of companies, both on the
Internet and in brick-and-mortar galleries. Our competitors have significantly
greater financial, technical, and marketing resources. Those that have
established a presence on the Internet have already begun to establish a
customer base and their brand. Our Internet competitors include ArtSelect,
NextMonet, Barewalls, and Guild.com, among others. Our brick-and-mortar
competitors include national galleries such as Deck the Walls and Wentworth
Galleries as well as a variety of regional and local galleries. All of these
companies have existed for a longer period, have greater financial resources,
have established marketing relationships with leading manufacturers, strategic
partners and advertisers, and have secured greater presence in distribution
channels. Some of these companies may also commence or expand their presence on
the Internet. We believe that there are also numerous other smaller
entrepreneurial companies that are focusing significant resources on developing
web sites to market and sell artwork on the Internet that will compete directly
with our web site.
In addition, new technologies and the expansion of existing
technologies may increase competitive pressures. As a result of increased
competition we may experience reduced operating margins, as well as loss of
market share and brand recognition. We cannot be certain that we will be able to
compete successfully against current and future competitors and competitors
could have a material adverse effect on our revenue growth and earnings.
INTELLECTUAL PROPERTY
Our ability to compete successfully and achieve future revenue growth
will depend, in part on our ability to protect our proprietary technology and
operate without infringing the rights of others. We have filed an application
for a United States Registration for "ARTinaClick.com".
EMPLOYEES
On September 30, 2002, we had four full-time employees. One of these
employees is an executive, also engaged in sales activity, two are engaged in
technical matters, including web design and maintenance and one is engaged in
administration and customer services. In addition to the employees, we engage
consultants from time to time including Mr. Noberto. Jay Camina, a principal
shareholder, devotes substantial time to our affairs without compensation. None
of our employees are represented by a labor union and we have not experienced
any work stoppages. We consider our employee relations to be good.
OTHER POSSIBLE OPERATIONS
Depending on financing we may determine to engage in other aspects of
the art business including operating a retail store.
-26-
PROPERTY
We currently occupy on a month to month basis approximately 4,050 square feet of
general office space in Holbrook, New York, which serves as our executive
offices. The arrangement is with an entity affiliated with Howard Blum, our
president. We only pay the entity that it is obligated to pay the landlord. We
occupy the entire space and the rental is currently $2,815.63. Our personal
property consists of computer equipment and furniture.
LEGAL PROCEEDINGS
We, Howard Blum, Jay Camina and Ross Galleries, Inc. are defendants
in an action commenced in June 2002 by Gottesman & Co., Inc. in the Supreme
Court of the State of New York for the county of New York. The portion of the
action against us is to recover $125,000 plaintiff claims is due it as
compensation pursuant to a non-exclusive transaction agreement allegedly entered
into in June 2001. That agreement obligated us to pay minimum commissions of
$125,000 on any transaction Gottesman finds for us and which closes after
execution of the agreement. The finder specifically claims he is owed the
compensation because it was instrumental in the formation of Artwork and Beyond
by Howard Blum and Jay Camina and because we entered into transactions between
Ross Galleries. We do not believe we have any liability to Gottesman because the
agreement was clearly for future transactions and the formation of Artwork and
Beyond and introduction to Ross Galleries occurred substantially before the June
2001 agreement. Each of the other defendants had signed separate agreements with
the plaintiff finder and the courses of actions against each of them is separate
from the claims against us. While we do not believe we have any liability to
Gottesman & Co. we could incur substantial expenses which would divert funds, if
available, from operations. This expense burden would be reduced because Ross
Galleries and Messrs. Blum and Camina are also defendants.
-27-
PLAN OF OPERATIONS
PLAN
Our primary business is the sale of artworks through the internet. We
have an online retail website and an internet based charity art auctions
website. Artwork and Beyond closed a private placement and related debt
financing (converted into equity) between March 2000 and September of 2000 in
which approximately $1,200,000 of gross proceeds were raised. To date, the net
proceeds of the offering has been used for the following purposes:
o Completion of our retail web site WWW.ARTINACLICK.COM. The site
was launched in December of 2000.
o Marketing of the retail website.
o Hiring of personal.
o Completion of marketing for WWW.ARTAUCTIONFUNDRAISER.COM, which
was launched in May 2001.
o Working Capital
Artwork and Beyond anticipates generating additional revenues by
implementing its marketing plan previously described. This is dependent upon
receiving additional funds from operations or future financing.
Artwork and Beyond's Internet based charity art auction division,
ArtAuctionFundraiser.com capitalized on the expertise of both Jay Camina and
Ross Galleries, Inc. Mr. Camina continues to provide advice.
ArtAuctionFundraiser was launched on May 1, 2000. There are numerous
organizations including, alumni groups, religious organizations, schools, health
care organizations, and public radio stations, whose members are geographically
dispersed. These organizations are constantly looking to raise funds to meet
their operating budgets. Artwork and Beyond believes that an online auction
would enable organizations to raise funds from their members no matter how
geographically dispersed they may be.
FINANCING NECESSARY
Because we will not obtain sufficient funds from the offering to
continue operations we must obtain additional funds for that purpose. Assuming
we will obtain funds for operations we will need additional amounts for other
purposes as set forth below. :
o Marketing of the online retail art business.
o Marketing of the online Internet based charity art auction
business.
o Payment of salaries including payment to officers and additional
personnel.
o Working capital.
If financing is available, Artwork and Beyond expects to hire
additional employees to market its two websites. These employees marketing
charity auctions will be commission based. At the present time Artwork and
Beyond does not expect any to expenditures for plant and equipment.
-28-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
The following discussion and analysis of Artwork and Beyond should be
read in conjunction with Artwork and Beyond's Financial Statements and Notes
thereto included elsewhere in this prospectus.
RESULTS OF OPERATIONS
Fiscal year 2001 compared to fiscal year 2000
During the year ended December 31, 2001 we had revenues of $158,491
compared to revenues of $15,915 in the prior year. During the year 2000 we did
not have any revenue producing operations until our ARTinaClick website was
launched. During 2001 we derived revenues for a full year from this website as
well as a small amount of revenues from our charity site which was launched in
September 2001. A portion of our total income, or approximately $37,310 from art
sales of approximately $75,000 through our retail site were treated as
commissions under generally accepted accounting principles. This is because we
fill merchandise from an existing order on ARTinaClick.com directly from the
supplier to the customer without risk. We believe our revenues growth has been
hampered by a limited marketing activity, which is a direct result of lack of
capital. We believe we will increase our marketing activity after completion of
sufficient financing. There is no assurance we will be able to obtain sufficient
additional capital or that we will be able to generate increased sales with
additional marketing efforts.
The approximately $103,135 cost of sales for 2001 consisted of
$81,000 for purchases and $22,000 for packaging and shipping.
During 2001 we had gross profits on sales of $55,356 compared to
$6,584 in 2000. The increase is attributable primarily to increase sales. Our
operating income was $92,666 in 2001 compared to $6,584 in 2000. The increases
were primarily the result of increased revenues as well as commission income.
We had selling, general and administrative expenses of $1,149,040 in
2001 compared to $772,455 of these expenses in the prior year.. Our expenses in
2001 consisted of $302,800 salaries, $91,700 marketing, $86,700 for professional
fees, $32,200 rent, $24,700 insurance, $28,100 outside miscellaneous, $27,100
payroll taxes and $53,700. If we eliminate non-cash stock compensation expenses
in 2001, our selling general and administrative expenses for 2001 actually
declined slightly as we had greater development and start-up expenses in 2000.
The increase in expenses in 2001 resulted in significant part to a
non-recurring, non-cash stock compensation expense of $502,000. This non-cash
stock compensation expense arises out of the sale of 600,000 shares of our
common stock pursuant to a subscription agreement entered into as of October 4,
2001. The stock compensation of $502,000 represents the difference between the
aggregate fair market value of the shares and aggregate purchase price.
The increase in expenses between the two years arises in significant
part out of our subscription agreement with Dutchess Partners. Dutchess Partners
purchased 600,000of our shares pursuant to that subscription agreement as of
October 2001. That agreement provided that Dutchess Partners pay us $50,000. At
that time we had determined for accounting purposes that the fair market value
of the stock was approximately $552,000. Under generally accepted accounting
rules, the difference between $552,000 and $50,000 or $502,000 was treated as an
expense.
-29-
Our net loss increased to $1,041,174 in 2001 from $761,913 in 2000 as
a result of the foregoing factors.
THIRD QUARTER 2002 COMPARED TO THIRD QUARTER 2001
Our sales revenues declined from $148,044 in the first nine months of
2001 to $122,582 in the first nine months of 2002. Our sales revenues for first
nine months of 2002 did not include $16,935 of commission income. The commission
income amount represents sales derived from fulfilling orders on ArtinaClick.com
directly from the supplier without us taking title or bearing any risks. This
generally is done with Art Express objects. Under an SEC staff bulletin this
income is to be treated as if it were commissions (presumably because the seller
in fact acts as if it were a broker).
Our costs of sales decreased in the first nine months of 2002 to
$58,381 from $72,337 reflecting the decline in sales.
During the first nine months of 2002, our selling, general and
administrative expenses were $262,194 compared to $997,993 for the comparable
period in 2001. The reduction reflects limited activity and cost reductions made
because of the lack of funding. The expenses in 2001 also include website
development costs, which were not incurred in 2002.
The expenses for the first nine months of 2001 include a non-cash
stock compensation expense of $457,000. This expense arose over the issuance of
600,000 shares of our common stock primarily in consideration of an agreement by
the subscriber to pay expenses of a proposed offering by us. Since the fair
market value of these shares exceeded the estimated expenses of approximately
95,000 by $457,000, this excess was treated as an expense. In addition, the
expenses prior to the end of 2001 also included the estimated expenses of
$95,000 which were never paid by the subscriber. The transaction was rescinded
by the parties by the end of the year 2001. As a result, both the $95,000
estimated expense item and $457,000 amount were written off and had no impact on
year end results.
Other income in the first nine months of 2002 was $4,890 compared to
$14,388 in the comparable period of fiscal 2001 primarily because we had
negligible cash in interest bearing accounts as cash was spent or our cash put
into operating accounts.
Our net loss decreased from $907,898 for the first nine months of
2001 to $176,138 for the comparable period of fiscal 2002 for the foregoing
reasons.
SEASONAL FACTORS
We have recently found that orders have increased during the Christmas season.
LIQUIDITY
Our operations began in late 2000 and have not generated sufficient
revenues to cover our expenses. We have relied on equity financing for start-up
costs and to fund our operations. One of our principles also has advanced funds
to us on an interest free basis.
-30-
As of September 30, 2002, we had $31,084 in cash and cash equivalent.
This was derived primarily from our equity financing and to a lesser extent from
loans and revenues. The cash has been used as working capital to operate our
business. We have had insufficient capital to fully implement our marketing
plan, which we believe is required to generate increased sales. We should also
receive $20,000 pursuant to a subscription agreement after the effective date of
the registration statement of which this prospectus is a part but we would still
need additional capital to pay expenses of this offering legal fees in an action
commenced against us and to repay loans. If we do not obtain any additional
capital we may not be able to pay our employees or otherwise continue operating
or to institute our marketing plan.
The lack of operating capital has prevented us from implementing our
marketing plan which we believe would increase our revenues. Because of the
inability to generate sufficient revenues our income does not cover expenses. As
a result, between December 31, 2001 and September 30, 2002 we experienced
significant declines in cash (76%) current assets (75%) and total assets (63%).
As of September 30, 2002, our accumulated deficit was $2,003,000.
During the first nine months of the year 2002 we used $168,718 in our
operations and had a $65,000 increase in cash through financing activities. We
had no cash received or used for investment activity during this period. As a
result we had a net use of cash of $103,718 in this period reducing our cash to
$31,084 by the end of the period.
As of September 30, 2002, we had $39,996 in accrued expenses, which
consists of $20,370 legal fees and accounting fees $5,135 payroll; $5,166
purchases and $9,363 miscellaneous. We believe the aggregate accrued expenses
have not increased subsequent to September 30, 2002. The total accrued expenses
declined by $59,717 reflecting the payment by stock of an accrued finder fee of
$66,000 and small increase in other expenses reflecting our difficulties in
satisfying our current liabilities.
We are also a defendant in an action commenced by a business finder
for $125,000 as compensation pursuant to a non-exclusive transaction agreement
entered into in June 2001. No transaction resulted from the agreement. The
finder claims he is owed the compensation because the finder was instrumental in
the founding of Artwork & Beyond by our two principal shareholders and in
connection with transactions among us and Ross Galleries. We do not believe we
have any liability because we already were engaged in continuous business
transactions with Ross Galleries and Artwork & Beyond was founded substantially
before the agreement with us. Each of the other defendants had signed separate
agreements with the finder and the cause of actions against each of them is
separate from the claims against us. While we do not believe we have any
liability to the finder we may incur substantial expenses which could divert
funds, if available at all, from operations. This expense burden should be
reduced because Ross Galleries and Messrs. Blum and Camina and also defendants.
We are not aware of any trends, events, or uncertainties that would
have a material impact on Artwork and Beyond's liquidity revenue or income.
-31-
FUND RAISING ACTIVITY
We raised approximately 1,200,000 in private placements of shares and
notes in 2000. These are described under "Certain Relationships and Related
Transactions". In March 2000 we entered into a consulting agreement with an
unaffiliated entity. The entity agreed to provide us, among other things, with
business advice and introduction to potential acquisitions. This firm received
approximately $70,000 for introducing us to investors in the private placement
from March to September 2002. In 2001 we agreed to pay $66,150 of accrued fees
to this entity by issuing 71,664 shares of our common stock in the second
quarter of 2002. These shares were issued in June 2002.
In January 2001 Biofarm purchased 600,000 shares of our common stock.
The purchase was made pursuant to a subscription agreement which required that
the shares were to be paid for by payment of nominal cash and payment by Biofarm
of all offering costs of a proposed public offering of our shares. Because the
offering was delayed, the parties agreed to terminate the subscription agreement
in October 2001. No amounts are paid for offering expenses. The 600,000 shares
were returned to us. At approximately the same time that we terminated the
Biofarm subscription we sold 600,000 shares of our common stock to Dutchess
Farms. The agreement called for payment of $50,000 payable in four installments.
Of the amount thirty thousand dollars has been paid and twenty thousand will be
paid when our registration statement is declared effective. Written
documentation was not executed and new 600,000 shares issued until February
2002.
In addition during April of 2002 we made an offering of convertible
notes to raise funds for a new business line. We accepted a subscription for
$200,000 of these Notes. Before the funds were paid it became apparent we would
be unable to enter the new business. As a result the subscription agreement was
cancelled and no money was paid and no notes were issued.
The foregoing does not include advances made from time to time. As of
March 31, 2002 we owed our chief executive officer approximately $9,800 for
advances made by him to us. In August 2002 we borrowed an additional $45,000 in
short term loans due in February 2003. A portion of these funds were advanced by
Howard Blum an officer and principal shareholder and Giltner Stevens another
principal shareholder. The notes are repayable in February 2003 and bear
interest at 9% per annum.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
To the best of management's knowledge, other than as set forth below,
there were no material transactions, or series of similar transactions, or any
currently proposed transactions, or series of similar transactions, to which
Artwork and Beyond was or is to be a party, in which the amount involved exceeds
$60,000, and in which any director or executive officer, or any security holder
who is known by us to own of record or beneficially more than 5% of any class of
our common stock, or any member of the immediate family of any of the foregoing
persons, has an interest.
During the fourth quarter of 1999, we issued 7,583,504 shares of
common stock to Howard Blum, Chief Executive Officer and Chairman of the Board
and Jay Camina formerly a Co-Chairman of the Board and principal shareholder of
the Company.
In the second quarter of 2000 we borrowed $350,000 from Giltner
Stevens pursuant to an interest-bearing note. Subsequently, pursuant to a
private placement we sold Mr. Stevens 704,185 shares of stock for $650,000 and
exchanged 379,175 shares of our common stock for the extinguishment of the
$350,000 note. In connection with his purchase we issued an additional 113,753
shares to Mr. Stevens and granted him warrants expiring in June 2005 to purchase
379,175 shares or common stock at $.98 per share. Finally, we sold an additional
aggregate of 219,383 shares at $.92 per share to Christopher Fiore, Timothy M.
Schlameuss, George P. Warren and Albert Pick III Trust. We, therefore, sold an
aggregate of 1,416,496 shares for cash or exchange of outstanding indebtedness
or an aggregate of $1,202,500.
-32-
In January 2001, Biofarm, Inc., entered into a Subscription Agreement
with Artwork and Beyond to purchase an aggregate of 600,000 shares of our common
stock for $600.00. In addition the subscription agreement provided for the
payment by Biofarm of all of the expenses of this offering. We and Biofarm have
verbally agreed to terminate the Subscription Agreement and all related
transactions in the fall of 2001. Biofarm prior to termination entered into
arrangements with third parties for the payment of fees in conjunction with this
registration statement. As of October 2001, we entered into a subscription
agreement with Dutchess Partners, a then unaffiliated party for the sale of
600,000 shares at $.083 per share or an aggregate purchase price of $50,000. Of
this amount, $10,000 was paid in October 2001 (by paying a portion of our
offering expenses), $10,000 in March 2002 and $10,000 in April 2002 or a total
of $30,000. The balance of $20,000 is due and payable upon the earliest of the
date that the registration statement is declared effective or our securities are
otherwise publicly traded. Dutchess Partners initially had the right to rescind
its purchase if the registration statement was not declared effective by
December 31, 2002 but has waived this right. In the view of the Securities &
Exchange Commission, Dutchess Partners may have the right to rescind its
purchase and demand the return of its money. The information in this prospectus
assumes that the shares issued to Dutchess Partners are fully paid as of this
date.
As of March 31, 2002 we owed our chief executive officer
approximately $9,800 for advances made by him to us. In August 2002 we borrowed
an additional $45,000 to be repaid in February 2003 with interest at nine (9%)
percent. A portion of these funds were advanced by Howard Blum and Giltner
Stevens an officer and another principal shareholder.
We also had a month to month lease with Ross Galleries, Inc. wholly
owned by Mr. Jay Camina. We paid that firm $2,604.71 per month until Ross
Galleries, Inc. sold its assets to Ross Galleries, LLC in July 2001. Ross
Galleries, LLC continued the arrangement. We have terminated this lease. We
currently occupy on a month to month basis approximately 4,050 square feet of
general office space in Holbrook, New York, which serves as our executive
offices. The arrangement is with an entity affiliated with Howard Blum, our
president. The arrangement is a pass through and we only pay the entity that it
is obligated to pay the landlord. We occupy the entire space and the monthly
rental is currently $2,815.63.
In November 1999, Artwork and Beyond entered into a seven year Supply
Agreement with Ross Galleries, Inc. Ross Galleries, Inc. was owned by Jay
Camina, one of our principal shareholders. Pursuant to this agreement Ross
Galleries, Inc. supplied us with framed and unframed artworks, exclusively for
sale on the internet. Ross Galleries, Inc. has sold its assets to another
entity, which is named Ross Galleries LLC. Mr. Camina has no affiliation with
this new entity. Since the inception of the agreement through July 31, 2001,
Artwork and Beyond has made payments to Ross Galleries, Inc. of approximately
$62,000 and no amounts are owed to Ross Galleries, Inc. We continue to do
business with Ross Galleries, LLC.
-33-
DESCRIPTION OF SECURITIES
GENERAL
The following description of our capital stock does not purport to be
complete and is subject to and qualified in its entirety by our certificate of
incorporation and bylaws, which are included as exhibits to the registration
statement of which this prospectus forms a part, and by the applicable
provisions of Delaware law.
We are authorized to issue up to 20,000,000 shares of common stock,
$.001 par value per share, of which 9,671,664 shares were issued and
outstanding. Our certificate of incorporation authorizes 1,000,000 shares of
"blank check" preferred stock, none of which are outstanding.
COMMON STOCK
Subject to the rights of holders of preferred stock, if any, holders
of shares of our common stock are entitled to share equally on a per share basis
in such dividends as may be declared by our Board of Directors out of funds
legally available therefore. There are presently no plans to pay dividends with
respect to the shares of our common stock. Upon our liquidation, dissolution or
winding up, after payment of creditors and the holders of any of our senior
securities, including preferred stock, if any, our assets will be divided pro
rata on a per share basis among the holders of the shares of our common stock.
The common stock is not subject to any liability for further assessments. There
are no conversions or redemption privileges nor any sinking fund provisions with
respect to the common stock and the common stock is not subject to call. The
holders of common stock do not have any pre-emptive or other subscription
rights.
Holders of shares of common stock are entitled to cast one vote for
each share held at all stockholders' meetings for all purposes, including the
election of directors. The common stock does not have cumulative voting rights.
PREFERRED STOCK
None of the 1,000,000 "blank check" preferred shares are currently
outstanding. Our Board of Directors has the authority, without further action by
the holders of the outstanding common stock, to issue shares of preferred stock
from time to time in one or more classes or series, to fix the number of shares
constituting any class or series and the stated value thereof, if different from
the par value, and to fix the terms of any such series or class, including
dividend rights, dividend rates, conversion or exchange rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price and the liquidation preference of such class or series.
WARRANTS
As of December 31, 2001, we have 379,175 warrants outstanding,
exercisable at $.98 per share, which expire on June 2005 as extended.
The exercise price of the warrants and the number of shares issuable
upon exercise of the warrants will be subject to adjustment to protect against
dilution in the event of stock dividends, stock splits, combinations,
subdivisions and reclassifications.
-34-
DELAWARE ANTI-TAKEOVER LAW PROVISIONS
As a Delaware corporation, we are subject to Section 203 of the
General Corporation Law ("Anti-Takeover Statute". In general, the Anti-Takeover
Statute prevents an "interested stockholder" (defined generally as a person
owing 15% or more of a Delaware corporation's outstanding voting stock) from
engaging in a "business combination" (as defined) with such Delaware corporation
for three years following the date such person became an interested stockholder
unless (i) before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination, (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by the
directors who are also officers of the corporation and by certain employee stock
plans), or (iii) following the transaction in which such person became an
interested stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote of the holders of two-thirds of the outstanding voting stock of
the corporation not owned by the interested stockholder. The restrictions
described above also do not apply to certain business combinations proposed by
an interested stockholder following the public announcement or notification of
one of certain extraordinary transactions involving the corporation and a person
who had not been an interested stockholder during the previous three years or
who became an interested stockholder with the approval of the corporation's
board of directors and if such business combination is approved by a majority of
the board members who were directors prior to any person's becoming an
interested stockholder. The provisions of the Anti-Takeover Statute requiring a
super-majority vote to approve certain corporate transactions could have the
effect of discouraging, delaying or preventing hostile takeovers, including
those that might result in the payment of a premium over market price or changes
in control or management of Artwork and Beyond.
LIMITATION ON LIABILITY OF DIRECTORS
Our certificate of incorporation provides that a director of Artwork
and Beyond will not be personally liable to Artwork and Beyond or its
stockholders for monetary damages for breach of the fiduciary duty of care as a
director, including breaches which constitute gross negligence. By its terms and
in accordance with the Delaware General Corporation Law, however, this provision
does not eliminate or limit the liability of a director of Artwork and Beyond
(i) for breach of the director's duty of loyalty to Artwork and Beyond or its
stockholders, (ii) for acts or omissions not in good faith or which involve
international misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, (relating to unlawful payments or
dividends or unlawful stock repurchases or redemptions), (iv) for any improper
benefit or (v) for breaches of a director's responsibilities under the Federal
Securities laws.
DIVIDEND POLICY
We have not paid any dividends on our Common Stock since our
inception and do not intend to pay dividends on our common stock in the
foreseeable future. Any earnings, which we may realize in the foreseeable
future, will be retained to finance the growth of Artwork and Beyond.
-35-
TRANSFER AGENT
The transfer agent for our common stock will be Continental Stock
Transfer & Trust Company, 2 Broadway, New York, New York 10004.
SHAREHOLDERS
We presently have 12 record shareholders.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Our bylaws provide that we will indemnify our officers and directors
for costs and expenses incurred in connection with the defense of actions,
suits, or proceedings against them on account of their being or having been
directors or officers of Artwork and Beyond, absent a finding of negligence or
misconduct in the performance of their duties.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Artwork and Beyond pursuant to the above described provisions, or
otherwise, Artwork and Beyond has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against these liabilities (other
than the payment by Artwork and Beyond issuer of expenses incurred or paid by
any director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Artwork and Beyond issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of the issue.
MARKET INFORMATION
Our securities are not traded on any public market. After the
effective date we will attempt to have our shares traded on the OTC Bulletin
Board. There is no assurance this will happen.
-36-
SHARES ELIGIBLE FOR FUTURE RESALE
As of September 30, 2002, we had an aggregate of 9,671,664 shares of
our common stock issued and outstanding, all of which are "restricted
securities," which may be sold only in compliance with Rule 144 under the
Securities Act of 1933, as amended or other exemptions from registration
requirements of this act. Rule 144 provides, in essence, that a person holding
restricted securities for a period of one year after payment therefore may sell,
in brokers' transactions or to market makers, an amount not exceeding 1% of the
outstanding class of securities being sold, or the average weekly reported
volume of trading of the class of securities being sold over a four-week period,
whichever is greater, during any three-month period. (Persons who are not our
affiliates and who had held their restricted securities for at least two years
are not subject to the volume or transaction limitations.) Commencing ninety
days after the effective date of the registration statement to which this
prospectus is a part all 9,000,000 of our shares will be capable of sale
pursuant to Rule 144 subject to the foregoing limitation. The sale of a
significant number of these shares in the public market may adversely affect
prevailing market prices of our securities.
PLAN OF DISTRIBUTION
One million shares will be offered on a "best efforts, basis" without
any requirement that a minimum number of shares be sold. The shares will be
offered for sale solely by our chief executive officer, Howard Blum without any
additional compensation. Each purchaser will receive from Artwork and Beyond
confirmation of his subscription to purchase shares of common stock with
instructions to forward their funds to us. We will then forward a share
certificate to you.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon
for Artwork and Beyond by Reed Smith LLP 599 Lexington Avenue, New York, New
York 10022.
EXPERTS
The financial statements of Artwork and Beyond included in this
prospectus and elsewhere in the registration statement, to the extent and for
the periods indicated in their reports, have been audited by Merdinger,
Fruchter, Rosen & Company, P.C., independent certified public accountants, whose
reports thereon appear elsewhere herein and in the registration statement.
AVAILABLE INFORMATION
We have filed with the Commission, Washington, D.C. 20549, a
Registration Statement on Form SB-2 under the Securities Act with respect to our
common stock offered hereby. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedules to the registration statement. For further information with respect to
Artwork and Beyond and our common stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement. Statements contained in this prospectus concerning the
contents of any contract or any other document are not necessarily complete;
reference is made in each instance to copy of such contract or any other
document filed as an exhibit to the registration statement. Each such statement
is qualified in all respects by such reference to such exhibit. After the
offering, we will be subject to the informational requirements of the Securities
Exchange Act of 1934, as amended and in accordance therewith will be required to
file annual, quarterly and special reports, proxy statements and other
information with the SEC. The registration statement, including exhibits and
schedules thereto, may be inspected without charge at the Commission's principal
office in Washington D.C., and copies of all or any part thereof may be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, after payment of fees prescribed by the Commission. The
Commission also maintains a World Wide Web site which provides online access to
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission at the address
http://www.sec.gov. We intend to furnish holders of our common stock with annual
reports containing financial statements audited by December 31, 2002.
-37-
ARTWORK AND BEYOND, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
AND
SEPTEMBER 30, 2002 (UNAUDITED)
ARTWORK AND BEYOND, INC.
FINANCIAL STATEMENTS
CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT F-1
BALANCE SHEET F-2
STATEMENT OF OPERATIONS F-3
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY) F-4
STATEMENT OF CASH FLOWS F-5 - 6
NOTES TO FINANCIAL STATEMENTS F-7 - 18
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF ARTWORK AND BEYOND, INC.:
We have audited the accompanying balance sheet of Artwork and Beyond, Inc. as of
December 31, 2001 and 2000, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Artwork and Beyond, Inc. as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the years, then ended in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
accompanying financial statements, the Company has recently begun to generate
revenue, but has had continuing operating losses since inception. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also discussed in
Note 1 to the financial statements. These financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
MERDINGER, FRUCHTER, ROSEN & COMPANY, P.C.
Certified Public Accountants
New York, New York
February 12, 2002
F-1
ARTWORK AND BEYOND, INC.
BALANCE SHEET
September 30, December 31,
-----------------------------------------
2002 2001 2000
----------- ----------- -----------
ASSETS (Unaudited)
Current assets
Cash and cash equivalents $ 31,084 $ 134,802 $ 661,151
Accounts receivable -- 1,690 --
Inventory 5,138 7,970 --
----------- ----------- -----------
Total current assets 36,222 144,462 661,151
Property and equipment, net 16,995 21,617 27,779
Deferred offering cost 10,000 10,000 --
Security deposit 5,631 -- --
----------- ----------- -----------
Total assets $ 68,848 $ 176,079 $ 688,930
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accrued expenses $ 39,996 $ 99,713 $ 84,000
Notes payable 54,804 9,804 23,259
Customer deposits 11,539 14,065 --
----------- ----------- -----------
Total current liabilities 106,339 123,582 107,259
----------- ----------- -----------
Commitments and contingencies -- -- --
Common stock subject to rescission 30,000 10,000 --
----------- ----------- -----------
Stockholders' equity (deficiency)
Preferred stock, $.001 par value;
1,000,000 shares authorized, no shares issued
and outstanding -- -- --
Common stock, $0.001 par value; 20,000,000
shares authorized, 9,071,664,
9,000,000, and 9,000,000 shares shares
issued and outstanding at September 30, 2002,
December 31, 2001 and 2000, respectively 9,072 9,000 9,000
Additional paid-in capital 1,926,581 1,860,503 1,358,503
Accumulated deficit (2,003,144) (1,827,006) (785,832)
----------- ----------- -----------
Total stockholders' equity (deficiency) (67,491) 42,497 581,671
----------- ----------- -----------
Total liabilities and stockholders' equity (deficiency) $ 68,848 $ 176,079 $ 688,930
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-2
ARTWORK AND BEYOND, INC.
STATEMENT OF OPERATIONS
Nine Months Ended Years Ended
September 30, December 31,
-------------------------- --------------------------
2002 2001 2001 2000
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
Sales $ 122,582 $ 148,044 $ 158,491 $ 15,915
Cost of sales 58,351 72,337 103,135 9,331
----------- ----------- ----------- -----------
Gross profit 64,231 75,707 55,356 6,584
Commission income, net 16,935 -- 37,310 --
----------- ----------- ----------- -----------
Total income 81,166 75,707 92,666 6,584
Selling, general and administrative expenses 262,194 997,993 1,149,040 779,039
----------- ----------- ----------- -----------
Loss from operations before interest income
and provision for income taxes (181,028) (922,286) (1,056,374) (772,455)
Interest income 290 14,388 15,200 10,542
Other income 4,600 -- -- --
----------- ----------- ----------- -----------
Total other income 4,890 14,388 15,200 10,542
Loss before provision for income taxes (176,138) (907,898) (1,041,174) (761,913)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net loss $ (176,138) $ (907,898) $(1,041,174) $ (761,913)
=========== =========== =========== ===========
Loss per common share - basic and diluted $ (0.02) $ (0.09) $ (0.12) $ (0.09)
=========== =========== =========== ===========
Weighted average shares outstanding 9,015,118 9,300,000 8,552,877 8,721,594
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
ARTWORK AND BEYOND, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
Common Stock Additional
-------------------------- Paid-in Retained
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------
Balance, January 1, 2000 7,583,504 $ 7,584 $ 52,416 $ (23,919) $ 36,081
Conversion of note payable to common
stock at May 15, 2000 379,175 379 349,621 -- 350,000
Issuance of common stock for cash
- - on September 30, 2000 704,185 704 649,296 -- 650,000
- - on September 30, 2000 54,169 54 49,947 -- 50,001
- - on September 30, 2000 54,169 54 49,947 -- 50,001
- - on September 30, 2000 54,169 54 49,947 -- 50,001
- - on September 30, 2000 56,876 57 52,443 -- 52,500
Issuance of common stock to induce
participation - September 30, 2000 113,753 114 104,886 -- 105,000
Net loss, December 31, 2000 -- -- -- (761,913) (761,913)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2000 9,000,000 9,000 1,358,503 (785,832) 581,671
Issuance of shares for services related
to public offering at January 2001 600,000 600 94,400 -- 95,000
Compensation expense recorded for
shares issued at a discount to market
at January 2001 -- -- 457,000 -- 457,000
Cancellation of January 2001 issuance
of shares and compensation expense (600,000) (600) (551,400) -- (552,000)
Compensation expense recorded for
shares issued at a discount to market -- -- 502,000 -- 502,000
Net loss, December 31, 2001 -- -- -- (1,041,174) (1,041,174)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2001 9,000,000 9,000 1,860,503 (1,827,006) 42,497
Issuance of shares for accrued expenses
at June 30, 2002 71,664 72 66,078 -- 66,150
Net loss -- -- -- (176,138) (176,138)
----------- ----------- ----------- ----------- -----------
Balance, September 30, 2002 (Unaudited) 9,071,664 $ 9,072 $ 1,926,581 $(2,003,144) $ (67,491)
=========== =========== =========== =========== ===========
The accompanying notes are integral part of these financial statements.
F-4
ARTWORK AND BEYOND, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended
September 30, December 31,
--------------------------- --------------------------
2002 2001 2001 2000
(Unaudited) (Unaudited)
----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (176,138) $ (907,898) $(1,041,174) $ (761,913)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation expense 4,622 4,563 6,162 3,034
Stock compensation expense -- 457,000 502,000 --
Common shares issued to induce participation -- -- -- 105,000
(Increase) decrease in accounts receivable 1,690 -- (1,690) --
(Increase) decrease in inventory 2,832 -- (7,970) --
(Decrease) increase in customer deposits (2,526) -- 14,065 --
Increase in accrued expenses 6,433 10,412 15,713 84,000
Increase in security deposit (5,631) --
----------- ----------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (168,718) (435,923) (512,894) (569,879)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment -- -- -- (30,813)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in notes payable 45,000 (13,455) (13,455) 23,259
Increase in common stock subject to rescission 20,000 -- -- --
Proceeds from issuance of convertible note -- -- -- 350,000
Issuance of common stock for cash -- -- -- 852,503
----------- ----------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 65,000 (13,455) (13,455) 1,225,762
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (103,718) (449,378) (526,349) 625,070
CASH AND CASH EQUIVALENTS - beginning of period 134,802 661,151 661,151 36,081
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS - end of period $ 31,084 211,773 $ 134,802 $ 661,151
=========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F-5
ARTWORK AND BEYOND, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
Years Ended
September 30, December 31,
----------------------------------------- ---------------------------------------
2002 2001 2001 2000
------------------ ------------------- -------------------- -----------------
(Unaudited) (Unaudited)
CASH PAID DURING THE PERIOD FOR:
Interest expense $ -- $ -- $ -- $ --
================== =================== ==================== ================
Income taxes $ -- $ -- $ -- $ --
================== =================== ==================== ================
NON-CASH FINANCING ACTIVITY:
Common stock issued for accrued expenses $ 66,150 $ -- $ -- $ --
================== =================== ==================== ================
Conversion of note to common stock $ -- $ -- $ -- $350,000
================== =================== ==================== ================
Common stock issued to induce participation $ -- $ -- $ -- $105,000
================== =================== ==================== ================
Common stock issued for services related
to public offering $ -- $ 552,000 $ 552,000 $ --
================== =================== ==================== ================
The accompanying notes are an integral part of the financial statements.
F-6
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Artwork
and Beyond, Inc. (the "Company"), a Delaware corporation formed on
August 5, 1999.
The Company conducts its operations from offices located in Holbrook,
Long Island, New York.
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going
concern. However, the Company has only recently begun to generate
revenue, and has incurred significant operating losses since inception.
These factors raise substantial doubt about the Company's ability to
continue as a going concern. Without realization of additional capital,
it would be unlikely for the Company to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the
Company be unable to continue in existence.
The Company will seek to obtain funds through the sale of additional
equity or debt securities and intends to expand its revenue stream
through the utilization of auctions on the internet.
UNAUDITED FINANCIAL INFORMATION
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly its financial position as of
September 30, 2002 and 2001, and the results of its operations and cash
flows for the nine months ended September 30, 2002 and 2001. These
statements are condensed and, therefore, do not include all of the
information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial
statements. The results of operations for the nine months ended
September 30, 2002, are not necessarily indicative of the results to be
expected for the full year.
NATURE OF OPERATIONS
The Company was a development-stage company under the provisions of the
Financial Accounting Standards Board ("FASB") Statement of Financial
Accounting Standards ("SFAS") No. 7 until the third quarter of 2001.
F-7
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
NATURE OF OPERATIONS (CONTINUED)
The Company was formed for the purpose of providing a medium for the
purchase of artwork on the internet. The Company offers artwork through
its website on the internet and provides this artwork directly from the
supplier (see Note 4). The Company generates revenue by the sale of
such artwork and framing. It is the Company's goal to become the
dominant provider in the charity art auction market and retail market,
both online and offline. It is anticipated that operating revenue will
accelerate during the first and/or second quarter of the year 2003.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue is recognized from sales when artwork is shipped. Substantially
all revenue is paid for prior to the artwork being shipped. The Company
has one gallery on its e-commerce site that generates sales in which
the Company acts essentially as an agent. The risk of loss on sales
filled through this gallery is borne by a related company (see Note 4).
Revenue on these orders is recorded net of related costs and classified
as commission income.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK
The Company places its cash in what it believes to be credit-worthy
financial institutions. However, cash balances may exceed FDIC insured
levels at various times during the year.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents and accounts payable
approximates fair value due to the relatively short maturity of these
instruments.
INVENTORY
The Company's inventory is valued at the lower of cost or market
determined by the first-in, first-out method of accounting.
F-8
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Repairs and maintenance
costs are charged to operations as incurred. Depreciation is computed
using straight-line methods calculated to amortize the cost of assets
over their estimated useful lives, generally three to seven years. Upon
retirement or other disposition of property and equipment, the cost and
related depreciation will be removed from the accounts and the
resulting gains or losses recorded.
ORGANIZATION COSTS
In accordance with American Institutes of Certified Public Accountants'
Statement of Position ("SOP") 98-5 "Reporting on the Costs of Start-Up
Activities," the Company expenses, as incurred, costs related to
organizational and start-up activities.
COST OF COMPUTER SOFTWARE
In accordance with SOP 98-1, "Accounting for Costs of Computer Software
Developed or Obtained for Internal Use," the Company expenses, as
incurred, such related
costs.
ADVERTISING COSTS
Advertising costs are expensed as incurred and included in selling,
general and administrative expenses. For the years ended December 31,
2001 and 2000, advertising expense approximated $98,000 and $75,000,
respectively, and for the nine months ended September 30, 2002 and 2001
was $3,000 and $82,000, respectively.
INCOME TAXES
Income taxes are provided for based on the liability method of
accounting pursuant to SFAS No. 109, "Accounting for Income Taxes."
Deferred income taxes, if any, are recorded to reflect the tax
consequences on future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each
year-end.
LOSS PER SHARE
The computation of basic earnings per share ("EPS") is computed by
dividing income available to common stockholders by the weighted
average number of outstanding common shares during the period. Diluted
EPS gives effect to all dilutive potential common shares outstanding
during the period. The computation of diluted EPS does not assume
conversion, exercise or contingent exercise of securities that would
have an anti-dilutive effect. Potentially dilutive securities
outstanding as of December 31, 2001 and 2000, were 637,500 and 559,175
shares, respectively. On April 25, 2001, the Company effected a
3.7917519 for 1 split of its common stock. All share and per share
amounts in the financial statements have been restated to give
retroactive effect to this stock split.
F-9
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income," establishes standards
for the reporting and display of comprehensive income and its
components in the financial statements. The items of other
comprehensive income that are typically required to be displayed are
foreign currency items, minimum pension liability adjustments, and
unrealized gains and losses on certain investments in debt and equity
securities. At December 31, 2001 and 2000, and for the period then
ended, the Company had no items of other comprehensive income and has,
therefore, not presented a Statement of Comprehensive Income.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
September 30, DECEMBER 31,
--------------------------------------------
2002 2001 2000
------------ ------------- -------------
Equipment and Furniture $ 30,813 $ 30,813 $ 30,813
Less: Accumulated Depreciation (13,818) (9,196) (3,034)
------------ ------------- -------------
$ 16,995 $ 21,617 $ 27,779
============ ============= =============
Depreciation expense for the years ended December 31, 2001 and 2000 was
$6,162 and $3,034, and for the nine months ended September 30, 2002 and
2001 was $4,622 and $4,563, respectively.
NOTE 3 - INCOME TAXES
The components of the provision for income taxes are as follows:
2001 2000
-------------- --------------
Current Tax Expense
U.S. Federal $ - $ -
State - -
-------------- --------------
Total Current - -
-------------- --------------
Deferred Tax Expense
U.S. Federal - -
State - -
-------------- --------------
Total Deferred - -
-------------- --------------
Total Tax Provision (Benefit) from
Continuing Operations $ - $ -
============== ==============
F-10
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 3 - INCOME TAXES (Continued)
The reconciliation of the effective income tax rate to the Federal
statutory rate is as follows:
2001 2000
------------ ------------
Federal Income Tax Rate 34.0% 34.0%
Effect of Valuation Allowance (34.0)% (34.0)%
----------- -----------
Effective Income Tax Rate 0.0% 0.0%
=========== ===========
At December 31, 2001, the Company had net carryforward losses of
approximately $1,782,000. Because of the current uncertainty of
realizing the benefits of the tax carryforward, a valuation allowance
equal to the tax benefits for deferred taxes has been established. The
full realization of the tax benefit associated with the carryforward
depends predominantly upon the Company's ability to generate taxable
income during the carryforward period.
Deferred tax assets and liabilities reflect the net tax effect of
temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and amounts used for
income tax purposes. Significant components of the Company's deferred
tax assets and liabilities as of December 31, 2001 and 2000, and for
the nine months ended September 30, 2002 and 2001 are as follows:
SEPTEMBER 30, DECEMBER 31,
2002 2001 2001 2000
---- ---- ---- ----
Deferred Tax Assets
Loss Carryforwards $ - $ - $ - $ -
Less: Valuation Allowance - - - -
-------- ------- -------- -------
Net Deferred Tax Assets $ - $ - $ - $ -
======== ======= ======== =======
Net operating loss carryforwards expire in 2020.
NOTE 4 - RELATED PARTY TRANSACTIONS
In November 1999, the Company entered into an agreement with an entity
which, at that time, was a related company (an officer, director and
shareholder of the Company owned this related company). The Company
purchased certain prints of works of art, framed and unframed, from
this entity. The entity had agreed to supply such art at competitive
terms, on an exclusive basis to the Company for sale on the internet.
The agreement was for a seven-year term, but could be terminated on 180
days written notice by either party after such time. Upon the sale
discussed below, this contract was terminated.
F-11
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
In July 2001, the shareholder discussed above sold his 100% interest in
the formerly related entity to an unrelated third party. The Company
continues to purchase from this unrelated third party pursuant to
purchase orders, whereby the Company is not bound by any exclusivity
and either party can terminate the arrangement on 30 days written
notice.
Additionally, the Company leased its office space from this related
entity until June 2002.
At December 31, 2001 and 2000, the Company is obligated to a
shareholder pursuant to a non-interest bearing demand note for $9,804
and $23,259, respectively, and for the nine months ended September 30,
2002 and 2001 was $9,804 and $23,259, respectively.
At September 30, 2002, the Company is obligated to a shareholder
pursuant to a $10,000 note payable, bearing interest at the rate of 9%
per annum. This note is due March 20, 2003.
NOTE 5 - NOTES PAYABLE
Notes payable are summarized as follows:
a) Gil Stevens $ 20,000
b) Marty Miller 15,000
c) Howard Blum 10,000
d) Howard Blum 9,804
------------------
Total $ 54,804
==================
a) On August 23, 2002, the Company entered into a note payable
agreement with an unrelated individual, which bears interest at
the rate of 9% per annum, and is due February 23, 2003.
b) On August 28, 2002, the Company entered into a note payable
agreement with an individual, which bears interest at the rate of
9% per annum, and is due February 28, 2003.
c) On September 20, 2002, the Company entered into a note payable
agreement with the Company's principal shareholder. This note
bears interest at the rate of 9% per annum, and is due March 20,
2003.
d) The Company is obligated to its principal shareholder pursuant to
a non-interest bearing demand note in the amount of $9,804.
F-12
ARTWORK AND BEYOND, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
AND
SEPTEMBER 30, 2002 (UNAUDITED)
ARTWORK AND BEYOND, INC.
FINANCIAL STATEMENTS
CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 1
BALANCE SHEET 2
STATEMENT OF OPERATIONS 3
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY) 4
STATEMENT OF CASH FLOWS 5 - 6
NOTES TO FINANCIAL STATEMENTS 7 - 18
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF ARTWORK AND BEYOND, INC.:
We have audited the accompanying balance sheet of Artwork and Beyond, Inc. as of
December 31, 2001 and 2000, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Artwork and Beyond, Inc. as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the years, then ended in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
accompanying financial statements, the Company has recently begun to generate
revenue, but has had continuing operating losses since inception. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also discussed in
Note 1 to the financial statements. These financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
MERDINGER, FRUCHTER, ROSEN & COMPANY, P.C.
Certified Public Accountants
New York, New York
February 12, 2002
ARTWORK AND BEYOND, INC.
BALANCE SHEET
September 30, December 31,
2002 2001 2000
----------- ----------- ----------
ASSETS (Unaudited)
Current assets
Cash and cash equivalents $ 31,084 $ 134,802 $ 661,151
Accounts receivable -- 1,690 --
Inventory 5,138 7,970 --
----------- ----------- -----------
Total current assets 36,222 144,462 661,151
Property and equipment, net 16,995 21,617 27,779
Deferred offering cost 10,000 10,000 --
Security deposit 5,631 -- --
----------- ----------- -----------
Total assets $ 68,848 $ 176,079 $ 688,930
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accrued expenses $ 39,996 $ 99,713 $ 84,000
Notes payable 54,804 9,804 23,259
Customer deposits 11,539 14,065 --
----------- ----------- -----------
Total current liabilities 106,339 123,582 107,259
----------- ----------- -----------
Commitments and contingencies
----------- ----------- -----------
Common stock subject to rescission 30,000 10,000 --
----------- ----------- -----------
Stockholders' equity (deficiency)
Preferred stock, $.001 par value;
1,000,000 shares authorized, no shares issued
and outstanding
----------- ----------- -----------
Common stock, $0.001 par value; 20,000,000 shares
authorized, 9,071,664, 9,000,000, and 9,000,000 shares
shares issued and outstanding at September 30, 2002,
December 31, 2001 and 2000, respectively 9,072 9,000 9,000
Additional paid-in capital 1,926,581 1,860,503 1,358,503
Accumulated deficit (2,003,144) (1,827,006) (785,832)
----------- ----------- -----------
Total stockholders' equity (deficiency) (67,491) 42,497 581,671
----------- ----------- -----------
Total liabilities and stockholders' equity (deficiency) $ 68,848 $ 176,079 $ 688,930
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
- 2 -
ARTWORK AND BEYOND, INC.
STATEMENT OF OPERATIONS
Nine Months Ended Years Ended
September 30, December 31,
-------------------------- --------------------------
2002 2001 2001 2000
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
Sales $ 122,582 $ 148,044 $ 158,491 $ 15,915
Cost of sales 58,351 72,337 103,135 9,331
----------- ----------- ----------- -----------
Gross profit 64,231 75,707 55,356 6,584
Commission income, net 16,935 -- 37,310 --
----------- ----------- ----------- -----------
Total income 81,166 75,707 92,666 6,584
Selling, general and administrative expenses 262,194 997,993 1,149,040 779,039
----------- ----------- ----------- -----------
Loss from operations before interest income
and provision for income taxes (181,028) (922,286) (1,056,374) (772,455)
Interest income 290 14,388 15,200 10,542
Other income 4,600 -- -- --
----------- ----------- ----------- -----------
Total other income 4,890 14,388 15,200 10,542
Loss before provision for income taxes (176,138) (907,898) (1,041,174) (761,913)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net loss $ (176,138) $ (907,898) $(1,041,174) $ (761,913)
=========== =========== =========== ===========
Loss per common share - basic and diluted $ (0.02) $ (0.09) $ (0.12) $ (0.09)
=========== =========== =========== ===========
Weighted average shares outstanding 9,015,118 9,300,000 8,552,877 8,721,594
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
- 3 -
ARTWORK AND BEYOND, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
Common Stock Additional
------------------------ Paid-in Retained
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
Balance, January 1, 2000 7,583,504 $ 7,584 $ 52,416 $ (23,919) $ 36,081
Conversion of note payable to common
stock at May 15, 2000 379,175 379 349,621 -- 350,000
Issuance of common stock for cash
- - on September 30, 2000 704,185 704 649,296 -- 650,000
- - on September 30, 2000 54,169 54 49,947 -- 50,001
- - on September 30, 2000 54,169 54 49,947 -- 50,001
- - on September 30, 2000 54,169 54 49,947 -- 50,001
- - on September 30, 2000 56,876 57 52,443 -- 52,500
Issuance of common stock to induce
participation - September 30, 2000 113,753 114 104,886 -- 105,000
Net loss, December 31, 2000 -- -- -- (761,913) (761,913)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2000 9,000,000 9,000 1,358,503 (785,832) 581,671
Issuance of shares for services related
to public offering at January 2001 600,000 600 94,400 -- 95,000
Compensation expense recorded for
shares issued at a discount to market
at January 2001 -- -- 457,000 -- 457,000
Cancellation of January 2001 issuance
of shares and compensation expense (600,000) (600) (551,400) -- (552,000)
Compensation expense recorded for
shares issued at a discount to market -- -- 502,000 -- 502,000
Net loss, December 31, 2001 -- -- -- (1,041,174) (1,041,174)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2001 9,000,000 9,000 1,860,503 (1,827,006) 42,497
Issuance of shares for accrued expenses
at June 30, 2002 71,664 72 66,078 -- 66,150
Net loss -- -- -- (176,138) (176,138)
----------- ----------- ----------- ----------- -----------
Balance, September 30, 2002 (Unaudited) 9,071,664 $ 9,072 $ 1,926,581 $(2,003,144) $ (67,491)
=========== =========== =========== =========== ===========
The accompanying notes are integral part of these financial statements.
- 4 -
ARTWORK AND BEYOND, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended
September 30, December 31,
----------------------------- ----------------------------
2002 2001 2001 2000
------------- ------------- ----------- ------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (176,138) $ (907,898) $(1,041,174) $ (761,913)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation expense 4,622 4,563 6,162 3,034
Stock compensation expense -- 457,000 502,000 --
Common shares issued to induce participation -- -- -- 105,000
(Increase) decrease in accounts receivable 1,690 -- (1,690) --
(Increase) decrease in inventory 2,832 -- (7,970) --
(Decrease) increase in customer deposits (2,526) -- 14,065 --
Increase in accrued expenses 6,433 10,412 15,713 84,000
Increase in security deposit (5,631) --
----------- ----------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (168,718) (435,923) (512,894) (569,879)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment -- -- -- (30,813)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in notes payable 45,000 (13,455) (13,455) 23,259
Increase in common stock subject to rescission 20,000 -- -- --
Proceeds from issuance of convertible note -- -- -- 350,000
Issuance of common stock for cash -- -- -- 852,503
----------- ----------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 65,000 (13,455) (13,455) 1,225,762
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (103,718) (449,378) (526,349) 625,070
CASH AND CASH EQUIVALENTS - beginning of period 134,802 661,151 661,151 36,081
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS - end of period $ 31,084 211,773 $ 134,802 $ 661,151
=========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
- 5 -
ARTWORK AND BEYOND, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
Years Ended
September 30, December 31,
---------------------------------------- -----------------------------------------
2002 2001 2001 2000
------------------- ------------------- -------------------- ------------------
(Unaudited) (Unaudited)
CASH PAID DURING THE PERIOD FOR:
Interest expense $ -- $ -- $ -- $ --
================== =================== ==================== ========
Income taxes $ -- $ -- $ -- $ --
================== =================== ==================== ========
NON-CASH FINANCING ACTIVITY:
Common stock issued for accrued expenses $ 66,150 $ -- $ -- $ --
================== =================== ==================== ========
Conversion of note to common stock $ -- $ -- $ -- $350,000
================== =================== ==================== ========
Common stock issued to induce participation $ -- $ -- $ -- $105,000
================== =================== ==================== ========
Common stock issued for services related
to public offering $ -- $ 552,000 $ 552,000 $ --
================== =================== ==================== ========
The accompanying notes are an integral part of the financial statements.
- 6 -
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Artwork
and Beyond, Inc. (the "Company"), a Delaware corporation formed on
August 5, 1999.
The Company conducts its operations from offices located in Holbrook,
Long Island, New York.
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going
concern. However, the Company has only recently begun to generate
revenue, and has incurred significant operating losses since inception.
These factors raise substantial doubt about the Company's ability to
continue as a going concern. Without realization of additional capital,
it would be unlikely for the Company to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the
Company be unable to continue in existence.
The Company will seek to obtain funds through the sale of additional
equity or debt securities and intends to expand its revenue stream
through the utilization of auctions on the internet.
UNAUDITED FINANCIAL INFORMATION
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly its financial position as of
September 30, 2002 and 2001, and the results of its operations and cash
flows for the nine months ended September 30, 2002 and 2001. These
statements are condensed and, therefore, do not include all of the
information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial
statements. The results of operations for the nine months ended
September 30, 2002, are not necessarily indicative of the results to be
expected for the full year.
NATURE OF OPERATIONS
The Company was a development-stage company under the provisions of the
Financial Accounting Standards Board ("FASB") Statement of Financial
Accounting Standards ("SFAS") No. 7 until the third quarter of 2001.
- 7 -
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
NATURE OF OPERATIONS (CONTINUED)
The Company was formed for the purpose of providing a medium for the
purchase of artwork on the internet. The Company offers artwork through
its website on the internet and provides this artwork directly from the
supplier (see Note 4). The Company generates revenue by the sale of
such artwork and framing. It is the Company's goal to become the
dominant provider in the charity art auction market and retail market,
both online and offline. It is anticipated that operating revenue will
accelerate during the first and/or second quarter of the year 2003.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue is recognized from sales when artwork is shipped. Substantially
all revenue is paid for prior to the artwork being shipped. The Company
has one gallery on its e-commerce site that generates sales in which
the Company acts essentially as an agent. The risk of loss on sales
filled through this gallery is borne by a related company (see Note 4).
Revenue on these orders is recorded net of related costs and classified
as commission income.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK
The Company places its cash in what it believes to be credit-worthy
financial institutions. However, cash balances may exceed FDIC insured
levels at various times during the year.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents and accounts payable
approximates fair value due to the relatively short maturity of these
instruments.
INVENTORY
The Company's inventory is valued at the lower of cost or market
determined by the first-in, first-out method of accounting.
- 8 -
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Repairs and maintenance
costs are charged to operations as incurred. Depreciation is computed
using straight-line methods calculated to amortize the cost of assets
over their estimated useful lives, generally three to seven years. Upon
retirement or other disposition of property and equipment, the cost and
related depreciation will be removed from the accounts and the
resulting gains or losses recorded.
ORGANIZATION COSTS
In accordance with American Institutes of Certified Public Accountants'
Statement of Position ("SOP") 98-5 "Reporting on the Costs of Start-Up
Activities," the Company expenses, as incurred, costs related to
organizational and start-up activities.
COST OF COMPUTER SOFTWARE
In accordance with SOP 98-1, "Accounting for Costs of Computer Software
Developed or Obtained for Internal Use," the Company expenses, as
incurred, such related costs.
ADVERTISING COSTS
Advertising costs are expensed as incurred and included in selling,
general and administrative expenses. For the years ended December 31,
2001 and 2000, advertising expense approximated $98,000 and $75,000,
respectively, and for the nine months ended September 30, 2002 and 2001
was $3,000 and $82,000, respectively.
INCOME TAXES
Income taxes are provided for based on the liability method of
accounting pursuant to SFAS No. 109, "Accounting for Income Taxes."
Deferred income taxes, if any, are recorded to reflect the tax
consequences on future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each
year-end.
LOSS PER SHARE
The computation of basic earnings per share ("EPS") is computed by
dividing income available to common stockholders by the weighted
average number of outstanding common shares during the period. Diluted
EPS gives effect to all dilutive potential common shares outstanding
during the period. The computation of diluted EPS does not assume
conversion, exercise or contingent exercise of securities that would
have an anti-dilutive effect. Potentially dilutive securities
outstanding as of December 31, 2001 and 2000, were 637,500 and 559,175
shares, respectively. On April 25, 2001, the Company effected a
3.7917519 for 1 split of its common stock. All share and per share
amounts in the financial statements have been restated to give
retroactive effect to this stock split.
- 9 -
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
COMPREHENSIVE INCOME SFAS No. 130, "Reporting Comprehensive Income,"
establishes standards for the reporting and display of comprehensive
income and its components in the financial statements. The items of
other comprehensive income that are typically required to be displayed
are foreign currency items, minimum pension liability adjustments, and
unrealized gains and losses on certain investments in debt and equity
securities. At December 31, 2001 and 2000, and for the period then
ended, the Company had no items of other comprehensive income and has,
therefore, not presented a Statement of Comprehensive Income.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
September 30, DECEMBER 31,
-----------------------------
2002 2001 2000
---- ---- ----
Equipment and Furniture $ 30,813 $ 30,813 $ 30,813
Less: Accumulated Depreciation (13,818) (9,196) (3,034)
------------ ------------- -------------
$ 16,995 $ 21,617 $ 27,779
============ ============= ============
Depreciation expense for the years ended December 31, 2001 and 2000 was
$6,162 and $3,034, and for the nine months ended September 30, 2002 and
2001 was $4,622 and $4,563, respectively.
NOTE 3 - INCOME TAXES
The components of the provision for income taxes are as follows:
2001 2000
------------- -------------
Current Tax Expense
U.S. Federal $ - $ -
State - -
--------------- --------------
Total Current - -
--------------- --------------
Deferred Tax Expense
U.S. Federal - -
State - -
-------------- --------------
Total Deferred - -
-------------- --------------
Total Tax Provision (Benefit) from
Continuing Operations $ - $ -
============= =============
- 10 -
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 3 - INCOME TAXES (Continued)
The reconciliation of the effective income tax rate to the Federal
statutory rate is as follows:
2001 2000
------------ ----------
Federal Income Tax Rate 34.0% 34.0%
Effect of Valuation Allowance (34.0)% (34.0)%
----------- ---------
Effective Income Tax Rate 0.0% 0.0%
============ =========
At December 31, 2001, the Company had net carryforward losses of
approximately $1,782,000. Because of the current uncertainty of
realizing the benefits of the tax carryforward, a valuation allowance
equal to the tax benefits for deferred taxes has been established. The
full realization of the tax benefit associated with the carryforward
depends predominantly upon the Company's ability to generate taxable
income during the carryforward period.
Deferred tax assets and liabilities reflect the net tax effect of
temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and amounts used for
income tax purposes. Significant components of the Company's deferred
tax assets and liabilities as of December 31, 2001 and 2000, and for
the nine months ended September 30, 2002 and 2001 are as follows:
SEPTEMBER 30, DECEMBER 31,
------------- ------------
2002 2001 2001 2000
---- ---- ---- ----
Deferred Tax Assets
Loss Carryforwards $ - $ - $ - $ -
Less: Valuation Allowance - - - -
---------------- ----------------- ----------------- -----------------
Net Deferred Tax Assets $ - $ - $ - $ -
================ ================ ================ ================
Net operating loss carryforwards expire in 2020.
NOTE 4 - RELATED PARTY TRANSACTIONS
In November 1999, the Company entered into an agreement with an entity
which, at that time, was a related company (an officer, director and
shareholder of the Company owned this related company). The Company
purchased certain prints of works of art, framed and unframed, from
this entity. The entity had agreed to supply such art at competitive
terms, on an exclusive basis to the Company for sale on the internet.
The agreement was for a seven-year term, but could be terminated on 180
days written notice by either party after such time. Upon the sale
discussed below, this contract was terminated.
- 11 -
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
In July 2001, the shareholder discussed above sold his 100% interest in
the formerly related entity to an unrelated third party. The Company
continues to purchase from this unrelated third party pursuant to
purchase orders, whereby the Company is not bound by any exclusivity
and either party can terminate the arrangement on 30 days written
notice.
Additionally, the Company leased its office space from this related
entity until June 2002.
At December 31, 2001 and 2000, the Company is obligated to a
shareholder pursuant to a non-interest bearing demand note for $9,804
and $23,259, respectively, and for the nine months ended September 30,
2002 and 2001 was $9,804 and $23,259, respectively.
At September 30, 2002, the Company is obligated to a shareholder
pursuant to a $10,000 note payable, bearing interest at the rate of 9%
per annum. This note is due March 20, 2002.
NOTE 5 - NOTES PAYABLE
Notes payable are summarized as follows:
a) Gil Stevens $ 20,000
b) Marty Miller 15,000
c) Howard Blum 10,000
d) Howard Blum 9,804
------------------
Total $ 54,804
==================
a) On August 23, 2002, the Company entered into a note payable
agreement with an unrelated individual, which bears interest at the
rate of 9% per annum, and is due February 23, 2003.
b) On August 28, 2002, the Company entered into a note payable
agreement with an individual, which bears interest at the rate of 9%
per annum, and is due February 28, 2003.
c) On September 20, 2002, the Company entered into a note payable
agreement with the Company's principal shareholder. This note bears
interest at the rate of 9% per annum, and is due March 20, 2002.
d) The Company is obligated to its principal shareholder pursuant to a
non-interest bearing demand note in the amount of $9,804.
- 12 -
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 6 - COMMON STOCK
In September 2000, the Company completed a private placement through
which $1,252,500 was raised through debt and equity. The offering
consisted of the sale of 923,568 shares of common stock for $852,500
and a 6% convertible note payable, issued April 13, 2000, of $350,000.
The note was converted at $0.92 per share, the fair market value of the
Company's common stock. Additionally, 113,753 shares were issued at a
fair market value of $105,000 to induce participation in the offering.
This amount is included as financing costs in selling, general and
administrative expense.
The Company paid $73,150 in finder's fees, which is included at
December 31, 2000 in selling, general and administrative expenses.
In January 2001, the Company entered into a Subscription Agreement with
a third party through which the unrelated party acquired 600,000 shares
of the Company's common stock in exchange for the future payment of all
of the Company's expenses relating to its Form SB-2 Registration
Statement. The difference between the fair value of the shares issued
and the estimated expense had been charged to operations upon issuance
of the shares. An expense of $457,000 had been recorded. In the fourth
quarter of 2001, upon mutual consent, this agreement was cancelled and
the aforementioned expense and the issuance of shares reversed. No
expense had been paid by this third party.
As of October 4, 2001, the Company entered into a Subscription
Agreement with an unrelated third party to purchase 600,000 shares of
the Company's common stock at a purchase price of $50,000, which was
less than its fair value. Payments on this purchase are scheduled as
various milestones regarding the Company's registration statement
covering the shares are met. The Company had received $10,000 and
$30,000 at December 31, 2001 and September 30, 2002, respectively. The
balance of $20,000 is to be paid upon the earlier of the registration
statement being declared effective, or when the Company's securities
are otherwise publicly traded. In the view of the Securities and
Exchange Commission, this sale many not have been an offering exempt
from the registration requirements under the Securities Act of 1933.
The purchaser may have the right to rescind the purchase of its shares
and obtain repayment of the purchase price. If the purchaser obtains
rescission the Company would be required to return the purchase price
of up to $50,000. The proceeds received, all of which are subject to
rescission, have been shown outside of stockholders' equity in the
financial statements.
At December 31, 2001, the Company has recorded deferred offering costs
of $10,000 which represents amounts paid by this investor for costs
incurred by the Company relating to its Form SB-2. Further, the
difference between the fair value of the shares issued and the price
paid by this investor, or $502,000, is included in selling, general and
administrative expenses at December 31, 2001.
- 13 -
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 6 - COMMON STOCK (Continued)
During April 2002, the Company made an offering of $500,000 of
convertible 5% notes due December 31, 2005. These notes would have been
convertible from the date that the Company's common stock was first
publicly traded, at a 50% discount to market value, but not less than
$0.50 per share and, for the first thirty one days that the notes are
convertible, not more than $3.00 per share. After this initial period,
there was to be no ceiling in the conversion price. The Company
accepted a subscription for $200,000 of notes; however, on May 24,
2002, before any funds were received, the offering was canceled.
Approximately $4,800 of costs related to this offering have been
charged to expense.
On June 30, 2002, the Company issued 71,664 common shares for accrued
finder's fees expense in the amount of $66,150, which was incurred
during the fiscal year ending December 31, 2000.
In April 2001 the Company effected a stock split of its common shares
by issuing 3.7917519 newly issued shares of $.001 par value common for
each prior outstanding common share. The split increased the Company's
authorized $.001 par value common stock shares to 20,000,000.
NOTE 7 - OPTIONS AND WARRANTS
OPTIONS
In January 2000, the Company adopted an Incentive Stock Option Plan
("ISO") which provides for the issuance of options to purchase 450,000
shares of common stock. The plan was established to provide employee
incentives.
The Company will use the intrinsic value method (APB Opinion 25) to
account for its stock options granted to officers, directors, and
employees. Under this method, compensation expense is recorded over the
vesting period based on the difference between the exercise price and
quoted market price on the date the options are granted.
ISOs may not be granted to an individual to the extent that in the
calendar year in which such ISOs first become exercisable the shares
subject to such ISOs have a fair market value on the date of grant in
excess of $100,000. No option may be granted under the ISO after
January 2010 and no option may be outstanding for more than ten years
after its grant. Additionally, no option can be granted for more than
five years to a stockholder owning 10% or more of the Company's
outstanding common stock and such options must have an exercise price
of not less than 110% of the fair market value on the date of the
grant. To date, no options have been granted pursuant to the ISO plan.
- 14 -
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 7 - OPTIONS AND WARRANTS (Continued)
OPTIONS (CONTINUED)
On September 30, 2000, the Company granted to an employee an option to
purchase 180,000 shares of common stock, exercisable at $0.92 per
share. The options vested one-half on November 15, 2000, and the
balance on May 15, 2001, and expire in September 2005. The exercise
price equaled the fair value of the stock on the date of grant and,
accordingly, the Company has not recorded any compensation expense
related to these options.
The Company has granted options to members of its advisory board
covering an aggregate of 7,500 shares of common stock. The options have
an exercise price of $1.50 per share, vest one year from date of grant
and expire in 2004.
There were no stock option transactions during fiscal year ended
December 31, 2001.
A summary of stock option transactions is as follows:
YEARS ENDED
DECEMBER 31,
2001 2000
---- ----
Outstanding, beginning 180,000 -
Granted at an exercise price of $1.50 per share 7,500 -
Granted at an exercise price of $0.92 per share - 180,000
-------- ---------
Outstanding, ending 187,500 180,000
======== =========
Exercisable, ending 187,500 90,000
======== =========
The above number of options and exercise prices reflect the effect of
the stock split described in Note 5.
The Company accounts for its stock option transactions under the
provisions of APB No. 25. The following pro forma information is based
on estimating the fair value of grants based upon the provisions of
SFAS No. 123. The fair value of each option granted during the periods
indicated has been estimated as of the date of grant using the
Black-Scholes option pricing model with the following assumptions:
YEARS ENDED
DECEMBER 31,
--------------------------
2001 2000
Risk free interest rate 4% 5%
Life of the options 6 months 18 months
Expected dividend yield 0% 0%
Expected volatility 0% 0%
Weighted fair value of options granted $0.00 $0.25
-15-
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 7 - OPTIONS AND WARRANTS (Continued)
OPTIONS (CONTINUED)
Accordingly, the Company's pro forma net loss and net loss per share
assuming compensation cost was determined under SFAS No. 123 would have
been the following:
YEARS ENDED
DECEMBER 31,
--------------------------------
2001 2000
---- ----
Net loss $(1,078,267) $(788,163)
Net loss per basic share $(0.11) $(0.09)
Weighted average option price per share:
Granted $ 1.50 $ 0.92
Exercised - -
Cancelled - -
Outstanding at end of period 0.94 0.92
Exercisable at end of period 0.92 0.92
Weighted average remaining life
of options outstanding 45 months 57 months
WARRANTS
The Company has issued outstanding warrants to purchase 379,175 shares
of common stock. The warrants are exercisable on or before April 20,
2002 at an exercise price of $0.98 per share. The warrants expiration
date has been extended to April 20, 2005. The above number of warrants
and exercise prices reflect the effect of the stock split described in
Note 5.
NOTE 8 - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses primarily include
salaries, finder's fees, professional fees, web-site design and
financing costs.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company entered into a month-to-month lease for its office space,
at a monthly amount of $2,917 from January to April 2001, and $2,604
from May to July 2001 from a related entity, and from July to December
2001 from an unrelated entity (see Note 4). Rental expense was $32,289
and $29,150 for the years ended December 31, 2001 and 2000,
respectively. In June 2002, the Company canceled its lease and entered
into a new month-to-month lease agreement for its office space, at a
monthly amount of $2,815, and for the nine months ended September 30,
2002 and 2001 rent expense was $18,538 and $25,000, respectively.
-16-
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
The Company had an employment agreement with its Chief Operating
Officer with a one-year term commencing January 3, 2000 at a $75,000
base salary. There was a one-year option for 2001, at a base salary of
$100,000, which the Company elected to not exercise. The agreement also
had certain bonus incentive clauses that called for maximum additional
compensation of $25,000 per year and additional incentives in the form
of stock options. No additional compensation has been paid and the
options have been issued (see Note 6).
The Company entered into a one-year agreement in March 2000 with an
entity whereby a fee is to be paid for general business advice,
structuring of transactions and introduction to potential investors.
Additionally, if such entity introduced a potential acquisition target
and such acquisition is consummated, a fee of 1% of the transaction
value will be paid in stock and 1/2% of the transaction value in cash.
For the year ended December 31, 2001 and 2000, the Company paid $-0-
and $73,150, respectively. Included in accrued expenses at December 31,
2001 is $66,150, which will be paid to the entity in the second quarter
of 2002, with common stock at the fair market value when earned of
$0.92.
The Company has advertising agreements in place through which its
retail division advertises on the shopping network of two search
engines. The Company only pays its contractual advertising fees and
does not incur any fee to these companies when a sale of artwork is
made. One agreement was for the seven-month period from December 1,
2000 through June 30, 2001. The second agreement was for a twelve-month
period from December 1, 2000 through November 30, 2001. The Company is
currently negotiating new contracts.
The Company has signed as a participating advertiser with an online
clearinghouse operation. The clearinghouse consists of numerous
advertisers who desire to have their advertisement placed on websites
of other participants, known as publishers. The approved publishers
place a banner or other material of the advertiser on their website and
receive commissions of 15% based on sales generated through their site.
The advertiser is required to deposit funds with the clearinghouse
operator which is replenished periodically. The deposit is used to pay
the publisher's commission and a 3% commission to the clearinghouse
operator. There are over 4,500 publishers who may use the banner,
although the Company has no idea of the actual number placing its
banner on a site at any given instance.
The Company paid $6,206 in commissions during the twelve months ended
December 31, 2001, and for the nine months ended September 30, 2002
commission expense was $7,619.
-17-
ARTWORK AND BEYOND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000,
AND SEPTEMBER 30, 2002
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
On March 21, 2001, the Company entered into a sales and distribution
agreement to produce, package and distribute artwork for an unrelated
company. The Company will receive 60% of the sales price of the artwork
sold. The term of this agreement is one year, which can be renewed or
extended by the written mutual consent of both parties. At September
30, 2002, the Company was negotiating new terms for this agreement.
The Company, along with two shareholders and a related entity, are
defendants in an action commenced in June 2002 by Gottesman & Co., Inc.
in the Supreme Court of the State of New York for the county of New
York. The portion of the action against the Company is to recover
$125,000 that the plaintiff claims is due it as compensation pursuant
to a non-exclusive transaction agreement allegedly entered into in June
2001. That agreement obligated the Company to pay minimum commissions
of $125,000 on any transaction that Gottesman finds for the Company and
which closes after execution of the agreement. The plaintiff
specifically claims he is owed the compensation because it was
instrumental in the formation of Artwork and Beyond by Howard Blum and
Jay Camina, the shareholders, and because the Company entered into
transactions with Ross Galleries, the related entity. The Company does
not believe it has any liability to Gottesman because the agreement was
clearly for future transactions and the formation of Artwork and Beyond
and introduction to Ross Galleries occurred substantially before the
June 2001 agreement. Each of the other defendants had signed separate
agreements with the plaintiff and the course of actions against each of
them is separate from the claims against the Company. Outside counsel
for the Company has advised that at this stage in the proceedings he
cannot offer an opinion as to the probable outcome. The Company
believes that the claims are without merit and intends to defend itself
vigorously; however, the Company could incur substantial expenses which
would divert funds, if available, from operations. This expense burden
would be reduced because Ross Galleries and Messrs. Blum and Camina are
also defendants.
NOTE 10 - MAJOR VENDORS
The Company purchases substantially all of its artwork from two vendors
and has all of its artwork framed by one of the aforementioned vendors
(see Note 4). At December 31, 2001, the Company has included in accrued
expenses amounts payable to these vendors of $5,996 and $1,542,
respectively, and for the nine months ended September 30, 2002 amounts
payable to these vendors was $5,204.
-18-
---------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE
INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF THIS DOCUMENT.
ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN OR THAT ARE
CURRENTLY DEEMED IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS
OPERATIONS. THE RISKS AND UNCERTAINTIES DESCRIBED IN THIS DOCUMENT DISTRIBUTION
OF 1,000,000 SHARES OF AND OTHER RISKS AND UNCERTAINTIES, WHICH WE MAY FACE IN
THE FUTURE COMMON STOCK WILL HAVE A GREATER IMPACT ON THOSE WHO PURCHASE OUR
COMMON STOCK.
THESE PURCHASERS WILL PURCHASE OUR COMMON STOCK AT THE MARKET PRICE OR AT A
PRIVATELY NEGOTIATED PRICE AND WILL RUN THE RISK OF LOSING THEIR ENTIRE
INVESTMENT.
----------------------------
Until (insert date), all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
--------------------------------------------------------------
ARTWORK AND BEYOND, INC.
________________
PROSPECTUS
________________
_________, 2002
--------------------------------------------
[ALTERNATIVE PAGE FOR SELLING SECURITYHOLDERS PROSPECTUS]
PROSPECTUS SUBJECT TO COMPLETION; DATED ________, 2001
180,000 SHARES OF COMMON STOCK
OF
ARTWORK AND BEYOND, INC.
We are registering 180,000 shares of our common stock for sale by
Dutchess Partners. This shareholder is generally referred to throughout this
prospectus as "selling securityholder."
The selling stockholder will offer its shares at a price of five
cents per share prior to our common stock being quoted on the OTCBB or other
exchange. After this the shareholder may make sales on the open market or in
privately negotiated transactions and at prices greater or less than five cents
per share. We will not receive any of the proceeds from the sales of shares by
the selling securityholder.
No public trading market for our common stock exists. We anticipate
that if a trading market develops, our common stock will initially be traded on
the over-the-counter market after this offering.
------------------------------------
Our principal executive offices are located at 331 Dante Court,
Holbrook, New York 11741. Our telephone number is (631) 471-0065.
------------------------------------
OUR COMMON STOCK BEING OFFERED BY THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK. YOU SHOULD READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 6
BEFORE YOU DECIDE TO PURCHASE ANY COMMON STOCK.
------------------------------------
Neither the Securities and Exchange Commission nor any state
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Nor have they made, nor will they make,
any determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
The date of this Prospectus is ________, 2002
TABLE OF CONTENTS
PROSPECTUS SUMMARY 3
Risk factors 6
Forward Looking Information 7
Use of proceeds 7
Dilution 7
Directors, Executive Officers, Promoters and Control Persons 10
Security ownership of certain beneficial owners and management 16
Our business 17
Property 24
Legal Proceeding 24
Plan of Operations 25
Management Discussion and Analysis 25
Certain relationships and related transactions 28
Description of securities 28
Disclosure of commission position on indemnification
for securities act liabilities 30
Concurrent Offering
Selling Securityholder
Plan of distribution 31
Legal matters 32
Experts 32
Available Information 32
Financial Statements
[Inside Front Cover]
A-2
[ALTERNATE PAGE FOR SELLING SECURITYHOLDER PROSPECTUS]
THE OFFERING
Shares offered by Selling
Securityholder................................................. 180,000 shares of common stock.
Plan of distribution................................................ The offering of our shares of common stock is
being made by a shareholder. Shares will be
offered at five cents per share prior to shares of
our common stock being quoted on the bulletin
board or other exchange. After quotation, the
shareholder may make sales on the open market or
in privately negotiated transactions at prices
greater or less than five cents. The selling
shareholder has indicated it only intends to sell
the shares when the common stock is quoted. Then
sales may be made by selling securityholder in the
open market or in privately negotiated
transactions at prices greater or less than five
cents.
Use of proceeds..................................................... Artwork and Beyond will not receive any proceeds
from the sale of shares owned by the selling
securityholder.
CONCURRENT OFFERING
Shares offered by Artwork and Beyond............ 1,000,000 shares of common stock.
Plan of distribution.............................................. Artwork and Beyond will offer and sell 1,000,000
shares for cash at a price of $.05 per share.
Use of proceeds....................................................
Artwork and Beyond will receive the proceeds to
be derived from the sale of an aggregate of
1,000,000 shares of its common stock.
A-3
[ALTERNATE PAGE FOR SELLING SECURITYHOLDER PROSPECTUS]
USE OF PROCEEDS
This prospectus is part of a registration statement that permits the
shareholder of Artwork and Beyond who is identified in this prospectus to sell
its shares of Artwork and Beyond common stock in the open market or in privately
negotiated transactions. This shareholder is referred to throughout this
prospectus as the "selling securityholder". As such, Artwork and Beyond will not
receive any proceeds from this offering.
A-4
[ALTERNATE PAGE FOR SELLING SECURITYHOLDER PROSPECTUS]
CONCURRENT OFFERING
The registration statement of which this prospectus is a part also
includes a prospectus with respect to the offering by Artwork and Beyond for
cash of 1,000,000 shares of Artwork and Beyond common stock. This distribution
may have a material adverse effect on the market price of the common stock
offered by the selling securityholder.
PLAN OF DISTRIBUTION
Shares will be offered at five cents per share prior to our shares of
common stock being quoted on the bulletin board or other exchange. The selling
shareholder has indicated it only intends to sell the shares when the share of
our common stock are quoted. Sales may then be made by selling securityholder in
the open market or in privately negotiated transactions at prices greater or
less than five cents per share at prices, which may be greater or less than five
cents per share. Alternatively, the selling securityholder may from time to time
offer those shares through underwriters, brokers, dealers, agents or other
intermediaries at market prices which may be greater or less than five cents per
share. The selling securityholder as of the date of this prospectus has advised
us that at that time there were no underwriting or distribution arrangements
entered into with respect to the common stock offered hereby. The distribution
of the common stock by the selling securityholder may be effected in one or more
transactions that may take place on the OTC Electronic Bulletin Board (including
one or more block transactions) if our stock is traded on the OTC Bulletin Board
through customary brokerage channels, either through brokers acting as agents
for the selling securityholder, or through market makers, dealers or
underwriters acting as principals who may resell these shares on the OTC
Electronic Bulletin Board; in privately-negotiated sales; by a combination of
such methods; or by other means. These transactions may be effected at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at other negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the selling
securityholder in connection with sales of the common stock.
Any securities covered by this prospectus, which qualify for sale
pursuant to Rule 144 promulgated under the Securities Act may be sold under Rule
144 rather than pursuant to this prospectus. The selling securityholder has
advised us that it has not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of their
securities. There is no underwriter or coordinating broker acting in connection
with the proposed sale of shares by the selling securityholders.
Although the common stock covered by this prospectus is not currently
being underwritten, the selling securityholder or its underwriters, brokers,
dealers or other agents or other intermediaries that may participate with the
selling securityholder in any offering or distribution of common stock may be
deemed "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any profits realized or commissions received
by them may be deemed underwriting compensation thereunder.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), any person engaged in a
distribution of the common stock offered hereby may not simultaneously engage in
market making activities with respect to the common stock for a period of up to
five days preceding such distribution. The selling securityholder will be
subject to the applicable provisions of the Exchange Act and the rules and
regulations promulgated thereunder, including without limitation Regulation M,
which provisions may limit the timing of purchases and sales by the selling
securityholder.
A-5
We have advised the selling stockholder that during such time as it
may be engaged in a distribution of the shares, it is required to comply with
Regulation M under the Securities Exchange Act. With certain exceptions,
Regulation M prohibits any selling stockholder, any affiliated purchasers and
any broker-dealer or other person who participates in such distribution from
bidding for or purchasing, or attempting to induce any person to bid for or
purchase, any security which is the subject of the distribution until the entire
distribution is complete. Regulation M also prohibits any bids or purchases made
in order to stabilize the price of a security in connection with the
distribution of that security. The foregoing restrictions may affect the
marketability of the shares.
The selling securityholder is subject to the applicable provisions of
the Exchange Act, including, without limitation, Rules 10b-5 and Regulation M
thereunder. Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the common stock may not simultaneously
purchase such securities for a period beginning when such person becomes a
distribution participant and ending upon such person's completion of
participation in a distribution.
In addition, in connection with the transactions in the common stock,
we and the selling securityholder, will be subject to applicable provisions of
the Exchange Act and the rules and regulations under that Act, including,
without limitation, the Rules set forth above, and in so far as we and the
selling securityholders are distribution participants, Regulation M. These
restrictions may affect the marketability of the common stock. The selling
securityholder will pay all commissions and certain other expenses associated
with the sale of the common stock.
In order to comply with certain state securities laws, if applicable,
the common stock offered hereby will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In certain states, the common stock
may not be sold unless they are registered or qualified for sale in such state,
or unless an exemption from registration or qualification is available and is
obtained.
All of the expenses of this offering are being paid for by the
Company. See "Certain Relationships and Related Transactions". However, any
brokerage or underwriting commissions and similar selling expenses, if any,
attributable to the sale of the common stock will be borne by the Company.
We have agreed to indemnify the selling securityholder against
certain liabilities, including liabilities under the Securities Act of 1933, or
to contribute to payments to which such securityholder may be required to make
in respect thereof.
A-6
[ALTERNATE PAGE FOR SELLING SECURITYHOLDER PROSPECTUS]
SELLING SECURITYHOLDER
All of the 180,000 shares of Artwork and Beyond common
stock being offered by this selling securityholder's
prospectus are owned by and registered in the name of Dutchess Partners, a
partnership, whose address is 225 Mooney Hill Road, Holmes, New York 12531.
NAME OF NO. OF SHARES OWNED NO. OF SHARES OWNED
STOCKHOLDER AFTER OFFERING
------------ -------------------- -------------------
Dutchess Partners 600,000 420,000
The selling securityholder may be deemed an underwriter under Section
2(11) of the Securities Act of 1933.
A-7
[ALTERNATIVE PAGE FOR SELLING SECURITYHOLDER PROSPECTUS]
- ---------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE
INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF THIS DOCUMENT.
ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN OR THAT
ARE CURRENTLY DEEMED IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS
OPERATIONS. THE RISKS AND UNCERTAINTIES DESCRIBED IN THIS DOCUMENT 180,000
SHARES OF AND OTHER RISKS AND UNCERTAINTIES WHICH WE MAY FACE IN THE FUTURE
COMMON STOCK WILL HAVE A GREATER IMPACT ON THOSE WHO PURCHASE OUR COMMON STOCK
FROM THE SELLING SECURITYHOLDER. THESE PURCHASERS WILL PURCHASE OUR COMMON STOCK
AT THE MARKET PRICE OR AT A PRIVATELY NEGOTIATED PRICE AND WILL RUN THE RISK OF
LOSING THEIR ENTIRE INVESTMENT.
Until (insert date), all dealers that effect transactions in these
securities, whether or not participating in this offering, may be PROSPECTUS
required to deliver a prospectus. This is in addition to the ________________
dealers' obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
-----------------
------------------------------------------------------------------
ARTWORK AND BEYOND, INC.
---------------
___________, 2002
-------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "GCL")
empowers a corporation to indemnify its directors and officers and to purchase
insurance with respect to liability arising out of the performance of their
duties as directors and officers. The GCL provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of stockholders or otherwise.
Article Sixth of our Certificate of Incorporation eliminates the
personal liability of directors to the fullest extent permitted by Section 102
of the GCL. Our by-laws provide for indemnification of all persons whom it shall
have the power to indemnify pursuant to Section 145 of the GCL.
The effect of the foregoing is to require Artwork and Beyond to the
extent permitted by law to indemnify the officers and directors of Artwork and
Beyond for any claim arising against such persons in their official capacities
if such person acted in good faith and in a manner that he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers or persons
controlling Artwork and Beyond pursuant to the foregoing provisions, we have
been informed that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
We do not currently have any liability insurance coverage for its
officers and directors.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses in connection
with the sale of the securities being registered. All amounts are estimates
except the SEC registration fee:
SEC registration fee $ 375.00
Printing and engraving expenses $10,000.00
Accounting fees and expenses $20,000.00
Legal fees and expenses $60,000.00
Transfer agent's fees and expenses $ 5,000.00
Miscellaneous $10,000.00
Total $95,375.00
II-1
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth below is information regarding the issuance and sales of
Artwork and Beyond 's common stock without registration during the last three
years. Other than as set forth below, no such sales involved the use of an
underwriter and no commissions were paid in connection with the sale of any
securities.
During the fourth quarter of 1999, we issued 7,583,504 shares of
common stock to Howard Blum, Chief Executive Officer and Co-Chairman of the
Board and Jay Camina Co-Chairman of the Board, the founder as of the Company we
relied on the exemption afforded by Section 4(2) of the Securities Act.
During the third quarter of 2000, we issued an aggregate of
1,416,496 shares of common stock, at $.92 per share (pre-split), to Christopher
Fiore, Timothy M. Schlameuss, George P. Warren, Giltner B. Stevens and Albert
Pick III Trust, accredited individual investors. Prior to the issuance of these
shares we borrowed $350,000 from one of the investors, Giltner B. Stevens, and
issued our note or debenture for this amount. The issuance of the 1,416,946
shares consisted of (a) the sale of 923,568 shares of common stock for $852,500
at $.92 per share (per split) and (b) 113,753 shares issued at a fair market
value of $105,000 to induce participation in the offering and (c) 379,175 shares
pursuant to the conversion of the note or debenture of $350,000 principal
amount. We believe all the shares, as well as the debentures, were issued
pursuant to the exemption from the registration requirements of Securities Act
pursuant to Section 4.2.
During the third quarter of 2000, we issued warrants to purchase an
aggregate of 379,175 shares of common stock at a purchase price of $.98 per
share. We believe the warrants were issued pursuant to the exemption from the
registration requirements of the Securities Act pursuant to Section 4.2.
In January 2001 we entered into a subscription agreement to sell
600,000 shares to Biofarm for $600.00. In additional Biofarm agreed to pay all
of our expenses relating to this form SB-2. The parties agrees to terminate the
transaction and Biofarm is not a shareholder and its shares were cancelled. As
of October 2001, we entered into a subscription agreement with Dutchess Partners
for the sale of 600,000 shares for $50,000 payable in installments. None of the
shares were issued in October 2001 but all were issued in February 2002. We
believe the shares were issued pursuant to the exemption from the registration
requirements of Securities Act pursuant to Section 4.2.
In June 2002 we issued 71,664 shares to a finder of our private
placement as a fee pursuant to an arrangement agreed to in 2000. We believe the
shares were issued pursuant to the exemption from the registration requirements
of the Securities Act pursuant to Section 4.2 thereof.
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ITEM 27. EXHIBITS
EXHIBIT
NUMBER NAME
3.1 Restated Certificate of Incorporation*
3.2 Bylaws**
5.1 Opinion of Reed Smith**
10.1 Supply Agreement, dated as of November 1, 1999, between Artwork and
Beyond and Ross Galleries. Inc.*
10.1a New Supply Agreement, dated May 29, 2002 between Artwork and Beyond,
Inc. and Ross Galleries, LLC
10.1b Supply Agreement between Artwork and Beyond, Inc. and Lieberman's
Gallery, LLP
10.2 Lease Agreement, between Ross Galleries and Artwork and Beyond, Inc.*
10.3 Subscription Agreement, dated January 22, 2001, between Artwork and
Beyond, Inc. and Biofarm, Inc.*
10.4 Employment Agreement, dated December 17, 1999, between Artwork and
Beyond, Inc. and Jason Norbeto*
10.5 2001 Stock Option Plan of Artwork and Beyond.*
10.6 Subscription Agreement between Artwork and Beyond, Inc. and Dutchess
Partners.*
10.7 Form of Subscription Agreement for convertible note offering.*
23.1 Consent of Merdinger, Fruchter, Rosen & Company, P.C., independent
certified public accountants.*
23.2 Consent of Counsel (see Exhibit 5.1)
*Filed herewith. All other exhibits have previously been filed.
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(a) To include any prospectus required by section 10(a)(3)
of Securities Act.
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the commission pursuant to Rule 424(B) if, in the aggregate,
the changes in volume and price represent no more than 20% change
in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
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(c) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(d) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Artwork and Beyond pursuant
to the above described provisions, or otherwise, Artwork and
Beyond has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
In the event that a claim for indemnification against these
liabilities (other than the payment by Artwork and Beyond issuer
of expenses incurred or paid by any director, officer or
controlling person of the small business issuer in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, Artwork and Beyond issuer will,
unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of the issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of New York, State of New
York, on January 6, 2003.
ARTWORK AND BEYOND, INC.
By: /S/ HOWARD BLUM
---------------------------------
Name: Howard Blum
Title: Chief Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Act this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
NAME TITLE DATE
- ---- ----- ----
/S/ HOWARD BLUM Chief Executive Officer, January 6, 2003
- -------------------- Chairman of the Board,
Howard Blum Chief Financial Officer,
Principal Accounting
Officer
/S/ STEVEN FRIEFELD Director January 6, 2003
- --------------------
Steven Friefeld
/S/ J.R. LESHUFY Director January 6, 2003
- --------------------
J. R. LeShufy