As Filed with the Securities and Exchange Commission on October 12, 2001
Registration No.___-______
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
AMENDMENT 1 TO
FORM SB-2, REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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Anagram Plus, Inc. Prodijeux, Inc
(Name of small business issuer (Name of small business issuer
in its charter) in its charter)
Delaware Canada
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) Incorporation or organization)
3944 3944
(Primary Standard Industrial (Primary Standard Industrial
Classification Number) Classification Number)
65-1045323 N/A
(I.R.S. Employer Identification (I.R.S. Employer Identification
Number) Number)
Anagram Plus, Inc. Prodijeux, Inc.
2700 N. Military Trail 1751 Richardson Street
Suite 100 Suite 5507
Boca Raton, FL 33731 Montreal, Quebec H3K 1G6
(561) 241-3621 (514) 932-4744
(Address, including zip code, and telephone number, including area code, of each
registrant's principal offices)
Frederick M. Mintz, Esq.
Mintz & Fraade, P.C.
488 Madison Avenue
New York, New York 10022
Telephone No.: (212) 486-2500
Facsimile No.: (212) 486-0701
(Name, address and Telephone
number of agent for service)
----------
Approximate date of proposed sale to 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 a post-effective amendment filed pursuant to Rule 462 (c)
under the Securities Act, pleased 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 pursuant to Rule 434,
please check the following box. |_|
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.
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum Amount of
securities to Amount to be Offering Price Aggregate registration
be registered registered Per Share(1) Offering Price fee
--------------------------------------------------------------------------------
Common Stock,
par value
$0.001(2) 236,000 $1.00 $236,000 $59.00
--------------------------------------------------------------------------------
Common Stock,
par value
$0.001(3) 2,500,000 $1.00 $2,500,000 $625.00
--------------------------------------------------------------------------------
Total
Registration
Total 2,736,000 Fee $684.00
--------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
(2) Offered by the persons named in this prospectus under the caption "Selling
Stockholders".
(3) Offered by us.
This prospectus relates to 2,736,000 shares of our common stock, of which
236,000 shares are owned by the persons named in this prospectus under the
caption "Selling Stockholders". The shares of our common stock may be sold
directly or through brokers or dealers. The 236,000 shares may be offered from
time to time by the selling stockholders through ordinary brokerage transactions
in the over-the-counter market, in negotiated transactions or through other
commonly used methods to trade publicly available stock, at market prices
prevailing at the time of sale or negotiated prices. Up to 2,500,000 shares of
our common stock are being sold by us, on a self-underwritten, best efforts
basis, with no minimum. Our offering will commence on the date of this
prospectus and will continue until the earlier of July 31, 2002, all of the
shares offered are sold, or we otherwise terminate the offering.
We will bear all the costs and expenses associated with the preparation
and filing of this registration statement.
ii
SUBJECT TO COMPLETION, DATED October 12, 2001
PROSPECTUS
2,736,000 shares
Anagram Plus, Inc.
Common Stock
$1.00 per share
This is the first public offering of Anagram's securities. The common
stock available for sale as a result of this prospectus will be sold by Anagram
and current stockholders. Anagram will not receive any money from the sale of
its common stock by the selling stockholders.
Prior to this offering, there has been no public market for the common
stock. We have applied to have the common stock traded on the OTC Bulletin
Board, which is maintained by the National Association of Securities Dealers,
Inc., after this registration statement is declared effective. The shares will
be priced based upon bid and ask quotes submitted by broker-dealers.
The offering will commence on the date of this prospectus and will
continue until the earlier of July 31, 2002, all of the shares offered are sold,
or we otherwise terminate the offering.
----------
An investor should read the Risk Factors section of this prospectus,
commencing on page 3 before deciding whether to invest in these securities.
----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 2001
iii
TABLE OF CONTENTS
Page
----
Prospectus summary...........................................................1
Summary financial information................................................2
Risk factors.................................................................3
Use of proceeds..............................................................9
Capitalization...............................................................9
Dilution....................................................................10
Management's discussion and analysis of financial
condition and results of operations.......................................10
Business....................................................................12
Dividend policy.............................................................13
Employees...................................................................14
Management..................................................................14
Executive compensation......................................................15
Certain relationships and transactions......................................16
Principal stockholders......................................................17
Plan of distribution........................................................17
Description of the securities...............................................18
Legal matters...............................................................21
Experts.....................................................................21
Available information.......................................................22
Index to financial statements..............................................F-I
iv
Summary
Our business
Anagram Plus, Inc. is a fifty one (51%) percent stockholder of Prodijeux,
Inc. Prodijeux was founded in October 1998, and is a Canadian corporation based
in Montreal, Quebec, Canada. Prodijeux specializes in the creation and
development of interactive "edutainment" products. Edutainment is a term
utilized in the Toy and Game Industry, which refers to products which provide an
educational experience through an entertainment medium. Edutainment products are
available in the form of traditional family board games, CD-ROM and online
multi-player games. Prodijeux has commenced distributing its edutainment
products through traditional retail outlets, such as toy stores, bookstores and
specialty learning stores as well as through its own and Anagram's web site.
Prodijeux has entered into a written agreement with Northern Group pursuant to
which, Northern Group is its U.S. sales manager. Northern Group also acts as a
sales representative for the states of Illinois, Wisconsin and Minnesota. Sales
in other states will be handled via other sales agencies as arranged by Northern
Group. Prodijeux has begun to launch the first in its line of edutainment
products, WordXchange(R), a word game intended by Prodijeux's management to
rival Scrabble(R). WordXchange(R) is a brain-twisting word game, which has two
versions: an advanced edition (ages 10 and up) and a junior edition (ages 5 and
up), allowing it to be stimulating and entertaining for a wide range of
consumers. The advanced edition is available in English under the name
WordXchange(R), and in French, under the name AnagramPlus. AnagramPlus,
introduced to the public in the fall of 2000 at the International Book Fair in
Montreal, was recently exhibited at the Paris International Toy and Game
Festival (Paris International Toy Fair), and at the American Toy and Game
Festival (American International Toy Fair) in New York in February 2001. The
revenues for Prodijeux for the most recent audited period (October 1, 2000 to
June 30, 2001) were $24,487. The losses for Anagram for the most recent audited
period (January 1, 2001 to June 30, 2001) were $109,339. Prodijeux's losses for
the most recent audited period (October 1, 2000 to June 30, 2001) were $241,703.
Management believes that Prodijeux will become profitable through the
development and sale of its products, and, therefore increase the value of
Anagram through its investment in Prodijeux.
Neither Anagram nor Prodijeux will receive any proceeds from the sale of
the 236,000 shares of our common stock by the selling stockholders. Anagram will
use the net proceeds of the offering of 2,500,000 shares of its common stock to
fund, pursuant to a loan agreement, Prodijeux's working capital and general
corporate purposes including but not limited to product development, selling and
marketing. No public market for our securities existed prior to this offering. A
total of up to 2,736,000 shares may be sold based upon this prospectus.
Anagram's executive offices are located at 2700 N. Military Trail, Suite
100, Boca Raton, FL 33431. The telephone number is 561-241-3621 and the
facsimile number is 561-241-3055. The executive offices of Prodijeux are located
at 1751 Richardson Street, Suite 5507, Montreal, Quebec, H3K 1G6, Canada. The
telephone number is 514-932-4744.
1
Summary financial information
Anagram was formed on October 1, 2000 and is a fifty one (51%) stockholder
of Prodijeux. The following financial data of Anagram and Prodijeux should be
read in conjunction with our and Prodijeux's financial statements, which are
included in this prospectus. The audited financial data of Anagram has been
provided from January 1, 2001 to June 30, 2001 and from October 1, 2000
(inception) through December 31, 2000. The audited financial data of Prodijeux
has been provided from October 1, 2000 to June 30, 2001 and from October 1, 1999
to September 30, 2000..
Anagram Plus, Inc.
June 30, 2001 December 31, 2000
------------- -----------------
Working capital .................... $(253,376) $(143,970)
Total assets ....................... $ 225,507 $ 110,143
Total liabilities .................. $ 253,915 $ 144,886
Stockholders' deficit .............. $ (28,408) $ (34,743)
Prodijeux, Inc.
June 30, 2001 September 30, 2000
------------- ------------------
Working capital .................... $ 77,715 $ (13,058)
Total assets ....................... $ 114,723 $ 6,666
Total liabilities .................. $ 347,530 $ 61,467
Stockholders' deficit .............. $(232,807) $ (54,801)
2
Risk factors
An investment in our common stock involves a high degree of risk. If any
of the following risks actually occur, our business, financial condition and
operations will be materially affected.
Anagram is a company whose primary asset is a majority interest in Prodijeux, a
company with limited operations, and there can be no assurance that either
Anagram or Prodijeux will ever become profitable.
Anagram is a company whose primary asset is a majority interest in
Prodijeux. Prodijeux has limited operations. At this time, Anagram does not
contemplate commencing active operations directly. The company in which Anagram
has an investment, Prodijeux, is entering a highly competitive market. You
should be aware of the difficulties which Prodijeux will encounter because it is
a recently formed company and has only recently commenced operations, including,
but not limited to, competition and unanticipated costs and expenses. There can
be no assurance that Anagram will ever realize a positive net cash flow from its
investment in Prodijeux. If Prodijeux's business and development plans prove to
be unsuccessful, stockholders may lose all or a substantial part of their
investments.
Anagram has no limitation upon its ability to sell its interest in Prodijeux,
and Anagram may sell its interest in Prodijeux at a loss.
Anagram may sell its interest in Prodijeux. There is no guarantee that Prodijeux
will ever become profitable. If Prodijeux does not realize a profit at some
point in the future, Anagram may decide to sell its interest in Prodijeux, and
may sell its interest at a loss.
Anagram's primary asset is a 51% interest in Prodijeux, which may require, and
Anagram may not be able to obtain, additional financing to meet its capital
requirements.
Prodijeux will need additional financing to meet its capital requirements
for product development, administrative expenses and other costs. Prodijeux
currently has no arrangements to obtain additional financing and Prodijeux will
be dependent upon sources such as: future earnings, the availability of funds
from private sources including, but not limited to, loans and additional private
3
placements, and the availability of funds through an additional public offering.
In view of its lack of an operating history, Prodijeux's ability to obtain
additional funds is limited. Additional financing may only be available, if at
all, upon terms which may not be commercially advantageous. If adequate funds
are not available from operations or additional sources of financing,
Prodijeux's business will be materially adversely affected.
There can be no assurance that Anagram or Prodijeux will ever achieve
profitability.
There can be no assurance that Anagram or Prodijeux will ever achieve
profitability. Revenues and operating results may fluctuate from quarter to
quarter and from year to year due to a combination of factors, including, but
not limited to, Prodijeux's cost of production, sales of its products and
variations in expenditures for personnel and marketing. Prodijeux may incur
significant expenditures to fund research and development of new products or
improvements to their existing edutainment products. This would adversely affect
Anagram's ability to generate a profit. Anagram may never be able to achieve
profitability on a quarterly or annual basis. If Anagram does not, business will
be adversely affected and potential investors will lose all or substantially all
of their investment.
Qualified Report of Independent Auditors
Our independent auditor's report on the our financial statements includes
an explanatory paragraph stating that the accompanying financial statements have
been prepared assuming that we will continue as a going concern. Our operations
have generated losses and cash flow deficiencies from inception, which raises
substantial doubt about our ability to continue as a going concern. We may be
unable to continue as a going concern.
Anagram is dependent upon the introduction and success of a new game
WordXchange(R), and there can be no assurance that that WordXchange will ever
achieve any significant market acceptance.
Anagram's success depends upon the value of Prodijeux as well as any
dividends paid on Prodijeux's common stock. Prodijeux's success depends largely
upon its new edutainment products, WordXchange(R) and the Junior Edition. There
can be no assurance that WordXchange(R) will achieve any significant degree of
market acceptance, or that such acceptance will be sustained for any meaningful
period. The failure of WordXchange(R) to achieve or sustain market acceptance
would have a material adverse effect upon our business, operating results and
financial condition.
The Edutainment industry is extremely competitive, and there is no guarantee
that competitors with superior resources will not bring new, better and cheaper
edutainment games to the market more quickly than Anagram's primary interest,
Prodijeux.
Competitors with superior resources may be able to bring new, better and
cheaper edutainment games to the market more quickly than Prodijeux, thereby
gaining a competitive edge over Prodijeux. Anagram believes that the quality of
Prodijeux's goods and services combined with the expertise of their combined
management should give Prodijeux a competitive advantage. However, there can be
no assurance that Prodijeux will be able to compete successfully or that
4
competitive pressures faced by Prodijeux will not have a material adverse effect
upon its business, operating results and financial condition. Anagram will not
be directly engaged in any part of Prodijeux's business including, but not
limited to, development, production and sales of WordXchange(R).
WordXchange(R)'s major competition in the word game category is Scrabble(R).
Scrabble(R) has been the leader in word games sales for more than 50 years.
WordXchange(R)'s success will depend heavily upon its ability to compete with
Scrabble(R) and other word games.
Anagram's success is dependent upon the key personnel of Prodijeux, and the
potential loss of such key personnel would have a material adverse effect upon
Prodijeux, thereby affecting Anagram adversely.
Prodijeux's success depends to a significant extent upon the performance
and continued services to Prodijeux of Michael Chiarore, co-founder and
President of Prodijeux, and Rodolphe Charpentier, Prodijeux's co-founder,
Vice-President of Marketing and Creative Director of Research and Development.
Michel Chiarore is in charge of Prodijeux's operations, manufacturing and
distribution of Prodijeux's product line, and is experienced in dealing with
suppliers and buyers. Rodolphe Charpentier is the creator of the WordXchange(R)
game and has seventeen years of experience in the design and communications
fields.
The loss of services of either Mr. Chiarore or Mr. Charpentier would have
a material adverse effect upon Prodijeux's business and its prospects.
Our majority shareholder could exert significant influence over matters
requiring stockholder approval.
ADC Development is Anagram's initial shareholder and owns 6,000,000 shares
of our common stock and is its majority shareholder. Accordingly, ADC
Development will be able to exert complete control over matters requiring
approval by Anagram's stockholders, including, but not limited to, the election
of directors and the approval of mergers or other business combinations. In
addition, a company owned by Anagram's president, Paul Michelin and his wife,
owns 83% of ADC Development.
A portion of Prodijeux's future business plans will depend upon its Internet
marketing strategy and its business, and thereby Anagram's business would be
adversely effected if use of the Interest fails to grow in the future.
Prodijeux plans to take full advantage of the potential of the Internet
through development of a Website to promote Prodijeux's product, WordXchange(R).
A portion of Prodijeux's business depends upon its Internet marketing strategy
and its business will be adversely effected if use of the Internet fails to grow
in the future.
The market for Anagram's securities is unsure and may be volatile
5
There is no current market for Anagram's securities and there can be no
assurance that a market will exist in the future. In addition, if a trading
market does develop, there can be no assurance that Anagram's common stock can
be resold either at or near its original trading prices. Anagram intends to
arrange to list its common stock on the NASD Bulletin Board, which is maintained
by the NASD. However, there can be no assurance that Anagram will qualify, or if
it qualifies will continue to qualify, for such listing.
Prodijeux conducts business and has operations in countries other than the
United States and any changes in international markets or currencies may
materially affect its operations, and consequently Anagram's value.
Prodijeux conducts its business and maintains, and intends to maintain,
ongoing operations in the United States, Canada, Asia, and other international
markets. Fluctuations in the foreign exchange rates between the United States
dollar and these other countries could have an adverse affect upon Prodijeux's
operating results in the future. Prodijeux may seek to limit its exposure to the
risk of currency fluctuations by engaging in foreign currency transactions,
which could expose us to substantial risk of loss. Prodijeux's management has
limited experience in managing international transactions and has not yet
formulated a strategy to protect us against currency fluctuations. There can be
no assurance that fluctuations in foreign currency exchange rates will not have
a significant adverse impact upon Prodijeux's future operating results.
Prodijeux's and Anagram's success is dependent upon independent third parties to
manufacture the product.
Prodijeux does not intend to conduct manufacturing operations on a
continuing basis and will be dependent upon independent third parties to
manufacture and ship WordXchange(R) and the Junior Edition. Prodijeux expects to
continue to be dependent upon such manufacturers for the foreseeable future.
These manufacturers will be responsible for timely and cost-effective
manufacturing, which may affect Prodijeux's ability to cost-effectively compete
with other similar products. Therefore, Prodijeux is dependent upon the
continued viability and financial stability of these manufacturers. In addition,
these third party manufacturers are expected to produce WordXchange(R) and other
products to specifications supplied by Prodijeux. However, there can be no
assurance that these instructions will be followed by the manufacturers.
Reliance upon suppliers, as well as industry supply conditions, generally
involves several risks, including the possibility of defective parts or
components, increase in component costs and reduced control over delivery
schedules, any and all of which would adversely affect Prodijeux's financial
results. Although Anagram is the majority shareholder of Prodijeux, Anagram has
no control over the costs of production and manufacture by third parties. Delays
or rising costs in the production of WordXchange(R) would have a material
adverse effect upon Anagram's business and prospects.
There can be no assurance that Anagram will pay any dividends on its common
stock.
There can be no assurance that Anagram will have sufficient earnings to
pay any dividends
6
with respect to the common stock. Moreover, even if Anagram has sufficient
earnings, Anagram is not obligated to declare dividends with respect to the
common stock. The future declaration of any cash or stock dividends will be in
the sole and absolute discretion of our Board of Directors and will depend upon
our earnings, capital requirements, financial position, general economic
conditions and other pertinent factors. It is also possible that the terms of
any future debt financing may restrict the payment of dividends. To date,
Anagram presently intends to retain earnings, if any, for the development and
expansion of its business.
Prodijeux expects to incur significant losses for the foreseeable future and
there can be no assurance that Prodijeux or Anagram will ever achieve
profitability.
Prodijeux is still in the process of developing its products and therefore
it expects to incur significant losses on both a quarterly and an annual basis
for the foreseeable future. Prodijeux and Anagram are expecting losses to
continue until such time as WordXchange(R) is established, is being widely
marketed and/or Prodijeux enters into a contract with toy stores or other
retailer for distribution of WordXchange(R).
Anagram may be subject to the Securities and Exchange Commission's "penny stock"
rules if our common stock sells below $5.00 per share.
Anagram's shares may now and in the future be subject to the penny stock
rules under the Securities Exchange Act of 1934 which regulate broker-dealer
practices for transactions in "penny stocks." Penny stocks generally are equity
securities with a price of less than U.S. $5.00. The penny stock rules require
broker-dealers to deliver a standardized risk disclosure document prepared by
the SEC which provides information about penny stocks and the nature and level
of risks in the penny stock market. The broker-dealer must also provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson, and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information must be given to the customer orally or in writing
prior to completing the transaction and must be given to the customer in writing
before or with the customer's confirmation.
In addition, the penny stock rules require that prior to a transaction,
the broker and/or dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction.
The penny stock rules are burdensome and may reduce purchases of any
offerings and reduce the trading activity for Anagram's common shares. As long
as Anagram's common shares are subject to the penny stock rules, the holders of
such common shares may find it more difficult to sell their securities.
Conflicts may exist with certain of Anagram's officers and directors, which may
cause them to give priority to other matters over the needs of Anagram, which
may materially affect our operations
7
There are several conflicts associated with Anagram's officers and
directors. These conflicts include, engaging in other businesses similar or
dissimilar to ours and allocating their time and services between us and the
other entities with which they are involved. Robert Michelin, is a member of
both Anagram's Board of Directors and Prodijeux's Board of Directors. In
addition to sitting on Anagram's Board of Directors and Prodijeux's Board of
Directors, Paul Michelin is a member of the Board of Directors of a number of
other companies.
Unforeseen price increases in raw materials may result in the increase in the
estimated cost of production for WordXchange(R), thereby having a material
adverse effect upon Anagram's and Prodijeux's business and prospects.
Prodijeux is dependent upon independent manufacturers and suppliers for
production of WordXchange(R) and the Junior Edition These independents are
located in Asia. The market for raw materials may be volatile and unpredictable.
As a result, the costs of manufacture could far exceed any estimates made by
Prodijeux or Anagram. Although Anagram is the majority shareholder of Prodijeux,
neither Anagram nor Prodijeux have any control over the costs of production and
manufacture. Delays or rising costs in the production WordXchange(R) will have a
material adverse effect upon our business and prospects.
Prodijeux is dependent upon foreign manufacturers, and currency and exchange
fluctuations may have a material adverse effect upon Anagram's and Prodijeux's
business and prospects.
Because a large percentage of manufacturers and suppliers which Prodijeux
is dependent upon are located in foreign locales, it is subject to a risk of
currency and exchange rate fluctuations. In addition, the market may be subject
to foreign government currency and/or other restrictions.
Inability of Prodijeux to negotiate and close contracts with major distributors.
Prodijeux has begun marketing WordXchange(R) on a limited basis and,
through April 2001, had sold approximately 2,500 units. Prodijeux has negotiated
and signed a distribution agreement with S & F Associates, Inc., based in
Portland, Oregon, for US distribution of WordXchange(R). Prodijeux has also
entered into a sales management contract with Northern Group to manage and
oversee sales throughout the United States, as well as a sales representation
agreement for the states of Wisconsin, Illinois and Minnesota. While Prodijeux
intends to enter into contracts with distributors to offer and sell
WordXchange(R) and other products, there is no assurance that it will be able to
negotiate or conclude satisfactory distributor agreements or, if negotiated and
concluded, that such distributors will abide by the terms of said agreements.
There can be no assurance that contracted distributors will employ qualified or
competent personnel or that they will be able find retailers willing to carry
and purchase Prodijeux's products. While Anagram is a majority shareholder of
Prodijeux, Anagram does not have any control over the terms of any agreement for
the distribution of WordXchange(R). Delays or rising costs in the distribution
and retail sale of WordXchange(R) will have a material adverse effect upon
Prodijeux's business and prospects.
8
Forward-looking statements
Statements in this Prospectus discuss future expectations and plans which
are considered forward-looking statements. Sentences which incorporate words
such as "believes," "intends," "expects," "predicts," "may," "will," "should,"
"contemplates," "anticipates," or similar statements are based on our beliefs
and expectations using the most current information available to it. In view of
the fact that the discussions in this Registration Statement are based upon our
estimates and beliefs concerning circumstances and events which have not yet
occurred, the anticipated results are subject to changes and variations as
future operations and events actually occur and could differ materially from
those discussed in the forward-looking statements. Moreover, although Anagram
reasonably expects, to the best of its knowledge and belief, that the results to
be achieved by it will be as set forth, this is not a guarantee and there can be
no assurance that any of the potential results which are described will occur.
Furthermore, there will usually be differences between the forecasted and actual
results because events and circumstances frequently do not occur as expected,
and the differences may be material.
9
Use of proceeds
Anagram will not receive any proceeds from the sale of the 236,000 shares
of its common stock by selling stockholders. The estimation of the proceeds, as
listed in the table below, are based upon an assumed initial offering price of
$1.00 per share and estimated offering expenses of $75,000. There can be no
assurance that any proceeds will be received on this best-efforts, no minimum,
basis offering. Regardless of the amount raised, the net proceeds of this
offering will fund, pursuant to a loan agreement, Prodijeux's working capital
and general corporate purposes, including product development, selling and
marketing. Anagram will advance approximately $200,000 to Prodijeux to pay the
remaining amount due to Prodijeux under the loan agreement. The remaining
proceeds will be used to continue to fund Prodijeux with the development of
WordXchange(R) junior edition and other new games, i.e., travel and electronic
versions. Anagram will retain broad discretion in the allocation of the net
proceeds of this offering. Anagram intends to transfer portions of the proceeds
from this offering to Prodijeux as such funds are required and to use the
proceeds as Anagram deems appropriate. The amounts Anagram will actually utilize
will depend upon a number of factors, including the amount of Prodijeux's future
revenues and other factors described elsewhere in this prospectus. Pending such
uses, the net proceeds of this offering will be invested in short or medium
term, interest-bearing, investment grade securities. However, after the funds
are advanced to Prodijeux, Anagram will no longer have discretion over how they
are spent.
% of Offering Net Proceeds
------------- ------------
100% $2,425,000
75% $1,800,000
50% $1,175,000
25% $550,000
It is estimated that the net funds received will be utilized for the following
items in the percentages listed.
100% 75% 50% 25%
Game Production $727,500 $540,000 $352,500 $165,000
Expansion of Product Line $485,000 $360,000 $235,000 $110,000
Overhead expenses, including $727,500 $540,000 $352,500 $165,000
consumer and distribution channel
marketing
Anagram operating expenses $485,000 $360,000 $235,000 $110,000
10
Capitalization
In view of the fact that Anagram was formed in October 2000 and Anagram's
operations solely consist of its interest in Prodijeux, the following tables set
forth Anagram's and Prodijeux capitalization, expressed in U.S. Dollars. Audited
financial data for Anagram has been provided from January 1, 2001 to June 30,
2001 and from October 1, 2000 (inception) through December 31, Audited financial
data of Prodijeux has been provided from October 1, 2000 to June 30, 2001and
October 1, 1999 to September 30, 2000
Anagram Plus, Inc.
Liabilities June 30, 2001 December 31, 2000
----------- ------------- -----------------
Current liabilities $ 253,915 $ 144,886
Stockholders' equity
--------------------
Common stock,
$.001 par value $ 6,236 $ 6,000
Additional Paid in Capital $ 115,438 N/A
Accumulated deficit $(150,082) $ (40,743)
Total Stockholder's deficit $ (28,408) $ (34,743)
Total liabilities
and stockholder's deficit $ 225,507 $ 110,143
Prodijeux, Inc.
Liabilities June 30, 2001 September 30, 2000
----------- ------------- ------------------
Current liabilities $ 15,681 $ 13,058
Long-term liabilities $ 331,849 $ 48,409
11
Stockholders' deficit
---------------------
Common stock $ 66,831 $ 67
Accumulated deficit $(299,638) $ (54,868)
Total Stockholder's deficit $(232,807) $ (54,801)
Total liabilities
and stockholder's deficit $ 114,723 $ 6,666
Dilution
As of June 30, 2001, Anagram's Common Stock had a negative net tangible
book value per share of approximately $0.005. "Net tangible book value per
share" is the amount of total tangible assets (at book value) less total
liabilities, divided by the number of shares of Common Stock outstanding. After
giving effect to the sale of the maximum number of shares offered hereby at the
purchase price of $1.00 per Share, after deduction of the estimated expenses of
this Offering, the pro forma "net tangible book value per share" as of that date
would be approximately $0.27 per share. This represents an immediate increase in
the pro forma net tangible book value of approximately $.0275 per share to
existing stockholders and an immediate dilution (i.e., the difference between
the subscription price per Share and such pro forma net tangible book value per
share) of approximately $0.725, based upon the purchase price of $1.00 per share
of Common Stock. Please see the table below for corresponding numbers for a
100%, 75%, 50% and 25% successful offering. There can be no assurance that
Anagram will be able to sell any of its shares of common stock.
% of Offering Pro Forma Net Tangible Increase in Pro Forma Net Dilution
------------- Book Value per Share Tangible Book Value per --------
-------------------- Share
-----
100% $0.27 $0.275 $0.725
75% $0.22 $0.225 $0.775
50% $0.16 $0.165 $0.835
25% $0.08 $0.085 $0.915
The following discussion should be read in conjunction with the financial
statements and the notes to those statements, which appear elsewhere in this
prospectus. The following discussion contains forward-looking statements, which
reflect Anagram's and Prodijeux's plans, estimates and beliefs. Anagram's and
Prodijeux's actual results could differ materially from those discussed in the
forward-looking statements. Factors which could cause or contribute to such
differences include, but are not limited to, those discussed below and elsewhere
in this prospectus.
12
Management's discussion and analysis
of financial condition and results of operations
Overview
Since inception, all of Prodijeux's activities have been devoted to the
creation and development of WordXchange(R). Both companies have also been
preparing for the introduction into the marketplace of Prodijeux's products.
Prodijeux has raised $137,859.40 (CDN$206,500) in operating capital through the
investment of tangible and intangible assets by its founders, Michel Chiarore
and Rodolphe Charpentier.
Anagram purchased a forty-nine and one half percent (49.5%) interest in
Prodijeux, in consideration of $66,670 (CDN $100,000). Anagram further
purchased, as of July 1, 2001, an additional 1.5 percent interest in Prodijeux,
Inc., for approximately $2020 (CDN $3,030). As of the purchase of the stock,
Anagram owns a 51% majority interest in Prodijeux, Inc. and, therefore, has the
ability to influence the marketing and financial direction of Prodijeux.
Anagram has also agreed to loan Prodijeux up to approximately $330,000
(CDN $500,000), of which $292,011 (CDN $441,972) has been advanced as of June
30, 2001, at an interest rate of seven (7%) percent per annum to be repaid upon
the earlier of Prodijeux achieving sales of at least fifty thousand (50,000)
units of WordXchange(R) or October 1, 2002. In October 2001, Anagram's board of
directors agreed to increase the amount it will loan to Prodijeux to
approximately $500,000 (CDN $750,000). Pursuant to this agreement, Anagram is
committed to an additional $208,000 (CDN $315,000) to Prodijeux.
Plan of operations
During the next twelve months, Anagram, through Prodijeux, will be
continuing to develop and market WordXchange(R) adult and junior versions.
Prodijeux has obtained a letter of credit with respect to the manufacture of
10,000 units of the adult version of WordXchange(R). It is anticipated that
production of these units will be completed during the summer of 2001 and will
be ready for distribution at that time. Sales of WordXchange(R) to date have
been primarily in Canada, and will continue to be primarily in Canada through
the end of the summer. A sale of 570 units was made to a distributor based in
Lebanon for resale in that country.
Prodijeux has entered into a sales management agreement with a company
based in Wisconsin. This company will act as sales agent for Prodijeux in three
Midwestern states while organizing a sales network of other agencies to cover
other areas of the United States as well as the English speaking area of Canada.
Prodijeux is currently in discussion with other such sales agencies with regard
to the finalization of the necessary contracts.
Prodijeux is currently contacting several agencies to develop a
promotional campaign that will introduce WordXchange(R) to potential
distributors, retailers and consumers in both the United States and Canada.
Prodijeux plans to heavily promote WordXchange(R) and the related junior edition
to achieve sales exceeding the current production run of 10,000 units.
13
Through June 30, 2001, Prodijeux has sold 2,500 units to various retailers
and wholesalers including 366 units ordered by ToysRUs Canada. Subsequent to
June 30, 2001, Prodijeux has received additional orders totaling 1,494 from an
Australian distributor (240), and Iowa retail company (504) and an on-line
retailer (750). Prodijeux is in the process of fulfilling these orders.
In addition, Prodijeux is currently in negotiations with a French
distributor for a short-term order of approximately 3,000 units and an
additional order of 30,000 units for 2002. This order would be the single
largest order of the game to date.
The final design and manufacturing specifications of the junior edition
are currently being completed. Prodijeux does not anticipate producing the
Junior Edition until the beginning of 2002. Prodijeux anticipates making sales
of the junior edition during the spring of 2002. Additionally, once the design
for the junior edition is complete, Prodijeux will begin to research the
feasibility of designing the electronic and travel versions of the game.
Results of operations
Anagram has not generated revenue to date and its operating expenses are
related to accounting and administrative fees. Anagram's allocated portion of
the Prodijeux loss is the most significant item effecting the statement of
operations of Anagram. Therefore the focus of management's discussion will be on
the results of Prodijeux's operations.
The following table sets forth, for Anagram and Prodijeux, the percentage
of net loss at June 30, 2001 represented by the line items in the statement of
operations:
Anagram Plus, Inc. Prodijeux, Inc.
amount percentage amount percentage
------ ---------- ------ ----------
Revenues $0 0% $24,487 (10%)
Cost of Goods Sold -- -- ($27,313) 11%
Expenses ($9,483) 9% ($236,356) 98%
Other income and expenses
Interest expense ($4,470) 4% ($2,521) 1%
Loss from Investment ($95,386) 87% -- --
Net loss for the year ($109,339) 100% ($241,703) 100%
Revenues
During the nine months ended June 30, 2001 Prodijeux made the first sales
of its product line totaling $24,487. Sales were made to several different toy
and game retailers and distributors. Since the year-end, the management of
Prodijeux has received orders from additional vendors totaling approximately
1,500 units. Additionally Prodijeux is currently in negotiations to sell
additional units to a French distributor.
Cost of Goods Sold
Prodijeux's cost of goods sold for the period was $27,313, which led to a
net loss for the period of $2,826. This was due to the fact that some earlier
versions of the game were sold at discounts, some of which resulted in the game
being sold at, or below cost. Prodijeux's management believes the current
version being marketed and sold will be used for the foreseeable future and does
not anticipate the need for selling at such discounts in the near future.
Operating expenses
Prodijeux's salary expense for the period was $65,368 and is related to
the salaries of the officers of the Company who are also the chief creators and
designers of the game. As sales increase, Prodijeux's management anticipates the
hiring of a sales and administrative force as well as a production design staff.
Prodijeux's consulting expense for the period was $61,878 and includes
consulting services provided by one of the members of the board of directors and
by a consultant who assists the Company with the marketing and distribution of
the game. Prodijeux's management believes that the consulting fees will remain
at the current level for the foreseeable future as the Company continues to
negotiate distribution agreements.
The professional fees for Prodijeux were $24,448 and related to legal and
accounting expenses incurred in the normal course of business.
Prodijeux's net loss for the period was $241,703 for the period ended June
30, 2001 and $30,233 for the year ended September 30, 2000. The Company will
continue to experience losses until it makes significant sales of the game.
Management anticipates sales increasing during the current fiscal year, but does
not have any current orders or sales that would lead to an expectation of
profitability in the fiscal year end June 30, 2002.
Liquidity and capital resources of Anagram and Prodijeux Combined
Anagram intends to satisfy Prodijeux's working capital requirements
principally through issuance of debt and equity securities. As of June 30, 2001
Anagram had a negative working capital
14
of $253,376.
The management of Anagram believes, based upon Prodijeux's current plans
and assumptions relating to its operations, including, assumptions with respect
to the progress of research and development and the costs associated with
production, marketing and sale of its products, that Anagram's current cash
position will be sufficient to satisfy Prodijeux's contemplated cash
requirements for a period of ninety (90) days after the date of this prospectus.
With respect to Prodijeux's liquidity requirements for the next 12 months,
Anagram believes that the cash flow generated from Prodijeux's intended future
operations and sales of WordXchange(R) will complement its current cash
position, as supplemented by Anagram, and Anagram further believes that it will
be able to satisfy any liquidity needs that may arise by short term financing.
If the need arises, Anagram currently contemplates seeking additional financing
or conducting a public offering in order to satisfy Prodijeux's additional cash
requirements and any obligations it may have.
Anagram has committed to loan Prodijeux up to approximately $500,000 (CDN
$750,000) for continuing operations. Through June 3, 2001, Anagram loaned
Prodijeux $292,011 (CDN $441,972). Anagram may increase the amount loaned
Prodijeux, if approved by the board of directors of Anagram.
Currently Anagram receives its funding primarily from its parent, ADC
Development Corp. ADC Development Corp. has committed to loan Anagram up to
$500,000 pursuant to the terms of a promissory note. Through June 30, 2001, ADC
Development Corp. has loaned Anagram $242,779. Depending upon the amount of
money raised through this offering, Anagram may need additional financing to
allocate to Prodijeux during the next twelve months.
Notes Payable
Anagram and Prodijeux borrowed money under different repayment terms from
a variety of sources as discussed the notes to the respective financial
statements. Other than the bank loan and the loan owed to Anagram that are
secured by all the assets of Prodijeux, all other debt owed by Prodijeux
consists of unsecured debt with varying repayment schedules. The unsecured loan
that is owed by Anagram is payable to its parent, ADC Development Corp. The
principal and outstanding interest on this note is due on June 30, 2002. If
Anagram is not in a position to repay this note by the due date Anagram is
confident that the terms of the note can be renegotiated and an extension of
time to make any repayments will be granted.
If, for any reason, other parties demand repayment as agreed upon in the
notes payable, Prodijeux will seek additional financing from Anagram if it
cannot meet the obligations based on its cash position at the time of the
demand. Prodijeux would request financing from Anagram and, if its own funds are
not available, Anagram would request the additional funds from ADC Development
Co.
Due to the nature of the relationships between Prodijeux and its
creditors, Anagram does not anticipate a creditor will demand repayment within
the next twelve months. Although, if Prodijeux's
15
cash position allows Prodijeux will pay off these debts earlier than scheduled
to eliminate the payment of additional interest charges. If Prodijeux cannot
make timely repayments it would request financing from Anagram who, if it cannot
meet the request from its own funds, would seek financing from its parent.
Description of business
Anagram was incorporated under the laws of Delaware in October 2000. The
following discussion and disclosure represents Anagram's intended business plan
and intent with respect to the future operations of our business.
Proposed business
Anagram is a fifty one (51%) percent stockholder of Prodijeux; Prodijeux
creates, develops, markets, produces and manufactures interactive edutainment,
which is learning entertainment in the form of traditional board games, CD-ROMs,
and online multi-player games. Prodijeux, Inc.'s products are designed to
provide the consumer with both entertainment and an educational experience. The
first product developed by Prodijeux is WordXchange(R), introduced in the Fall
of 2000 in the Canadian market as AnagramPlus(R). The product is currently sold
under that name in the province of Quebec. A number of chain stores have already
placed orders for WordXchange(R), including, but not limited to ToysRUs Canada
(366 units) and several local chains throughout Quebec, and a retail chain in
Minnesota.
Prodijeux plans to distribute its products through traditional outlets
such as game and toy stores, bookstores, gift and novelty stores, and catalogs.
Prodijeux also has its own web site, which Anagram considers an essential part
of its product development.
Description of WordXchange(R)
WordXchange(R) is classified as a word game in the GAMES and PUZZLES
category in the toy and game industry. WordXchange(R) has been designed in
English and French versions and plans are underway for a Spanish version.
WordXchange(R) is designed to be played by two to four players or teams. A
complete game is estimated to take 30-40 minutes to play. Prodijeux and Anagram
believe WordXchange(R) has all the ingredients to please many age groups ranging
from young children to mature adults. WordXchange(R) is currently available in
an advanced edition designed for ages 10 and up. Prodijeux has plans to finalize
development of a junior edition designed for ages 5 and up in the summer of
2001. It is Anagram's and Prodijeux's belief that the game is of superior
quality and is priced competitively. The creators of WordXchange(R) sought to
develop a game which is more fun, creative, and challenging than Scrabble(R)
while taking less time to play. There can be no assurance that WordXchange(R)
will achieve success and popularity comparable to Scrabble(R).
WordXchange(R) Place in Market
16
Among the game and toy industry categories, WordXchange(R) is classified
as a word game in the Games and Puzzles Categories. This category represented
12% of total toy sales in 2000 (source: World Toy Facts and Figures, ICTI/The
NPD Group Worldwide).
The North American traditional toy market (excluding video games)
experienced slightly higher sales in 2000 ($24.2 billion) when compared to 1999
($24.1 billion). The North American market accounted for 44.2% of total retail
sales. (source: World Toy Facts and Figures).
According to data provided by the NPD Group in conjunction with the Toy
Manufacturers of America, Inc., in the year 2000, it is estimated that
manufacturers shipped 5 million units of word games; representing $38 million in
wholesale revenues.
According to commissioned research conducted by Hall & Partners (market
research firm) in the United States, Omnibus findings and focus group sessions
indicated that the strongest audience for the adult version of the game are:
females, between 25 and 45 years old with household incomes between $25,000 and
$75,000, who are looking for creative and educational outlets during their small
amount of free time.
Proposed Targeted Customer Base
Anagram and Prodijeux believe that the target market for WordXchange(R) is
large. Because Prodijeux will bring to the market the adult version
(WordXchange(R)) as well as WordXchange(R) junior edition, children under the
age of 10, university students, professionals, and parents are all well within
WordXchange(R)'s target market. Anagram and Prodijeux believe that the strongest
market for the WordXchange(R)'s advanced edition are college-educated women,
between the ages of 25-45 with children and a household income between $25,000
and $75,000. Anagram and Prodijeux believe that in the age group containing
25-45 year olds, a high percentage of consumers favor interactive multi-player
games which demand intellectual and strategic acuity. Anagram and Prodijeux aim
to reach the segment of the market with consumers of superior education, higher
wages and an appreciation for fine design. The target consumer is concerned with
getting the best quality-to-price ratio available. The target consumer owns a
computer and is familiar with the Internet and its services. This segment is
also where Anagram and Prodijeux believe the highest proportion of Scrabble(R)
players to be.
Distribution strategies
Although Anagram is a majority shareholder in Prodijeux, Anagram does not
intend to be directly engaged in any part of Prodijeux's business including, but
not limited to, development, production and sales of WordXchange(R). Prodijeux's
intended primary objective will be distribution of its products. Distribution
will be facilitated through S& F Associates, Inc., based in Portland, Oregon.
Products will be shipped from Oregon to buyers as determined by sales
representatives in various sectors of the country who communicate orders to
Prodijeux's Montreal office. Prodijeux plans
17
to close further deals with major distributors in specific markets. Prodijeux is
also seeking distribution contracts with major toy and game industry retailers,
including Gift and Novelty stores, educational retailers, e-tailers, and
catalogs. Prodijeux also plans to attend trade shows, servicing industry-related
manufacturers, distributors and buyers, as well as consumer shows, which cater
to the public at large. The basic advantage of attending these shows is that
attendance offers the opportunity to introduce the game, popularize it, sell it,
and establish industry contacts. Anagram and Prodijeux consider the Internet an
important distribution channel. Prodijeux plans to take advantage of the full
potential of the Internet by developing a Website which will promote and sell
WordXchange(R) and future products through an online store, drawing prospective
and current customers to the site with helpful, timely information. Prodijeux
will strategically coordinate the Website and e-commerce activities with its
marketing activities for the traditional market, thus creating a synergistic and
complementary effect.
Sales and Marketing Strategy
Prodijeux intends to create unique packaging for WordXchange(R) in order
to create quick market awareness and product recognition. There can be no
assurance that this approach will be successful. This will be part of a
multi-faceted marketing campaign designed to introduce WordXchange(R) to the
retail market. Prodijeux is participating in retail and consumer tradeshows,
sending out media kits and sample games as means of creating a market for
WordXchange(R). Prodijeux also plans to develop a Web Site as an integral part
of its advertising and promotional plan. This will be crucial to quickly
developing a market and gaining market acceptance.
Trends in the Game Industry
Management believes that the toy and game industry is witnessing a return
to traditional family entertainment. As more and more people spend increasingly
significant parts of their professional and occupational time working with
computers and other technologies, the desire to spend less family time on
computer and technology areas has spread. Accordingly, Anagram believes that its
products will appeal to a large segment of the general population that is
looking form entertainment options that create an enhanced environment for
family interaction.
Downturn in the Economy
The past 12-18 months have seen a downturn in the American (and North
American) economy. Management believes that, as a result of stock market
declines, families do not have the means to sustain the same levels of consumer
spending that was seen during the 4-5 year period prior to March 2000.
Management believes that its sales should not be seriously affected by this
downturn. The price points for its products suggest that a decline in the
purchase potential of consumers should not act as a hindrance to sales.
Prodijeux's lead products, WordXchange(R) and WordXchange(R) Junior Edition,
have anticipated retail prices in the $20 - $30 range. Purchases of such items
do not constitute major entertainment or leisure purchases for the families who
constitute
18
Anagram's target consumers. While there are no guarantees that the current
economic downturn will not impact the sales of WordXchange(R), it is the belief
of the management of Anagram and Prodijeux that Prodijeux's products would be
seen as less expensive family entertainment alternatives during such a period.
Dividend Policy
To date, Anagram has not paid dividends on its common stock and at the
present time, Anagram intends to retain earnings, if any, to loan to Prodijeux
for its development and expansion. There can be no assurance that Anagram will
have enough earnings to pay any dividends on its common stock. Even if Anagram
has sufficient earnings, it is not obligated to declare dividends on our common
stock. Anagram's Board of Directors has sole and absolute discretion whether to
declare any cash or stock dividends. This decision will be based upon the
following: earnings, capital requirements, our financial position, general
economic conditions, and other factors the board may consider. It is also
possible that the terms of any future debt financing may restrict the payment of
dividends.
Employees
Anagram currently does not have any employees and therefore does not
maintain "key man" insurance.
Excluding Prodijeux's executive officers and directors, Prodijeux
currently does not have any employees. Prodijeux does not maintain "key man"
insurance on the life of any of its employees.
Real Property Interests and Obligations
Anagram's offices are headquartered at 2700 N. Military Trail, Suite 100,
Boca Raton, Florida. Anagram is not charged rent or consulting fees by FMC
Group, Inc.
Prodijeux's offices are headquartered at 1751 Richardson Street, Suite
5507, Montreal, Quebec, H3K 1G6, Canada. Prodijeux leases its facility pursuant
to an operating lease, with a term of two years, payable in monthly
installments. The expected minimum lease payments for 2001 are $6,300 (CDN
$9,450).
Management
Executive officers and directors
The following table sets forth the names and ages of the members of
Anagram's board, Anagram's executive officers and the positions they each hold.
Name Age Position
---- --- --------
19
Paul Michelin 62 President & Director
Robert Michelin 37 Secretary & Director
Paul Michelin is Anagram's President and one of Anagram's Directors. Since 1992
Mr. Michelin has served as the President and a Director of FMC Group, Inc., a
financial consulting firm the stock of which he owns with his wife as joint
tenants with a right of survivorship. Mr. Michelin has also served since 1995 as
the Secretary and Director of COA Development Corp. f/k/a OT Computer Training
Corp., TL Industries, Inc., and International Software Technologies Corp. In
addition, Mr. Michelin has served as the Chairman of the Board and Director of
VI Solutions Inc. f/k/a SMC Multimedia Corp., which is engaged in the business
of video conferencing sales and services. Since August 1995, Mr. Michelin has
been a Director of Multicast Interactive Corp., f/k/a Stratosphere
Communications Corp. Mr. Michelin also served from 1990 until 2000 as Secretary
and Director of dotWAP.com f/k/a Nationwide Resources, Inc. which develops and
markets computer software. Furthermore, Mr. Michelin has served since 1996 as a
Director of Your Travel Connections, Inc., a travel agency 75% of which is owned
by Louisa Michelin. Mr. Michelin attended McGill University in Montreal, Canada.
Mr. Michelin has also served as a Director of Visitel Enterprises from January
2000 through May 5, 2001, as Director of QwikCap Corp. f/k/a Pacific Multimedia
Corp. since September 1999, and as President and as Director of Solutions
Software f/k/a MIS Solutions, Inc. since March 16, 2001. From 1983 to 1987, Mr.
Michelin was a principal of Michelin & Company, Inc., a brokerage firm. In 1986
and 1987, certain allegations were made against Mr. Michelin and Michelin &
Company, Inc. with respect to non-compliance with certain state and NASD
regulations. Mr. Michelin has advised management that the foregoing claims were
totally without merit. Nevertheless, he chose to pay certain fines in order to
avoid the expenditure of substantial time and money in litigation. The Company
made a determination to cease business and elected not to pay the fine to the
NASD in view of the fact that the only penalty for non-payment would be the
suspension of its business, which the Company had determined to cease.
Robert Michelin is Anagram's Secretary and one of Anagram's Directors. Since
February 2000, Mr. Michelin has acted as the General Counsel for the Canadian
Network for Vaccines and Immunotherapeutics (CANVAC), an initiative created by
the Canadian government to commercialize university research in Canada. Mr.
Michelin has also served as the Vice President of Kensington Sports Management,
Inc., a sports management firm specializing in the representation of
professional coaches since January 1999. Kensington Sports Management is located
in Montreal, Quebec, Canada. Mr. Michelin previously practiced law specializing
in labor and employment matters. From September 1994 to June 1996, he was an
attorney with the law firm of Herman Blaikie located in Montreal, Quebec,
Canada. Mr. Michelin was a sole practitioner from June 1996 to November 1997 and
was an attorney with the firm of O'Connor, Greenspoon (presently known as
Greenspoon, Butts), also located in Montreal, Quebec, Canada, from November 1997
to January 1999. Mr. Michelin has been an independent journalist specializing in
legal subjects since 1996. Mr. Michelin attended McGill University in Montreal
and L'Institut d'Etudes Politiques in Paris, France.
20
The following table sets forth the names and ages of the members of
Prodijeux's board, their executive officers and the positions they each hold.
Name Age Position
---- --- --------
Michel Chiarore 42 Director, President
Rodolphe Charpentier 43 Director, Vice President,
Creative Director
Paul Michelin 62 Director
Robert Michelin 37 Director
Michel Chiarore is Prodijeux's President, and is in charge of operations,
manufacturing and distribution of Prodijeux's product line. He has also been one
of Prodijeux's Directors since 1998
Mr. Chiarore is the founder and president of Diffusion Le Bouquin inc. in
Montreal, Diffusion Le Bouquin inc. is a book distribution company, of which he
is still President. His experience in the distribution business aided the
company in creating and establishing its distribution network.
His experience further includes 16 years as a manager of a bookstore with
expertise in serving school commissions, government agencies and specialized
organizations.
Rodolphe Charpentier is the cofounder and creative director of product research
and development for Prodijeux, Inc. He is also one of Prodijeux's Directors and
its Creative Director and Vice President of Marketing.
Previous to his responsibilities at Prodijeux, Mr. Charpentier worked, for over
17 years, as a communications and design consultant in industries ranging from
corporate and public interests groups to fashion and commercial packaging. From
1996 to 1998, he focused mainly on the fashion trade, creating seasonal ad
campaigns for national retail chains such as Reitmans, Smart Set, Parasuco Jeans
and Bedo.
Outside directors will not be compensated for attendance at board meetings. Each
outside director will be entitled to reimbursement for reasonable expenses
incurred with respect to attending each meeting.
Executive compensation
Anagram:
21
Paul Michelin, Anagram's President and one of its Directors, does not
presently receive compensation.
Robert Michelin, Anagram's Secretary and one of its Directors, does not
presently receive compensation.
Prodijeux:
Prodijeux has entered into an employment agreement with its president,
Michel Chiarore. The agreement provides a salary in the amount of $40,056.00
(CDN $60,000) per year. The agreement also provides for an annual bonus
equivalent to five (5%) of the pre-tax profits of Prodijeux as calculated by
outside auditors in accordance with GAAP, above the first $80,112.00 (CDN
$120,000) of such profits during the year. Prodijeux may terminate the agreement
at any time, with or without cause.
Prodijeux has entered into an employment agreement with its vice president
and creative director, Rodolphe Charpentier. The agreement provides a salary in
the amount of $40,056.00 (CDN $60,000) per year. The agreement also provides for
an annual bonus equivalent to five (5%) of the pre-tax profits of Prodijeux as
calculated by outside auditors in accordance with GAAP, above the first
$80,112.00 (CDN $120,000) of such profits during the year. Prodijeux may
terminate the agreement at any time, with or without cause.
Prodijeux also retains Anagram's secretary, Robert Michelin, as an
independent contractor. Mr. Michelin is paid a monthly retainer of $1,310 (CDN
$2,000).
Stock option plan
Anagram intends to implement a stock option plan in the future. The
purpose of the plan will be to provide its directors, officers, key employees
and consultants with additional incentives by increasing their ownership
interests. The stock option plan, which Anagram anticipates will incorporate
both qualified and non-qualified options, will contain terms that shall be
approved by the board and submitted to the shareholders for approval.
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, we have been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
No dealer, salesperson or any other person has been authorized to give any
information or to
22
make any representations other than those contained in this Prospectus, and, if
given or made, such information or representations must not be relied upon as
having been authorized by us or the Selling Shareholders. Neither the delivery
of this Prospectus, nor any sale made hereunder shall, under any circumstances,
create any implication that there has been no change in our affairs since the
date hereof or that the information contained herein is correct as of any date
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities offered hereby by
anyone in any jurisdiction in which such offer or solicitation is not authorized
or in which the person making such offer or solicitation is not qualified to do
so or to anyone to whom it is unlawful to make such offer or solicitation.
Certain relationships and transactions
ADC Development Corp., of which FMC Group Inc. owns eighty-three (83%)
percent of its capital stock, owns the majority of our outstanding common stock.
Accordingly, FMC Group through ADC Development will be able to exert complete
control over matters requiring approval by our stockholders, including, but not
limited to the election of directors and the approval of mergers or other
business combinations.
Two of Anagram's directors are related, as Robert Michelin is Paul
Michelin's nephew.
Anagram owns fifty one (51%) percent of the outstanding stock of
Prodijeux. Anagram has also agreed to loan Prodijeux approximately $330,000 (CDN
$500,00), of which $291,011 (CDN $441,972) has been advanced as of June 30,
2001, at an interest rate of seven (7%) percent per annum. This loan is to be
repaid upon the earlier of (i) Prodijeux achieving sales of at least fifty
thousand (50,000) units of WordXchange(R), or (ii) by October 1, 2002. In
October, the board of directors of Anagram agreed to increase the amount it will
loan Prodijeux to approximately $500,000 (CDN $750,000). The current loan, as
well as the increased amount, will be funded by Anagram through its parent ADC
Development Corp.
Anagram's loan from ADC Development Corp. is for an amount up to $500,000 at an
interest rate of 6% per year, with the unpaid principal and interest balance due
on June 30, 2002.
Principal stockholders
The following table sets forth the number of common stock owned and the
percentage of our outstanding shares of common stock for the following:
o all persons who own more than five percent of our outstanding common
stock;
o each officer and director;
o officers and directors as a group.
--------------------------------------------------------------------------------
NAME AMOUNT OF PERCENTAGE PERCENTAGE
BENEFICIAL BEFORE AFTER
OWNERSHIP OFFERING OFFERING
--------------------------------------------------------------------------------
23
--------------------------------------------------------------------------------
ADC Development Corp.
2700 North Military Trail, #100, 6,000,000 96% 69%
Boca Raton, Florida, 33431
--------------------------------------------------------------------------------
Paul Michelin,
Director and President (1) 6,000,000 96% 69%
--------------------------------------------------------------------------------
Robert Michelin, Director and
Secretary 0 0% 0%
--------------------------------------------------------------------------------
All Officers & Directors as a
group - Two people (1) 6,000,000 96% 69%
--------------------------------------------------------------------------------
(1) Includes 6,000,000 shares held by ADC Development Corp., of which
eighty-three (83%) percent of its capital stock is owned by FMC Group Inc., of
which Mr. Michelin is the President and a Director. Mr. Michelin, together with
his wife are the sole shareholders of FMC Group, Inc..
Plan of distribution
Prior to this offering, no public market for our securities existed. A
total of up to 2,736,000 shares may be sold pursuant to this prospectus. This
includes 2,500,000 shares of our common stock, which as of the date of this
Prospectus, have not been issued. Such shares are being offered by us, using our
officers, directors, and broker-dealers on a self-underwritten, best efforts
basis. The broker-dealers referred to in this section may be deemed to be
underwriters. The broker-dealers' commissions will be paid as may be negotiated
in accordance with applicable laws and regulations. The remaining 236,000 shares
may be sold pursuant to this prospectus by the stockholders listed below.
Anagram will not receive any of the proceeds from the sale of its common stock
by the selling stockholders. Except as described above, the stockholders selling
Anagram's stock have never held any position or office with Anagram or had any
other material relationship with Anagram.
The selling stockholders may, from time to time sell all or a portion of
their registered shares in negotiated transactions or on any exchange in which
Anagram may list or trade its common stock, at prices then prevailing or related
to the then current market price. The shares will not be sold in an underwritten
public offering, but may be sold either directly or through brokers or dealers.
Brokers or dealers may receive commissions or discounts, which will be paid as
may be negotiated in accordance with applicable laws and regulations, from
selling stockholders, or if any such broker-dealer acts as agent for the
purchaser of such shares, from the purchaser, in amounts to be negotiated which
are not expected to exceed those customary in the types of transactions
involved.
The following list assumes all shares which will be registered based on
the filing of this prospectus are sold by the selling shareholders.
24
--------------------------------------------------------------------------------
Selling Shares Shares Shares owned Percentage
Stockholder owned registered following of shares
prior to offering following
offering offering
--------------------------------------------------------------------------------
John C. Caras 40,000 40,000 0 0%
-------------------------------------------------------------------------------
Joseph Cantore 6,000 6,000 0 0%
--------------------------------------------------------------------------------
Angela Grandinetti 20,000 20,000 0 0%
--------------------------------------------------------------------------------
Samantha Hockenberry 20,000 20,000 0 0%
--------------------------------------------------------------------------------
Teddy Hockenberry 20,000 20,000 0 0%
--------------------------------------------------------------------------------
Joseph Letzelter 10,000 10,000 0 0%
--------------------------------------------------------------------------------
Marcai Levin 40,000 40,000 0 0%
--------------------------------------------------------------------------------
James Perretty 10,000 10,000 0 0%
--------------------------------------------------------------------------------
Jeanne Perretty 10,000 10,000 0 0%
--------------------------------------------------------------------------------
Thad Pryor 40,000 40,000 0 0%
--------------------------------------------------------------------------------
Stephen S. Shelman 10,000 10,000 0 0%
--------------------------------------------------------------------------------
Keith Neil Thompson 10,000 10,000 0 0%
--------------------------------------------------------------------------------
Description of the securities
General
The following description summarizes our authorized and currently
outstanding securities. Anagram is authorized to issue Twenty Million
(20,000,000) shares of common stock, par value $.001 per share and a maximum of
Two Million (2,000,000) shares of preferred stock, $.01 per share. There are
6,236,000 shares of common stock issued and outstanding as of the date of this
prospectus. No shares of preferred stock have been issued.
Common stock
Each holder of shares of Anagram's common stock, issued and outstanding,
is entitled to one vote per share held and has the sole right and power to vote
upon all matters upon which a vote of stockholders is taken. Neither the
certificate of incorporation nor our by laws permit Anagram's stockholders to
vote their shares cumulatively. Upon liquidation, dissolution, or winding up of
the business, the owners of common stock are entitled to receive Anagram's net
assets in proportion to the respective number of shares held by them, following
payment to our preferred stockholders. The holders of common stock do not have
any preemptive right to subscribe for or purchase any shares of any class of
stock.
To date, Anagram has never paid dividends on any of its common stock.
Anagram does not guarantee that it will have enough earnings to pay any
dividends on its common stock. Even if Anagram has sufficient earnings, it is
not required to declare dividends on its common stock. Whether Anagram should
declare cash or stock dividends will be in the sole and absolute discretion
25
of its board and will depend upon its earnings, capital requirements, financial
position, general economic conditions and other relevant factors. It is also
possible that the terms of any future debt financing may restrict declaration of
dividends.
Preferred stock
Anagram is authorized by its certificate of incorporation to issue
preferred stock, in one or more series which may contain rights, privileges and
limitations, including:
o Conversion privileges
o Dividends
o Redemption rights
o Liquidation privileges.
Except as specifically provided by the Delaware General Corporation Law
relating to the voting by all classes of stock, holders of preferred stock will
have no voting rights unless specifically granted by Anagram's board. Anagram
has not issued any of our preferred stock, as of the date of this prospectus and
currently have no plans to do so.
If any shares of preferred stock are issued, a certificate of designation,
setting forth the series of such preferred stock and the rights, privileges and
limitations of the holders of the preferred stock will be filed with the
Secretary of State of the State of Delaware. This may have the effect of
delaying, deferring or preventing a change in control of Anagram's management
without further action by other stockholders and may adversely affect the rights
of the holders of its common stock.
Warrants
As of the date of this registration statement, there are no warrants to
purchase shares of Anagram's common stock outstanding.
Determination of offering price
Prior to this offering of Anagram's common stock, there has been no public
market for any of its securities and there can be no assurance that a market
will develop. The price of Anagram's common stock, when sold by its stockholders
will be determined by broker-dealers and market makers in negotiated
transactions, or trades over the open market where Anagram intends to list its
common stock. Among factors which may be considered by broker-dealers, market
makers and investors to determine the price for Anagram's securities in the
public market are:
o estimates of our business potential;
o prevailing market conditions in the U.S. economy and the market in
which Anagram and Prodijeux intend to compete;
o an evaluation of other companies comparable to Anagram and Prodijeux
and their ability to
26
effectively compete with Prodijeux's product.
Transfer agent
The transfer agent for Anagram's common stock is Liberty Transfer Company,
191 New York Avenue, Huntington, New York 11243
Shares eligible for future sale
Prior to this offering, there has been no public market for Anagram's
common stock. Future sales of substantial amounts of common stock in the public
market, or the availability of shares for sale, could adversely affect the
prevailing market price of Anagram's common stock and its ability to raise
capital through an offering of equity securities.
The 2,736,000 shares of common stock offered in this offering will be
immediately tradable without restriction under the Securities Act, except for
any shares held by an "affiliate" of Anagram, as that term is defined in the
Securities Act. Affiliates will be subject to the resale limitations of Rule 144
under the Securities Act. The remaining 6,000,000 shares of common stock will be
deemed "restricted securities" as defined in Rule 144.
In general, under Rule 144, a stockholder, or stockholders, whose shares
are aggregated, who has beneficially owned "restricted securities" for at least
one,year will be entitled to sell an amount of shares within any three month
period,equal to the greater of:
o 1% of the then outstanding shares of common stock; or
o the average weekly trading volume in the common stock during the four
calendar weeks immediately preceding the date on which notice of the sale is
filed with the commission, provided certain requirements are satisfied.
In addition, Anagram's affiliates must comply with additional requirements
of Rule 144 in order to sell shares of common stock, including shares acquired
by affiliates in this offering. Under Rule 144, a stockholder who had not been
Anagram's affiliate at any time during the 90 days preceding a sale by him,
would be entitled to sell those shares without regard to the Rule 144
requirements if he owned the restricted shares of common stock for a period of
at least two years. The foregoing summary of Rule 144 is not a complete
description.
Interest of named experts and counsel
Legal matters
The legality of Anagram's common stock has been passed upon on our behalf
by Mintz & Fraade, P.C., New York, New York.
Experts
27
The financial statements included in this prospectus and in the
registration statement have been audited. Anagram's financial statements have
been audited by Daszkal, Bolton, Manela, Devlin & Co. 2401 NW Boca Raton Blvd.,
Suite 100, Boca Raton, FL 33431, independent certified public accountants, to
the extent and for the periods set forth in their reports appearing elsewhere in
this prospectus and in the registration statement, and are included in reliance
upon such reports given upon the authority of each said firm as experts in
accounting and auditing.
Prodijeux's financial statements have been audited by Perreault, Wolman,
Grzywacz & Co., 5250 Ferrier, Suite 814, Montreal, Quebec H4P 2N7, independent
chartered accountants, to the extent and for the periods set forth in their
reports appearing elsewhere in this prospectus and in the registration
statement, and are included in reliance upon such reports given upon the
authority of each said firm as expects in accounting and auditing.
Legal proceedings
Neither Anagram nor Prodijeux know of any litigation pending, threatened
or contemplated, or unsatisfied judgments, against them, or of any proceeding to
which they are a party.
Available Information
Anagram and Prodijeux have filed with the Securities and Exchange
Commission a registration statement on Form SB-2 under the Securities Act,
together with all amendments and exhibits, for the securities registered by this
registration statement. This prospectus, filed as a part of the registration
statement, does not contain all of the information set forth in, or annexed as
exhibits to, the registration statement, parts of which are omitted in
accordance with the rules and regulations of the commission. For further
information about Anagram and Prodijeux, please refer to the registration
statement, including its exhibits and schedules, which may be inspected without
charge at the principal office of the commission, 450 Fifth Street, NW,
Washington, D.C. 20549, or at other regional offices of the commission. Copies
of such material may be obtained by mail from the Public Reference Section of
the Commission at 450 Fifth Street, NW, Washington, D.C. 20549, at prescribed
rates. To obtain information on the operation of the Public Reference Room, the
Securities and Exchange Commission can be contacted at 1-800-SEC-0330. Such
material may also be accessed electronically at the SEC's home page on the
Internet at http://www.sec.gov.
28
PART II
Indemnification of Directors and Officers.
Article SEVENTH of the Registrant's Certificate of Incorporation, contains
the following provision with respect to the indemnification of directors of the
Company:
"SEVENTH: The personal liability of the directors of the Corporation
is hereby eliminated to the fullest extent permitted by the provisions of
Section 102(b)(7) of the General Corporation Law of the State of Delaware, as
the same may be amended or supplemented."
Sections 1, 2, 3 and 4 of Article 8 of the Registrant's By-laws contain
the following provisions with respect to the indemnification of directors,
officers and authorized representatives:
"Section 1. Indemnification of Directors and Officers in Third Party
Proceedings. The Corporation shall indemnify any director or officer of the
Corporation who was or is an "authorized representative" of the Corporation
(which shall mean for the purposes of this Article a director or officer of the
Corporation, or a person serving at the request of the Corporation as a
director, officer, partner or trustee of another corporation, partnership, joint
venture, trust or other enterprise) and who was or is a "party" (which shall
include for purposes of this Article the giving of testimony or similar
involvement) or is threatened to be made a party to any "third party proceeding
" (which shall mean for purposes of this Article any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the Corporation) by
reason of the fact that such person was or is an authorized representative of
the Corporation, against expenses (which shall include for purposes of this
Article attorney's fees and disbursements), judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such third party proceeding if such person acted in good faith
and in a manner such person reasonably believed to be in, or not opposed to, the
best interests of the Corporation and, with respect to a criminal third party
proceeding (which shall include for purposes of this Article any investigation
which could or does lead to a criminal third party proceeding) had not
reasonable cause to believe such conduct was unlawful. The termination of any
third party proceeding by judgment, order, settlement, indictment, conviction or
upon a plea of no contest or its equivalent, shall not, of itself, create a
presumption that the authorized representative did not act in good faith and in
a manner which such person reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal third party
proceeding, had reasonable cause to believe that such conduct was unlawful.
29
Section 2. Indemnification of Directors and Officers in Corporate
Proceedings. The Corporation shall indemnify any director or officer of the
Corporation who was or is an authorized representative of the Corporation and
who was or is a party or is threatened to be made a party to any "corporate
proceeding" (which shall mean for purposes of this Article any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor or any investigative proceeding by or on behalf
of the Corporation) by reason of the fact that such person was or is an
authorized representative of the Corporation, against expenses (including
attorneys' fees and disbursements) actually and reasonably incurred by such
person in connection with the defense or settlement of such corporate proceeding
if such person acted in good faith and in a manner such person reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of such person's duty to the
Corporation unless and only to the extent that the court in which such corporate
proceeding was pending shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
authorized representative is fairly and reasonably entitled to indemnity for
such expenses which the court shall deem proper.
Section 3. Indemnification of Authorized Representatives. To the
extent that an authorized representative of the Corporation who neither was nor
is a director or officer of the Corporation has been successful on the merits or
otherwise in defense of any third party or corporate proceeding or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses actually and reasonably incurred by such person in connection
therewith. Such an authorized representative may, at the discretion of the
Corporation, be indemnified by the Corporation in any other circumstances to any
extent if the Corporation would be required by Section 1 or 2 of this Article
VIII to indemnify such person in such circumstances to such extent as if such
person were or had been a director or officer of the Corporation.
Section 4. General Terms. Any indemnification under Section 1 and
Section 2 of this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he had met the applicable standard of conduct set forth in
Section 1 and Section 2 of this Article VIII. Such determination shall be made
(i) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in written
opinion, or (iii) by the stockholders.
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in these By-laws.
Section 145 of the Delaware General Corporation Law also contains
provisions entitling directors and officers of the Company to indemnification
from judgments, fines, amounts paid in settlement and reasonable expenses,
including attorneys' fees, as the result of an action or
II-1
proceeding in which they may be involved by reason of being or having been a
director or officer of the Company (or, at the request of the Company,, a
director or officer of another corporation or other enterprise); provided the
officers or directors acted in good faith. The Company also may obtain an
insurance policy which will cover officers and directors for any liability
arising out of their actions in such capacity.
The foregoing do not and will not eliminate or limit the liability of a
director for violating his duty of loyalty (which includes the obligation of a
director of the Company to refrain from self-dealing with respect to the
Company, improperly competing with the Company or usurping Company
opportunities), failing to act in good faith, engaging in intentional misconduct
or knowingly violating a law or participating in the payment of a dividend or a
stock repurchase or redemption for himself. The foregoing also do not and will
not affect any director's liability under federal securities laws or the
availability of equitable remedies such as an injunction or rescission for
breach of fiduciary duty.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth an itemized list of all expenses to be
borne by the Registrant in connection with the issuance and distribution of the
securities being registered hereby other than underwriting discounts and
commissions and non-accountable expenses.
SEC Registration Fee......................................... $ 684.00
Printing and Engraving....................................... * 5,000.00
Legal Fees and Expenses...................................... *40,000.00
Accounting Fees and Expenses................................. * 5,000.00
Transfer Agent Fees.......................................... * 4,000.00
Miscellaneous Expenses....................................... 20,316.00
---------
TOTAL.................................................. $75,000.00
----------
* Estimated.
Item 26. Sales of Unregistered Securities.
Effective October 4, 2000, Anagram issued an aggregate of 6,000,000 shares
of common stock as founder's shares. The issuance of all such shares of common
stock did not require registration under the Securities Act in that all of such
shares of common stock were issued pursuant to a Section 4(2) private offering.
An aggregate of up to 236,000 shares may be sold pursuant to this prospectus by
the selling shareholders. As described elsewhere in this registration statement,
the selling shareholders are friends, relatives and business associates of the
officers and directors of Anagram. The issuance of all such shares of common
stock did not require registration under the Securities Act in that all of such
shares of common stock were issued pursuant to an exemption from the
registration requirements of the Securities Act afforded by Rule 506 of Section
4(2) thereof. Neither Anagram nor Prodijeux will not receive any of the proceeds
from the sale of shares of common stock by the selling shareholders.
II-2
Item 27. Exhibits.
Number Description
------ -----------
3.1 Articles of Incorporation of Anagram.
3.2 By-Laws of Anagram.
3.3* Articles of Incorporation of Prodijeux
3.4* By-Laws of Prodijeux
4.1 Specimen Common Stock Certificate.
5.1 Opinion of Mintz & Fraade, P.C.
23.1 Consent of Mintz & Fraade, P.C. (Included in 5.1)
23.2 Consent of Daszkal, Bolton, Manela, Devlin & Co.
23.3 Consent of Perreault, Wolman, Grywacz & Co.
24.1 Power of Attorney (set forth on the signature page
of this Registration Statement).
----------
* To be filed by amendment
Item 28. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any of the provisions described under Item 24 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant 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, the Registrant 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 and will governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(a) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) reflect in this prospectus any facts or events which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement; and,
notwithstanding the forgoing, 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 the
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
II-3
(c) Include any additional or changed material information with
respect to the plan of distribution.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering; and
The Registrant hereby further undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act as part of this Registration Statement as
of the time the Commission declared it effective; and
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the Registration
Statement, and that offering of such securities at that time as the
initial bona fide offering of those securities.
II-4
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, Anagram
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and authorize this registration statement to
be signed on its behalf by the undersigned, in Boca Raton, State of Florida, on
October 12, 2001.
Anagram Plus, Inc.
By: /s/ Paul Michelin
---------------------------------------
Paul Michelin, President
By: /s/ Robert Michelin
---------------------------------------
Robert Michelin, Secretary
II-5
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
Prodijeux certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorize this registration
statement to be signed on its behalf by the undersigned, in the City of Quebec,
Quebec Canada, on October 12, 2001.
Prodijeux, Inc.
By: /s/ Michel Chiarore
---------------------------------------
Michel Chiarore, President
By: /s/ Rodolphe Charpentier
---------------------------------------
Rodolphe Charpentier, Vice President
II-6
INDEX TO FINANCIAL STATEMENTS
ANAGRAM
Independent Auditors' Report ............................................... F-1
Financial Statements
Balance Sheets........................................................ F-2
Statements of Operations.............................................. F-3
Statements of Changes in Stockholders' Deficit ....................... F-4
Statements of Cash Flows.............................................. F-5
Notes to Financial Statements ........................................ F-6 - F-9
PRODIJEUX INC.
Table of contents
Independent Auditors' Report ...............................................F-11
Balance sheets .............................................................F-12
Statement of changes in stockholders' deficit ..............................F-13
Statements of operations ...................................................F-14
Statements of cash flows ...................................................F-15
Notes to the financial statements .....................................F-16-F-20
--------------------------------------------------------------------------------
AnagramPlus, Inc.
2,736,000 shares
----------
PROSPECTUS
----------
We have not authorized anyone to give any information or to make any
representations other than those contained in this prospectus. No other
information should be relied upon. The information contained in this prospectus
is current only to the date of this prospectus. This prospectus does not offer
to sell any securities in any jurisdiction where to do so would be unlawful.
----------
Until , 2001, 25 days after the date of this prospectus, all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligations of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
______ , 2001
================================================================================
ANAGRAM PLUS, INC.
FINANCIAL STATEMENTS
PERIOD FROM OCTOBER 1, 2000 (INCEPTION)
THROUGH DECEMBER 31, 2000 AND FOR
THE SIX MONTHS ENDED JUNE 30, 2001
TABLE OF CONTENTS
Anagram
Independent Auditor's Report.................................................F-1
Financial Statements:
Balance Sheets.........................................................F-2
Statements of Operations...............................................F-3
Statement of Changes in Stockholders' Deficit..........................F-4
Statements of Cash Flows...............................................F-5
Notes to Financial Statements............................................F-6-F-9
DASZKAL BOLTON MANELA DEVLIN & CO.
CERTIFIED PUBLIC ACCOUNTANTS
----------------------------
A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS
2401 N.W. BOCA RATON BOULEVARD, SUITE 100 BOCA RATON, FLORIDA 33431
TELEPHONE (561) 367-1040 FAX (561) 750-3236
JEFFREY A. BOLTON, CPA, P.A MEMBER OF THE AMERICAN INSTITUTE
MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
ROBERT A. MANELA, CPA, P.A.
TIMOTHY R. DEVLIN. CPA, P.A.
MICHAEL S. KRIDEL, CPA, P.A.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Anagram Plus, Inc.
We have audited the accompanying balance sheets of Anagram Plus, Inc. as of June
30, 2001 and December 31, 2000, and the related statements of operations,
changes in stockholders' deficit and cash flows for the six months ended June
30, 2001 and the period from October 1, 2000 (inception) through December 31,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits 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 audits provide 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 Anagram Plus, Inc. as of June
30, 2001 and December 31, 2000 and the results of its operations and its cash
flows for the six months ended June 30, 2001 and the period from October 1, 2000
(inception) through December 31, 2000 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 8 to the
financial statements, the Company has experienced losses since its inception as
well as negative cash flows from operations. 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 described in Note 8. The accompanying
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might result from the resolution of these
uncertainties.
/s/Daskal Bolton Manela Devlin & Co.
Boca Raton, Florida
October 8, 2001
F-1
ANAGRAM PLUS, INC.
BALANCE SHEETS
================================================================================
ASSETS
June 30, December 31,
2001 2000
--------- ------------
Cash $ 539 $ 916
--------- ---------
Other assets:
Investment 224,968 109,227
--------- ---------
Total assets $ 225,507 $ 110,143
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 6,000 $ --
Due to related party 667 --
Accrued interest 4,469 --
Note payable - related party 242,779 144,886
--------- ---------
Total current liabilities 253,915 144,886
Stockholders' deficit
Preferred stock, $0.01 par value; 2,000,000
shares authorized -- --
Common stock, $.001 par value; 20,000,000
shares authorized, 6,236,000 and 6,000,000
shares issued and outstanding 6,236 6,000
Additional paid-in-capital 115,438 --
Accumulated deficit (150,082) (40,743)
--------- ---------
Total stockholders' deficit (28,408) (34,743)
--------- ---------
Total liabilities and stockholders' deficit $ 225,507 $ 110,143
========= =========
See accompanying notes to financial statements.
F-2
ANAGRAM PLUS, INC.
STATEMENTS OF OPERATIONS
================================================================================
January 1, 2001 October 1, 2000
to to
June 30, December 31,
2001 2000
--------------- ---------------
Revenues $ -- $ --
Selling, general and administrative expenses (9,484) (2,416)
Loss from investment (95,386) (38,327)
Interest expense (4,469) --
----------- -----------
Net loss $ (109,339) $ (40,743)
=========== ===========
Net loss per share (basic and diluted) (0.02) (0.01)
=========== ===========
Weighted average shares outstanding
(basic and diluted) 6,114,232 6,000,000
=========== ===========
See accompanying notes to financial statements.
F-3
ANAGRAM PLUS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIT
FOR THE PERIOD FROM OCTOBER 1, 2000 (INCEPTION) THROUGH JUNE 30, 2001
================================================================================
Common Stock Additional
--------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
--------- --------- ---------- --------- ---------
Balance at October 1, 2001 (Inception) -- $ -- $ -- $ -- $ --
Common stock issued for cash 6,000 6,000 -- -- 6,000
Net loss for the period ended December 31, 2000 -- -- -- (40,743) (40,743)
--------- --------- --------- --------- ---------
Balance at December 31, 2000 6,000,000 6,000 -- (40,743) (34,743)
Common stock issued for cash 236,000 236 117,764 -- 118,000
Costs associated with common stock issuance -- -- (2,326) -- (2,326)
Net loss for the period ended June 30, 2001 -- -- -- (109,339) (109,339)
--------- --------- --------- --------- ---------
Balance at June 30, 2001 6,236,000 $ 6,236 $ 115,438 $(150,082) $ (28,408)
========= ========= ========= ========= =========
See accompanying notes to financial statements.
F-4
ANAGRAM PLUS, INC.
STATEMENTS OF CASH FLOWS
================================================================================
January 1, 2001 October 1, 2000
to to
June 30, December 31,
2001 2000
--------------- ---------------
Cash flows from operating activities:
Net loss $(109,339) $ (40,743)
Adjustments to reconcile net loss to cash
provided (used) by operating activities:
Loss from equity investment 95,386 38,327
Increase (decrease) in:
Accounts payable 6,000 --
Accrued interest 4,469 --
Due to related parties 667 --
--------- ---------
Net cash used in operating activities (2,817) (2,416)
--------- ---------
Cash flows from investing activities:
Advances to related party (211,127) (80,884)
Investment in Prodijeux, Inc. -- (66,670)
--------- ---------
Net cash used in investing activities (211,127) (147,554)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 115,674 6,000
Proceeds from loan from related party 97,893 144,886
--------- ---------
Net cash provided by financing activities 213,567 150,886
--------- ---------
Net (decrease) increase in cash (377) 916
--------- ---------
Cash at beginning of period $ 916 $ 0
Cash at end of period $ 539 $ 916
========= =========
Supplemental disclosure of cash flow
information
Interest paid $ -- $ --
========= =========
See accompanying notes to financial statements.
F-5
ANAGRAM PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Anagram Plus, Inc. (the Company), a subsidiary of ADC Development Corp., is a
49.5% owner of the Canadian company Prodijeux, Inc. Prodijeux creates and
develops interactive education/entertainment products in the form of traditional
family board games, CD-ROM and on-line multiplayer games for the Internet. The
games will be distributed in department stores, toy specialty stores and
bookstores.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Investment
The Company uses the equity method of accounting for investments when the
Company has a significant influence over the operations of the investee, but
lacks control.
The Company accounts for the excess of the cost of the investment over the fair
value of the net assets acquired as goodwill. The equity method of accounting
does not involve the recording of individual assets and liabilities and,
therefore, does not record goodwill. However, the allocation of the excess cost
is amortized on the straight-line basis over a period of time and reduces the
investment as presented on the balance sheet.
The excess cost is being amortized on the straight-line method over five years.
Accumulated amortization at June 30, 2001 and December 31, 2000 was $9,380 and
$4,690, respectively.
Fiscal Year
The Company has changed its fiscal year from December 31st to June 30th to
coincide with the new fiscal year end of Prodijeux, Inc.
NOTE 3 - INVESTMENT AND SUBSEQUENT EVENT
At its inception the Company entered in to a stock subscription agreement with
the shareholders of Prodijeux, Inc., a Canadian company. According to the terms
of the agreement the Company purchased 495 shares of Prodijeux, representing
49.5% of the outstanding shares in exchange for $66,670. The purchase price was
allocated to the 49.5% of the assets acquired based on their estimated fair
values. The 49.5% of the assets acquired total $3,300 and the portion of the
liabilities assumed were $30,426. The stockholders' deficit was allocated to
goodwill. Goodwill, while not recorded on the balance sheet of the Company,
totaled $93,796 and is being amortized on a straight-line basis over 5 years.
F-6
ANAGRAM PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 3 - INVESTMENT AND SUBSEQUENT EVENT, CONTINUED
The Company's loss on its investment in Prodijeux for the periods ended June 30,
2001 and December 31, 2000 are presented in the following table.
Period ended
Period ended December 31,
Allocated portion of Prodijeux's: June 30, 2001 2000
------------- ------------
Sales $ 5,941 $ 6,180
======== ========
Gross (loss) profit $ (1,535) $ 136
======== ========
Net loss $(86,006) $(33,637)
======== ========
Loss from equity investment:
Allocated net loss of Prodijeux, Inc. $(86,006) $(33,637)
Less: Amortization of excess cost (9,380) (4,690)
-------- --------
Loss on equity investment $(95,386) $(38,327)
======== ========
In September 2000 the Company executed a note receivable with Prodijeux for an
amount up to $330,350 ($500,000 Canadian). The note charges no interest until
50,000 units of the product are sold, and then charges interest at 7% per annum.
The note is due upon demand but not before July 1, 2002. The loan is secured by
all the rights and titles that Prodijeux has on its family game products. During
the periods ended June 30, 2001 and December 31, 2000 the Company loaned
Prodijeux $211,127 and $80,884, respectively. The Company was owed $292,011 and
$80,884 at June 30, 2001 and December 31, 2000, respectively.
The investment in Prodijeux has a balance of $224,968 and $109,227 at June 30,
2001 and December 31, 2000, respectively. The details of the investment account
are presented in the following table:
Period ended
Period ended December 31,
June 30, 2001 2000
------------- ------------
Investment in Prodijeux:
Beginning Balance $ 109,227 $ --
Initial investment -- --
Advances fo Prodijeux 211,127 66,670
Allocated portion of net loss (86,006) (33,637)
Amortization of excess cost (9,380) (4,690)
--------- ---------
Ending Balance $ 224,968 $ 109,227
========= =========
F-7
ANAGRAM PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 3 - INVESTMENT AND SUBSEQUENT EVENT, CONTINUED
Subsequent Event
On July 1, 2001 the Company purchased an additional 1.5% interest in Prodijeux
from another shareholder for approximately $2,020. After the purchase of the
additional interest the Company is the majority shareholder, holding 51% of the
outstanding stock of Prodijeux, Inc. Additionally, the Company received a
statement from the two other major shareholders of Prodijeux acknowledging that
Anagram Plus can unilaterally control the daily operations of the Company and
may appoint or remove members of the board of directors of Prodijeux at will by
virtue of its majority ownership of the outstanding shares of Prodijeux.
NOTE 4 - INCOME TAXES
Temporary differences between the financial statement carrying amounts and tax
basis of assets and liabilities did not give rise to significant portions of
deferred taxes at June 30, 2001 and December 31, 2000.
As of June 30, 2001 and December 31, 2000, the Company had an unused net
operating loss carry forward of $9,484 and $2,416, respectively, available for
use on its future corporate federal tax returns. The Company's evaluation of the
tax benefit of its net operating loss carry forward is presented in the
following table. The tax amounts have been calculated using the Company's
effective income tax rate resulting from the use of graduated rates.
June 30, December 31,
2001 2000
--------- ------------
Deferred tax asset:
Tax benefit of net operating loss $ 4,403 $ 894
Valuation allowance:
Beginning balance (894)
Increase during the year (3,509) (894)
------- -------
Ending balance (4,403) (894)
------- -------
Net deferred taxes $ -- $ --
======= =======
Year Loss Originated Year Expiring
-------------------- -------------
December 31, 2000 2015
June 30, 2001 2016
Reconcilation of the Federal statutory income tax rate to the Company's
effective income tax rate is as follows:
June 30, December 31,
2001 2000
--------- ------------
Computed at the statutory rates (34%) $ 37,175 $ 13,853
Non-deductible expenses (33,666) (12,959)
Increase in valuation allowance (3,509) (894)
-------- --------
Tax provision (benefit) $ -- $ --
======== ========
NOTE 5 - RELATED PARTY TRANSACTIONS
A related party by way of common management has paid operating expenses on
behalf of the Company. During the periods ended June 30, 2001 and December 31,
2000 the related party paid operating expenses on behalf of the Company in the
amount of $4,556 and $171, respectively. The Company made repayments of $3,889
and $171 for the periods ending June 30, 2001 and December 31, 2000. The Company
owes the related party $667 as of June 30, 2001.
F-8
ANAGRAM PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 5 - RELATED PARTY TRANSACTIONS, CONTINUED
During the three months ended December 31, 2000, the Company executed a
non-interest bearing demand note with its parent (ADC Development Corp.). In
February 2001 the Company and its parent agreed to convert this note to an
unsecured promissory note for $500,000, or a lesser amount actually loaned now
or in the future. Under the terms of the note, interest of 6% per year begins to
accrue on the unpaid balance as of February 28, 2001. The unpaid principal
balance and interest becomes due on September 30, 2001. In October 2001 the
parent of the Company agreed to extend the due date of the unpaid principal and
interest balance, on the note referred to above, until June 30, 2002.
Under the terms of this note, the parent loaned the Company $97,893 and
$144,886, respectively, for the periods ending June 30, 2001 and December 31,
2000. At June 30, 2001 and December 31, 2000 the Company owed its parent
$242,779 and $144,886, respectively in unpaid principal and $4,469 and none in
accrued interest.
NOTE 6 - COMMON STOCK
In a private offering dated March 23, 2001, the Company offered common shares of
$.001 par value at a price of $.50 per share; the offering terminated on April
15, 2001. The Company sold 236,000 shares under the terms of this offering, for
a total of $118,000.
NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets,"
which is effective for fiscal years beginning after December 15, 2001. SFAS No.
142 requires, among other things, the discontinuance of goodwill amortization.
In addition, the standard includes provisions upon adoption for the
reclassification of certain existing recognized intangibles such as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the testing for impairment of existing goodwill and other intangibles. The
Company is currently assessing, but has not yet determined, the impact of SFAS
No. 142 on its financial position and results of operations.
NOTE 8 - GOING CONCERN AND MANAGEMENT'S PLAN OF ACTION
As shown in the accompanying financial statements, the Company incurred a net
loss during the periods ended June 30, 2001 and December 31, 2000 and, as of
those dates the Company's total liabilities exceeded its total assets.
Under the terms of the related party loan payable referenced in Note 3, the
Company has a commitment from its parent, ADC Development Corp., for funds in
the amount of $500,000, of which approximately $260,000 is still due the
Company. These funds will be used to loan to Prodijeux as well as to cover the
Company's operating expenses. As Prodijeux's need for additional funding
decreases, Anagram's cash requirements will also decrease. The Company is
attempting to raise additional funds from a public offering. The ability of the
Company to achieve its funding requirements is dependent upon the success of the
public offering and the ability of ADC to fulfill its commitment.
F-9
PRODIJEUX INC.
FINANCIAL STATEMENTS
JUNE 30, 2001
PERREAULT, WOLMAN, GRZYWACZ & CIE.CO.
Comptables Agrees - Chartered Accountants
Societe en nom collectif
5250 Ferrier, Suite 814
Montreal, Quebec H4P 2N7
Telephone: (514) 731-7987
Telecopieur: (514) 731-8782
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Prodijeux Inc.
Montreal, Quebec
We have audited the balance sheet of Prodijeux Inc. as at June 30, 2001 and
September 30, 2000 and the statements of operations, stockholders' deficit and
cash flows for the nine months and year 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 an audit to obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at June 30, 2001 and
September 30, 2000 and the results of its operations and its cash flows for the
nine months and year then ended in accordance with accounting principles
generally accepted in the United States of America.
Montreal, Quebec
August 31, 2001 Chartered Accountants
F-11
PRODIJEUX INC.
Balance sheets
================================================================================
June 30, September 30,
2001 2000
--------------------------------------------------------------------------------
ASSETS
CURRENT
Cash and cash equivalents $ 56,811 $ --
Accounts receivable (Note 4) 13,497 --
Inventory 23,088 --
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 93,396 --
PROPERTY AND EQUIPMENT, NET (Note 5) 18,635 3,803
INTANGIBLE ASSETS, NET (Note 6) 2,692 2,863
--------------------------------------------------------------------------------
TOTAL ASSETS $ 114,723 $ 6,666
================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 9,077 $ 4,664
Due to related party (Note 11) -- 1,730
Current portion of long term debt (Note 7) 6,604 6,664
--------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 15,681 13,058
LONG TERM DEBT (Note 7) 41,147 48,409
RELATED PARTY LOAN PAYABLE (Note 11) 290,702 --
--------------------------------------------------------------------------------
TOTAL LIABILITIES 347,530 61,467
STOCKHOLDERS' DEFICIT
Capital stock (Note 8) 66,831 67
Accumulated deficit (299,638) (54,868)
--------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' DEFICIT (232,807) (54,801)
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 114,723 $ 6,666
================================================================================
See accompanying notes to the financial statements.
F-12
PRODIJEUX INC.
Statement of changes in stockholders' deficit
For the period from October 1, 1999 through June 30, 2001
================================================================================
Accumulated
Other
Common stock Comprehensive Accumulated
Shares Amount Income Deficit Total
----------------------------------------------------------------------------------------------
BALANCE AT OCTOBER 1, 1999 100 $ 67 $ -- $ (16,938) $ (16,871)
Dividend -- -- -- (8,245) (8,245)
Foreign currency adjustment -- -- 548 -- 548
Net loss for the period -- -- -- (30,233) (30,233)
----------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2000 100 67 548 (55,416) (54,801)
Common stock issued 900 66,764 -- -- 66,764
Net loss at June 30, 2001 -- -- -- (241,703) (241,703)
Foreign currency adjustment -- -- (3,067) -- (3,067)
----------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 2001 1,000 $ 66,831 $ (2,519) $(297,119) $(232,807)
==============================================================================================
See accompanying notes to the financial statements.
F-13
PRODIJEUX INC.
Statements of operations
================================================================================
Nine months Year ended
ended June 30, September 30,
2001 2000
--------------------------------------------------------------------------------
SALES $ 24,487 $ --
--------------------------------------------------------------------------------
COST OF GOODS SOLD
Purchases 50,401 --
Inventory, end of period (23,088) --
--------------------------------------------------------------------------------
27,313 --
--------------------------------------------------------------------------------
GROSS LOSS (2,826) --
--------------------------------------------------------------------------------
OPERATING EXPENSES
Salaries 65,368 --
Consulting 61,878 --
Professional fees 24,448 976
Office supplies and delivery 10,426 2,694
Shows 18,265 870
Travel 10,928 615
Advertising 15,933 2,182
Equipment rental 4,614 4,366
Rent 5,049 4,330
Selling and promotion 10,132 8,096
Other expenses 2,628 --
Telephone 3,214 440
Taxes and licenses -- 965
Interest expense 2,521 2,735
Depreciation 3,003 1,751
Amortization 470 213
--------------------------------------------------------------------------------
238,877 30,233
--------------------------------------------------------------------------------
NET LOSS $(241,703) $ (30,233)
================================================================================
See accompanying notes to the financial statements.
F-14
PRODIJEUX INC.
Statements of cash flows
================================================================================
Nine months Year ended
ended June 30, September 30,
2001 2000
--------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(241,703) $ (30,233)
Adjustments to reconcile net loss to cash
provided (used) by operating activities:
Depreciation and amortization 3,473 1,964
Changes in assets and liabilities, net of effects
of acquisitions:
(Increase) decrease in:
Accounts receivable (13,497) 1,028
Inventory (23,088) --
Increase in accounts payable 4,413 3,106
Increase in due to related party (1,730) --
--------------------------------------------------------------------------------
Net cash used in operating activities (272,132) (24,135)
--------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (18,134) (2,737)
--------------------------------------------------------------------------------
Net cash used in investing activities (18,134) (2,737)
--------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in loans receivable - directors -- 3,739
Dividends paid -- (8,397)
Proceeds from issuance of common stock, net 66,764 --
Increase in related party loan payable 290,702 --
Proceeds from long term debt -- 36,833
Payments to long term debt (7,322) (6,667)
--------------------------------------------------------------------------------
Net cash provided by financing activities 350,144 25,508
--------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (3,067) 548
================================================================================
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 56,811 (816)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD -- 816
================================================================================
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 56,811 $ --
================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 2,521 $ 2,735
================================================================================
See accompanying notes to the financial statements.
F-15
PRODIJEUX INC.
Notes to the financial statements
================================================================================
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
The Company was incorporated under Part 1A of the Quebec Companies Act on
June 5, 1998. The Company creates and develops interactive
education/entertainment products in the form of traditional family board
games, CD-ROM and on-line multiplayer games for the internet.
The first game in this line of "edutainment" products is "WordXchange"
which is available in an adult and junior edition, as well as being
available in the French and English languages. The games will be
distributed in department stores, toy specialty stores and bookstores.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. The cash
equivalents at year-end consisted of a certificate of deposit.
Inventory
Inventory, consisting primarily of finished goods, is valued at the lower
of cost and replacement value. The cost of the inventory is determined
using the first-in, first-out method.
Property and Equipment
Property and equipment is recorded at cost and is depreciated using
accelerated methods over the estimated useful lives of the assets.
Intangible Assets
Intangible assets consist of trademark and financing costs and are
recorded at cost. Amortization is based on the estimated useful life using
the straight-line method over five years.
Advertising
Advertising costs are expensed when incurred. The advertising cost
incurred for the periods ended June 30, 2001 and September 30, 2000 were $
15,933 and $2,182, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual result could differ from those estimates.
F-16
PRODIJEUX INC.
Notes to the financial statements
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Revenue Recognition
Revenue is recognized on sales of products when the customer receives
title to the goods, generally upon the delivery.
Fiscal Year End
The Company has changed its fiscal year end from September 30th to June
30th.
3. CASH EQUIVALENTS
At June 30, 2001 cash equivalents consist of a certificate deposit in the
amount of $ 50,041. The deposit bears interest at 2.95% per annum and
matures on July 31, 2001. This deposit is pledged to the outstanding
letter of credit as described in Note 10.
4. ACCOUNTS RECEIVABLE
Accounts receivable consists of normal trade receivables. The Company
assesses the collectibility of its accounts receivable regularly. Based on
this assessment, an allowance for doubtful accounts is recorded. At June
30, 2001 an allowance for doubtful accounts was not considered necessary.
5. PROPERTY AND EQUIPMENT
June 30, September 30,
2001 2000
--------------------------------------------------------------------------------
Accumulated Net Net
Cost depreciation Value Value
--------------------------------------------------------------------------------
Production moulds $15,225 $ 4,413 $10,812 $ 3,803
Computer hardware 7,763 873 6,890 --
Computer software 1,421 488 933 --
--------------------------------------------------------------------------------
$24,409 $ 5,774 $18,635 $ 3,803
================================================================================
F-17
PRODIJEUX INC.
Notes to the financial statements
================================================================================
6. INTANGIBLE ASSETS
June 30, September 30,
2001 2000
--------------------------------------------------------------------------------
Accumulated Net Net
Cost Amortization Value Value
--------------------------------------------------------------------------------
Incorporation costs $ 641 $ 381 $ 260 $ 388
Trademark 2,069 311 1,758 1,755
Financing costs 793 119 674 720
--------------------------------------------------------------------------------
$3,503 $ 811 $2,692 $2,863
================================================================================
7. LONG TERM DEBT
June 30, September 30,
2001 2000
--------------------------------------------------------------------------------
Loan payable to individuals bearing
interest at a rate of 10% annual, due on
demand and not repayable before October 1,
2002. $32,885 $ 9,849
Term bank loan, bearing interest at prime
plus 1.5%, repayable in monthly capital
instalments of $550 until September 2003
plus interest. The loan is secured by a
moveable hypothec over the universality of
claims. 14,866 20,556
Loans repaid during the year -- 24,668
--------------------------------------------------------------------------------
47,751 55,073
Less: Current portion 6,604 6,664
--------------------------------------------------------------------------------
$41,147 $48,409
================================================================================
Long term debt principal repayments to be made during the subsequent years
are as follows:
2002 $ 6,604
2003 39,489
2004 1,658
Subsequent --
--------------------------------------------------------------------------------
$47,751
================================================================================
F-18
PRODIJEUX INC.
Notes to the financial statements
================================================================================
8. CAPITAL STOCK
Authorized:
Unlimited number of Class "A" shares, voting, participating and
convertible into one Class "D" share.
Unlimited number of Class "B" shares, voting and participating.
Unlimited number of Class "C" shares, voting, non-participating and
redeemable by the company at time of death of holder.
Unlimited number of Class "D" shares, non-voting, non-cumulative dividend
of 1/2 % to 1 % per month, redeemable at the option of the holder.
Unlimited number of Class "E" shares, non-voting, non-cumulative dividend
of 3/4 % to 1 % per month, redeemable at the option of the holder.
Unlimited number of Class "F" shares, non-voting, non-cumulative annual
dividend of $1 per share, redeemable at the option of the holder.
Unlimited number of Class "G" shares, non-voting, non-cumulative annual
dividend of $1 per share, redeemable at the option of the company.
June 30, September 30,
Issued: 2001 2000
--------------------------------------------------------------------------------
1,000 Class "A" shares (100 in 2000) $ 66,831 $ 67
================================================================================
During the year, 900 Class "A" shares were issued for $ 66,764 in cash.
9. COMMITMENTS
The Company has a long term lease agreement for rent, expiring in October
2002. Future minimum lease payments under this operating lease are as
follows:
For the years ending June 30,
2002 $ 6,311
2003 $ 2,104
The Company has a long term lease agreement for equipment, expiring in
December 2001. Future minimum lease payments under this operating lease
are as follows:
2002 $ 2,517
F-19
PRODIJEUX INC.
Notes to the financial statements
================================================================================
10. LETTER OF CREDIT
As at June 30, 2001, the Company has an outstanding letter of credit in
the amount of $ 48,053. This letter of credit is secured by the Company's
certificate deposit.
11. RELATED PARTY TRANSACTIONS
A shareholder of the Company provides management and consulting services
to the company for $ 1,307 per month. The Company paid the related party $
10,453 during the nine months ended June 30, 2001 and $ 2,720 for the year
ended September 30, 2000. The Company owed the shareholder $ 0 and $ 1,730
at June 30, 2001 and September 30, 2000, respectively.
In September 2000 the Company executed a note payable with another
shareholder for an amount up to $ 330,350 ($ 500,000 Canadian). The note
charges no interest until 50,000 units of the product are sold and then
charges interest at 7% per annum. The note is due upon demand but no
before July 1, 2002. The loan is secured by a moveable hypothec on all
rights and titles that the company has on its family game products. The
shareholder loaned the Company $ 290,702 during the nine months ended June
30, 2001.
12. CURRENCY RATES
For the purpose of conversion from Canadian Dollars to US Dollars, the end
of the month and nine and twelve month average exchange rate were used,
where applicable, for the periods ending June 30, 2001 and September 30,
2000, respectively. the end of the month rate, as quoted in the Wall
Street Journal, was $.6607 Canadian Dollars to $1 US Dollar at June 30,
2001. The average rate for the period ending June 30, 2001 was $.6533
Canadian Dollars to $1 US Dollar.
The end of the month rate was $.6667 Canadian Dollars to $1 US Dollar at
September 30, 2000. The average rate for the period ending September 30,
2000 was $.6799 Canadian Dollars to $1 US Dollar.
F-20