________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
________________________________________________________________________________
Washington, D.C. 20549
________________________________________________________________________________
Form SB - 2/A
________________________________________________________________________________
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
SECOND AMENDMENT
WORLDWIDE PROMOTIONAL PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 5130 65-1184627
________________________________________________________________________________
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) identification No.)
3404-25th Street NE
Calgary, AB
T1Y 6C1
(403) 219-3090
____________________________________________________________________________
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Guy Peckham
President
3404-25th Street NE
Calgary, AB
T1Y 6C1
(403) 219-3090
_____________________________________________________________
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
The O'Neal Law Firm, P.C.
Attention: William D. O'Neal, Esq.
17100 E. Shea Boulevard
Suite #400-D
Fountain Hills, Arizona 85268
(480) 812-5058 Fax:
(480) 816-9241
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
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, check
the following box. [X]
1
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act Registration Statement number of the earlier effective
Registration Statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
2
CALCULATION OF REGISTRATION FEE
- ----------------------- --------------------- ------------------------- ------------------------- --------------------
Title of each Proposed Proposed
Class 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 10,016,000 $0.10 $1,001,600 $117.88
- ----------------------- --------------------- ------------------------- ------------------------- --------------------
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 Securities and Exchange Commission, acting
pursuant to said section 8(a), may determine.
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Fixed offering price was set by the selling shareholders until
securities are quoted on the OTC Bulletin Board or other national exchange, and
thereafter at prevailing market prices or privately negotiated prices.
3
PROSPECTUS
10,016,000 shares of common stock
WORLDWIDE PROMOTIONAL PRODUCTS CORPORATION
3404-25th Street NE
Calgary, AB
T1Y 6C1
(403) 219-3090
10,016,000 shares of common stock of Worldwide Promotional Products Corporation.
($0.10 per share)
This is an offering of 10,016,000 shares of common stock by the selling
shareholders. The shares are being registered to permit public secondary trading
of the shares that are being offered by the selling shareholders named in this
prospectus. We will not receive any of the proceeds from the sale of the shares.
There is currently no public market for our shares.
The sales price to the public was set by the selling shareholders at $0.10 per
share for a total of $1,001,600. The price of $0.10 per share is a fixed price
until the shares are listed on the OTC Bulletin Board or other national
exchange, and thereafter at prevailing market prices or privately negotiated
prices.
INVESTORS IN THE COMMON STOCK SHOULD HAVE THE ABILITY TO LOSE THEIR ENTIRE
INVESTMENT SINCE AN INVESTMENT IN THE COMMON STOCK IS SPECULATIVE AND SUBJECT TO
MANY RISKS. See "Risk Factors," which begins on page 7.
Neither the SEC nor any state securities commission has approved or disapproved
these securities, passed upon the adequacy or accuracy of this prospectus, or
made any recommendation that you buy or not buy the shares. Any representation
to the contrary is a Criminal offense.
The information in this prospectus is not complete and may be changed. The
selling shareholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
We currently have offices located in Vancouver, British Columbia and Calgary,
Alberta. We currently conduct business solely in Canada.
The date of this prospectus is August 29, 2005.
4
TABLE OF CONTENTS
PART I - Summary Information and Risk Factors............................... 6
Prospectus Summary.......................................................... 6
The Offering................................................................ 6
Summary of Financial Information ........................................... 7
Risk Factors................................................................ 7
Forward-Looking Statements.................................................. 10
Use of Proceeds............................................................. 10
Determination of Offering Price............................................. 10
Dilution.................................................................... 10
Selling Security Holders.................................................... 10
Plan of Distribution........................................................ 15
Legal Proceedings........................................................... 17
Directors, Executive Officers, Promoters and Control Persons................ 17
Security Ownership of Certain Beneficial Owners and Management.............. 18
Description of Securities................................................... 19
Interests of Named Experts and Counsel...................................... 19
Description of Business..................................................... 19
Management's Discussion and Analysis or Plan of Operation................... 27
Description of Property..................................................... 33
Certain Relationships and Related Transactions.............................. 34
Market for Common Equity and Related Shareholder Matters.................... 34
Dividend Policy............................................................. 35
Executive Compensation...................................................... 35
Legal Matters............................................................... 36
Securities Act Indemnification Disclosure................................... 36
Experts..................................................................... 36
Transfer Agent.............................................................. 36
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures................................................................. 36
PART II - Financial Statements............................................. 38
5
PART I - SUMMARY INFORMATION AND RISK FACTORS
PROSPECTUS SUMMARY
Unless the context indicates otherwise, all references in this prospectus to
"we," or "Worldwide," refer to Worldwide Promotional Products Corporation., a
corporation formed under the laws of the State of Nevada on October 28, 1999.
Worldwide Promotional Products Corporation was originally incorporated in the
State of Nevada on October 28, 1999, as "Victor James, Inc." We were a dormant
corporation since our inception and had never engaged in any prior business or
financing activities prior to July 1, 2004. On June 16, 2004, we filed a
Certificate of Amendment with the Nevada Secretary of State changing our name
from Victor James, Inc. to Worldwide Promotional Products Corporation. On July
1, 2004, we entered into a Share Exchange Agreement with Globestuff.com, Inc, an
Alberta corporation ("Globestuff"), whereby we acquired 100% of the outstanding
common stock of Globestuff for 5,000,000 shares of our common stock, whereby
Globestuff became a wholly-owned subsidiary of Worldwide.
We are a sales, marketing and administrative support organization for suppliers,
distributors, and end users of promotional products.
Our executive offices are located at 3404 25th St. NE, Calgary, AB, T1Y 6C1. Our
telephone number is (403) 219-3090. We also have a showroom and office in
Vancouver, British Columbia. We currently conduct business solely in Canada.
THE OFFERING
Securities Offered:......Up to 10,016,000 shares of common stock. The securities
being offered are those of the existing shareholders only.
Price per share:.........$0.10 as determined by the selling shareholders. The price
of $0.10 per share is a fixed price until the securities are
listed on the OTC Bulletin Board or other national exchange,
and thereafter at prevailing market prices or privately
negotiated prices.
Securities Issued........And Outstanding: 25,011,000 shares of common stock were
issued and outstanding as of the date of this prospectus.
Use of Proceeds:.........We will not receive any proceeds from the sale of the common
stock by the selling shareholders.
Plan of Distribution:....We are unaware of the nature and timing of any future sales
of our common stock by existing shareholders.
Registration Costs:......We estimate our total offering registration costs to be
6
SUMMARY OF FINANCIAL INFORMATION
The following summary financial information for the periods
stated summarizes certain information from our financial
statements included elsewhere in this prospectus. You should
read this information in conjunction with Management's Plan
of Operations and the financial statements and the related
notes thereto included elsewhere in this prospectus.
- ------------------------------ --------------------- ------------------- -------------------
Six Month Period Ended Year Ended Year Ended
Income Statement June 30, 2005 December 31, 2004 December 31, 2003
Revenues $476,070 $767,777 $423,327
- ------------------------------ --------------------- ------------------- -------------------
Net Income (Loss) $(306,969) $(258,536) $(4,000)
- ------------------------------ --------------------- ------------------- -------------------
Net Income (Loss per Share) a a $ a
- ------------------------------ --------------------- ------------------- -------------------
Balance Sheet
- ------------------------------ --------------------- ------------------- -------------------
Total Assets $266,492 $372,112 $123,210
- ------------------------------ --------------------- ------------------- -------------------
Total Current Liabilities $356,608 $346,345 $61,123
- ------------------------------ --------------------- ------------------- -------------------
Shareholders' Equity (Defecit) $(175,774) $(47,927) $(4,337)
- ------------------------------ --------------------- ------------------- -------------------
RISK FACTORS
The securities offered are highly speculative in nature and involve a high
degree of risk. They should be purchased only by persons who can afford to lose
their entire investment. This section sets forth all material risks known to
management with respect to this offering. Therefore, each prospective investor
should, prior to purchase, consider very carefully each of the following known
material risk factors among other things, as well as all other information set
forth in this prospectus.
(1) We may need to raise additional funds to the extent that current cash flows
are insufficient to fund future on-going operations or we may be unable to fully
execute our plan of operation or continue to operate as a going concern.
We anticipate that our cash flows from operations will be not be adequate to
satisfy our capital requirements for current operations for the next twelve (12)
months. To the extent that the funds generated by our on-going operations are
insufficient to fund our future operating requirements, it will be necessary to
raise additional funds, through public or private financings. Any equity or debt
financings, if available at all, may be on terms that are not favorable to us.
If adequate capital is not available, we may be unable to fully execute our
business plan as set forth herein or continue to operate as a going concern.
(2) If we do not accurately forecast our membership enrollment revenues will be
negatively impacted and we may not be able to continue to operate as a going
concern.
We must correctly estimate our membership enrollment in order to effectively
project what our revenue will be. The fewer members we have, the smaller the
discount we will be able to pass along to our members. Our inability to pass
along a sufficient discount to our members could make enrollment into our
membership program cost prohibitive to the distributors. Without adequate
7
RISK FACTORS - continued
participation of distributors, we will be unable to generate sufficient revenues
to continue to operate as a going concern.
(3) Failure of suppliers to deliver our product could cause members to become
unsatisfied with us and could affect our ability to operate as a going concern.
If our suppliers do not provide us with high quality goods, our members will not
be willing to purchase products from those suppliers. Our business model allows
us to provide customer service and discounts to members who would otherwise be
competitors. We must provide them with the same quality products at a discount
that they would otherwise buy from wholesalers. We must be able to provide them
a greater array of products than they are currently offered. If these products
are not available to us, we would not be able to pass this feature of our
membership on to our members thus giving them less reason to remain with us. As
a result, we would not be able to generate sufficient revenues to continue to
operate as a going concern.
(4) We may seek to compensate providers of services by issuance of stock in lieu
of cash, which would have a dilutive effect on the ownership interests of
shareholders and could reduce the value of their shares. If we are unable to
secure further capital we may seek to compensate providers of services by
issuance of stock in lieu of cash. Any such stock issuance would dilute
ownership interests of the shareholders. For example, it is possible that we
would grant stock or stock options to compensate its executives and employees.
Whether or not our cash assets prove to be inadequate to meet its operational
needs, we may seek to compensate providers of services by issuance of stock in
lieu of cash, which would have a dilutive effect on the ownership interests of
shareholders and could reduce the value of their shares.
(5) Failure to retain and expand our existing management team could negatively
impact our revenues.
Our success depends largely on the skills of certain key management, in
particular our President, Guy Peckham and our Secretary/ Treasurer Bruce Hannan.
We do not have employment agreements with our executive officers, key management
or other employees and, therefore, they could terminate their employment at any
time without penalty. We do not maintain key person life insurance policies on
any of our employees. The loss of one or both of these individuals would cause
us a significant setback. We may not be able to recruit personnel on acceptable
terms to replace these individuals in a timely manner, or at all. Furthermore to
execute our business plan fully we will need to bring in professionals capable
of managing a strict receivables department. If we cannot retain trained
personnel in this area, then this aspect of our service to our members would be
lost. This could cause a drop off of enrollment in our membership program and a
decrease in our revenues.
(6) Our failure to sign up distributors and agents could create greater
competition and could result in a loss of business and a decrease in our
revenues.
Potential members that we have targeted could also be our competition. If we are
unsuccessful in signing these people up for our membership, they will be selling
to the same target market that our members are selling to. At any time these
sales organizations could copy our business plan and directly compete with us.
Such competition could result in a loss of business and a decrease in our
revenues.
8
RISK FACTORS - continued
(7) Our officers and directors control our operations and matters requiring
shareholder approval and therefore have the ability to significantly influence
all matters requiring shareholder approval.
Our officers and directors own approximately 20.0% of our outstanding shares of
common stock. As a result, our officers and directors will have the ability to
significantly influence all matters requiring approval by our shareholders,
including the election and removal of directors. Such control will allow our
officers and directors to control the future course of our company. Our officers
and directors do not intend to purchase any of the shares in this offering.
(8) Shareholders could experience substantial dilution if we issue additional
shares of our capital stock.
Over the next twelve (12) months, we intend to issue additional equity
securities to raise additional cash to expand our operations. If we issue
additional shares of our capital stock, shareholders will experience dilution in
their respective percentages of ownership in Worldwide.
(9) There currently is no public market for our common stock. There can be no
assurance that our common stock will ever be publicly traded or appreciate
significantly in value and investors may not be able to find purchasers for
their shares of our common stock.
We cannot guarantee that an active public market will develop or be sustained.
Therefore, investors may not be able to find purchasers for their shares of our
common stock. Should there develop a significant market for our shares, the
market price for those shares may be significantly affected by such factors as
our financial results and introduction of new products and services. While we,
in conjunction with broker-dealers, intend to apply to the NASD to have our
stock publicly traded on the Over-the-Counter Electronic Bulletin Board, no
assurance can be given that such regulatory approval will ever be received. If
our common stock becomes publicly traded, no assurance can be given that our
common stock will ever be traded on an established national securities exchange
or that our business strategy will be well received by the investment community.
(10) We have incurred losses which may continue, requiring us to seek additional
sources of capital which may not be available, requiring us to suspend or cease
operations.
We incurred net losses of $258,536 for the year ended December 31, 2004, as well
as incurred a net loss of $306,969 for the six months ended June 30, 2005. We
cannot assure you that we can achieve or sustain profitability on a quarterly or
annual basis in the future. If revenues grows more slowly than we anticipate, or
if operating expenses exceed our expectations or cannot be adjusted accordingly,
we will continue to incur losses.
(11) Our losses have created an unhealthy financial position for the company and
our independent auditors have expressed doubt about our ability to continue as a
going concern, which may hinder our ability to obtain future financing.
In their report dated August 18, 2005, our independent auditors stated that our
financial statements for the year ended December 31, 2004 were prepared assuming
that we would continue as a going concern. Our ability to continue as a going
concern is an issue raised as a result of cash flow constraint, an accumulated
deficit of $262,536 at December 31, 2004 and recurring losses from operations.
We continue to experience net losses. Our ability to continue as a going concern
is subject to our ability to generate a profit and/or obtain necessary funding
9
RISK FACTORS - continued
from outside sources, including obtaining additional funding from the sale of
our securities, increasing sales or obtaining loans from various financial
institutions where possible. Our continued net losses and stockholders' deficit
increases the difficulty in meeting such goals and there can be no assurances
that such methods will prove successful.
FORWARD-LOOKING STATEMENTS
You should be aware that any forward-looking statements in this prospectus
involve risks and uncertainties as they are based on certain stated assumptions,
which may apply only as of the date of this prospectus. We use words such as
"anticipates," "believes," "plans," "expects," "future," "intends" and similar
expressions to identify these forward-looking statements and the actual results
of our operations could differ materially from those anticipated in these
forward-looking statements.
USE OF PROCEEDS
We will not receive the proceeds from the sale of any of the 10,016,000 shares
offered by the selling shareholders. We are, however, paying the costs of
registering those shares.
DETERMINATION OF OFFERING PRICE
The shareholders set the offering price of the common stock at $0.10 per share.
The shareholders arbitrarily set the offering price based upon their collective
judgment as to a price per share they were willing to accept. The price of $0.10
per share is a fixed price until the securities are listed on the OTC Bulletin
Board or other national exchange, and thereafter at prevailing market prices or
privately negotiated prices.
DILUTION
Since this offering is being made solely by the selling stockholders and none of
the proceeds will be paid to us, our net tangible book value will be unaffected
by this offering.
SELLING SECURITY HOLDERS
The following table sets forth the names of the selling shareholders and for
each selling shareholder the number of shares of common stock beneficially owned
as of August 23, 2005, and the number of shares being registered. The selling
shareholders have furnished all information with respect to share ownership. The
shares being offered are being registered to permit public secondary trading of
the shares and each selling shareholder may offer all or part of the shares
owned for resale from time to time. A selling shareholder is under no
obligation, however, to sell any shares immediately pursuant to this prospectus,
nor is a selling shareholder obligated to sell all or any portion of the shares
at any time. Therefore, no estimate can be given as to the number of shares of
common stock that will be sold pursuant to this prospectus or the number of
shares that will be owned by the selling shareholders upon termination of the
offering made hereby.
The following table provides as of August 23, 2005, information regarding the
beneficial ownership of our common stock held by each of the selling
shareholders, including:
10
SELLING SECURITY HOLDERS - continued
1. The number of shares owned by each prior to this offering;
2. The total number of shares that are to be offered for each;
3. The total number of shares that will be owned by each upon completion of
the offering;
4. The percentage owned by each; and
5. The identity of the beneficial holder of any entity that owns the shares.
To the best of our knowledge, the named parties in the table that follows are
the beneficial owners and have the sole voting and investment power over all
shares or rights to the shares reported. In addition, the table assumes that the
selling shareholders do not sell shares of common stock not being offered
through this prospectus and do not purchase additional shares of common stock.
The column reporting the percentage owned upon completion assumes that all
shares offered are sold, and is calculated based on 25,011,000 shares
outstanding on August 23, 2005.
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Selling Shareholders Shares of Common Shares of Shares of Percentage of Percentage of
Stock Owned Prior Common Stock Common Stock Common Stock Common Stock
to Offering to be Offered Owned After Owned Before Owned After
for Sale the Offering the Offering the Offering
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
D. Bruce Horton 625,000 0 625,000 2.5% 2.5%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Mryna Crawford 610,000 610,000 0 2.4% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
T. Robert Horton 525,500 300,000 225,500 2.1% .9%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Jason Scharfe 525,500 300,000 225,500 2.1% .9%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Brad Scharfe 600,000 600,000 0 2.4% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
H. Nixon Scharfe 625,000 0 625,000 2.5% 2.5%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Lucille Mao 510,500 510,500 0 2.0% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Tandoor Holdings Ltd. (1) 625,000 0 625,000 2.5% 2.5%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Lancaster Pacific 625,000 0 625,000 2.5% 2.5%
Investments Ltd.(2)
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Eric Tan 40,000 40,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Bryan Dear 610,000 610,000 0 2.4% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Kim Foster 485,500 200,000 285,500 1.9% 1.1%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Jacqueline Mcclure 625,000 0 625,000 2.5% 2.5%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Jim Mochoruk 735,000 735,000 0 2.9% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Korena Bleile 745,500 325,500 420,000 2.9% 1.7%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
11
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Selling Shareholders Shares of Common Shares of Shares of Percentage of Percentage of
Stock Owned Prior Common Stock Common Stock Common Stock Common Stock
to Offering to be Offered Owned After Owned Before Owned After
for Sale the Offering the Offering the Offering
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Tammy Seibel 230,000 75,000 155,000 .9% .6%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Daryl Turner 50,000 0 50,000 .2% .2%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Aaron Toth 625,000 625,000 0 2.5% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Rich Bergen 505,500 200,000 305,500 2.0% 1.2%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Ed Robb 645,000 20,000 625,000 2.6% 2.5%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Jason Sundar 610,000 610,000 0 2.4% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Peter Dunfield 675,000 50,000 625,000 2.7% 2.5%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Jeff Sundar 572,500 350,000 222,500 2.3% .9%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Joel Dumaresq 807,000 807,000 0 3.2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Keith Ebert 505,500 0 505,500 2.0% 2.0%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
David Dumaresq 625,000 0 625,000 2.5% 2.5%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Founders Cup Charity Classic 10,000 10,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Electronic Relationship 1,000,000 1,000,000 0 4.0% 0
Marketing (3)
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Guy Peckham (4) 2,500,000 0 2,500,000 10.0% 10.0%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Bruce Hannan (5) 2,500,000 0 2,500,000 10.0% 10.0%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Wes Dry 50,000 0 50,000 .2% .2%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Paul Olmstead 50,000 0 50,000 .2% .2%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Dr. Keith Lim, Inc. 75,000 75,000 0 .3% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
James Barton 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Craig Barton 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Andrew Cloutier 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Tana Cloutier 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Marko Ferenc 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Andras Romoki 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Michael Wood 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Rick Jeffery 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
12
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Selling Shareholders Shares of Common Shares of Shares of Percentage of Percentage of
Stock Owned Prior Common Stock Common Stock Common Stock Common Stock
to Offering to be Offered Owned After Owned Before Owned After
for Sale the Offering the Offering the Offering
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Wayne Osteiriecher 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Derek Puttick 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Silverback Management (6) 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
William Stewart 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Brian Cole 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Andrew Bilon 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
James Ericksteen 1,000 1,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Kevin Ericksteen (7) 25,000 25,000 0 .1 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Mike Howlet 25,000 25,000 0 .1 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Everett Sponagle 1,000 1,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Robert Olsen 1,000 1,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Beverly Shultak 1,000 1,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Deanna Olsen 1,000 1,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Mike Newman 1,000 1,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Marvin Munro 1,000 1,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Edwin Gouin 1,000 1,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Jo-Ann Ericksteen 1,000 1,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Palmesa Investments, Inc. (8) 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Paul Doherty 15,000 15,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Jim Osterreicher 10,000 10,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Cari Brown 15,000 15,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Mike Schutz 50,000 50,000 0 .2% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Wayne Hannon 35,000 35,000 0 .14% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Newport Capital (9) 200,000 200,000 0 .8% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Verona Capital International (10) 200,000 200,000 0 .8% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Pezzente Holdings(11) 5,000 5,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Marcus Johnson 16,000 16,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
13
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Selling Shareholders Shares of Common Shares of Shares of Percentage of Percentage of
Stock Owned Prior Common Stock Common Stock Common Stock Common Stock
to Offering to be Offered Owned After Owned Before Owned After
for Sale the Offering the Offering the Offering
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Coastal Asset Management (12) 160,000 160,000 0 .6% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Nadia Botteselle 5,000 5,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Gerrard B. Kelly 5,000 5,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Vaughn Biberdorf 20,000 20,000 0 .1% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Andoni Paleologos 160,000 160,000 0 .6% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Gordon D.Rough 20,000 20,000 0 .1% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Charles Leonard Clarke 5,000 5,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Dimitrios Georgas 5,000 5,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Kevin Clarke 5,000 5,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Alec McDonald 20,000 20,000 0 .1% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Terry Schmidt 6,000 6,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Mark A. Hayward 36,000 36,000 0 .1% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Shauna Matyas 1,000 1,000 0 * 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Allen Basler 20,000 20,000 0 .1% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Daren Sello 20,000 20,000 0 .1% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Sean Duncan 20,000 20,000 0 .1% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Peter Lafuente 20,000 20,000 0 .1% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Leo Kwok 20,000 20,000 0 .1% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
James Paleologos 60,000 60,000 0 .2%* 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
425001 Alberta Ltd. (13),(14) 2,500,000 0 2,500,000 10.0% 10.0%
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
Total 25,011,000 10,016,000 14,995,000 100% 0
- ------------------------------ -------------------- ---------------- ---------------- --------------- ----------------
* = less than 0.1%
14
SELLING SECURITY HOLDERS - continued
(1) Tandoor Holdings, Ltd. is controlled by Rosa Cheung.
(2) Lancaster Pacific Investments, Ltd. is controlled by Paul Chan.
(3) Electronic Relationship Marketing is controlled by John Rizzo.
(4) Guy Pechkam is an officer and director of Worldwide.
(5) Bruce Hannan is an officer and director of Worldwide.
(6) Silverback Management is controlled by Nadia Traversa.
(7) Kevin Ericksteen is a former officer and director of Worldwide.
(8) Palamesa Investments, Inc. is controlled by Kevin Ericksteen, a former
officer and director of Worldwide. (9) Newport Capital is controlled by
Brent Pierce. (10) Verona Capital is controlled by Gerold Hoop.
(11) Pezzente Holdings is controlled by Alfonzo Pezzente. (12) Coastal Asset
Management is controlled by Jason Sundar. (13) 425001 Alberta Ltd. is
controlled by Jeff Fearn and Jean Bundschuh.
(14) 425001 Alberta Ltd. has entered into a 5-year Management Services
Agreement with Worldwide for the services of Jeff Fearn and Jean
Bundschuh.
Except as disclosed in footnotes 4,5,7,8 and 14 above, to our knowledge, none of
the selling shareholders:
1. Has had a material relationship with Worldwide other than as a shareholder
as noted above at any time within the past three (3) years;
2. Has ever been an officer or director of Worldwide; or 3. Are
broker-dealers or affiliated with broker-dealers.
PLAN OF DISTRIBUTION
The selling shareholders have not informed us of how they plan to sell their
shares. However, they may sell some or all of their common stock in one or more
transactions:
1. on such public markets or exchanges as the common stock may from time to time
be trading; 2. in privately negotiated transactions; or 3. in any combination of
these methods of distribution.
The sales price to the public has been determined by the shareholders to be
$0.10 per share. The price of $0.10 per share is a fixed price until the
securities are listed on the OTC Bulletin Board or other national exchange, and
thereafter at prevailing market prices or privately negotiated prices.
The shares may also be sold in compliance with the Securities and Exchange
Commission's Rule 144. Under Rule 144, several provisions must be met with
respect to the sales of control securities at any time and sales of restricted
securities held between one and two years. The following is a summary of the
provisions of Rule 144: (a) Rule 144 is available only if the issuer is current
in its filings under the Securities Exchange Act of 1934. Such filings include,
but are not limited to, the issuer's quarterly reports and annual reports; (b)
Rule 144 allows resale of restricted and control securities after a one year
holding period, subjected to certain volume limitations, and resale's by
non-affiliates holders without limitations after two years; (c) The sales of
securities made under Rule 144 during any three-month period are limited to the
greater of: (i) 1% of the outstanding common stock of the issuer; or (ii) the
average weekly reported trading volume in the outstanding common stock reported
on all securities exchanges during the four calendar weeks preceding the filing
of the required notice of the sale under Rule 144 with the SEC.
15
SELLING SECURITY HOLDERS - continued
The selling shareholders may also sell their shares directly through market
makers acting in their capacity as broker-dealers. We will apply to have our
shares of common stock listed on the OTC Bulletin Board immediately after the
date of this prospectus. We anticipate once the shares are trading on the OTC
Bulletin Board the selling shareholders will sell their shares directly into any
market created. Selling shareholders will offer their shares at a fixed price of
$0.10 per share until the common stock is trading on the OTC Bulletin Board at
which time the prices the selling shareholders will receive will be determined
by market conditions. Selling shareholders may also sell in private
transactions. We cannot predict the prices at which shares may be sold or
whether the common stock will ever trade on any market. The selling shareholders
may sell the shares, as the case may be, from time to time, in one or more
transactions. We do not intend to enter into any arrangements with any
securities dealers concerning solicitation of offers to purchase the shares.
Commissions and discounts paid in connection with the sale of the shares by the
selling shareholders will be determined through negotiations between them and
the broker-dealers through or to which the securities are to be sold and may
vary, depending on the broker-dealer's fee schedule, the size of the transaction
and other factors. The separate costs of the selling shareholders will be borne
by them. The selling shareholders will, and any broker-broker dealer or agent
that participates with the selling shareholders in the sale of the shares by
them may be deemed an "underwriter" within the meaning of the Securities Act,
and any commissions or discounts received by them and any profits on the resale
of shares purchased by them may be deemed to be underwriting commissions under
the Securities Act. In the event any selling shareholder engages a broker-dealer
to distribute its shares, and the broker-dealer is acting as underwriter, we
will be required to file a post-effective amendment containing the name of the
underwriter.
The selling shareholders must comply with the requirements of the Securities Act
of 1933 and the Securities Exchange Act of 1934 in the offer and sale of their
common stock. In particular, during times that the selling shareholders may be
deemed to be engaged in a distribution of the common stock, and therefore be
considered to be underwriters, they must comply with applicable law. Regulation
M prohibits certain market activities by persons selling securities in a
distribution. To demonstrate their understanding of those restrictions and
others, selling shareholders will be required, prior to the release of
unlegended shares to themselves or any transferee, to represent as follows: that
they have delivered a copy of this prospectus, and if they are effecting sales
on the Electronic Bulletin Board or inter-dealer quotation system or any
electronic network, that neither they nor any affiliates or persons acting on
their behalf, directly or indirectly, has engaged in any short sale of our
common stock; and for a period commencing at least five (5) business days before
their first sale and ending with the date of their last sale, bid for,
purchased, or attempted to induce any person to bid for or purchase our common
stock.
We can provide no assurance that all or any of the common stock offered will be
sold by the selling shareholders.
We are bearing all costs relating to the registration of the common stock. Any
commissions or other fees payable to brokers or dealers in connection with any
sale of the common stock, however, will be borne by the selling shareholders or
other party selling the common stock. We will use our best efforts to update the
registration statement and maintain its effectiveness for one year.
16
LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings and we are not aware of
any pending or potential legal actions.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors and executive officers currently serving Worldwide are as follows:
Name Age Position Term Commenced Term Expires
- ---------------------- ------ -------------------- --------------- -------------
Guy Peckham 41 Director/President July 26, 2004 July 26, 2005
1203-1005 Beach Ave
Vancouver, B.C.
V6E 3W2
Bruce Hannan 35 Director/Secretary/ July 26, 2004 July 26, 2005
125 Sommerset Park SW Treasurer
Calgary, AB
T2Y 3H5
Wally Marcolin 43 Director June 17, 2004 June 17, 2005
128 Sunharbour Crescent
S.E Calgary, AB
T2X 3B3
The foregoing persons may be deemed "promoters" of Worldwide, as that term is
defined in the rules and regulations promulgated under the Securities and
Exchange Act of 1933.
Directors are elected to serve until the next annual meeting of stockholders and
until their successors have been elected and qualified. Officers are appointed
to serve until the meeting of the board of directors following the next annual
meeting of stockholders and until their successors have been elected and
qualified.
The director and officer Bruce Hannan is a full-time employee of the company.
The director and officer Guy Peckham will spend 75% of his time on company
business. The director Wally Marcolin is not an officer or employee of the
company.
No executive officer or director of Worldwide has been the subject of any order,
judgment, or decree of any court of competent jurisdiction, or any regulatory
agency permanently or temporarily enjoining, barring, suspending or otherwise
limiting him or her from acting as an investment advisor, underwriter, broker or
dealer in the securities industry, or as an affiliated person, director or
employee of an investment company, bank, savings and loan association, or
insurance company or from engaging in or continuing any conduct or practice in
connection with any such activity or in connection with the purchase or sale of
any securities.
No executive officer or director of Worldwide has been convicted in any criminal
proceeding (excluding traffic violations) or is the subject of a criminal
proceeding, which is currently pending.
No executive officer or director of Worldwide is the subject of any pending
legal proceedings.
17
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS - continued
Guy Peckham, Director/President, Age 41: Mr. Peckham is a Director and President
of our company. His term expires on July 26, 2005. From 1999 to 2001, Mr.
Peckham was the Owner and President of Goodlife Brands, Inc., a company formerly
known as Schwans Canada that offered Western Canada customers direct to home
gourmet frozen, entries, desserts and ice cream. Mr. Peckham has also been
president of Peckham Enterprises Ltd. since 1992. Peckham Enterprises Ltd. is a
holding company that has private investments in real estate and three private
businesses, a car wash, motel, and sports team. From 2001 to present Mr. Peckham
has been a private investor and consultant. Mr. Peckham has not served as an
officer or director in any other public company. Mr. Peckham devotes
approximately 75% of his time to the operations of the business. Bruce Hannan,
Director/Secretary/Treasurer, Age 36: Mr. Hannan is a Director, Secretary and
Treasurer of our company. His term expires on July 26, 2005. From 1999 to 2002,
Mr. Hannan was the National Sales Manager for McSweeney Plus Distribution/
Direct Plus Food Group . He oversaw 125 + supervisory and sales personnel across
Canada . From 2003 to 2004, Mr. Hannan served as President of Globestuff.com,
Inc., our wholly-owned subsidiary, a company engaged in the sales of promotional
products, awards and incentive programs, uniform programs and solutions
providers for corporations, small businesses, schools and sports teams. Mr.
Hannan has not served as an officer or director in any other public company. Mr.
Hannan is a full-time officer of the company and devotes 100% of his time to the
operations of the business Wally Marcolin, Director, Age 43: Mr. Marcolin is a
Director of our company. His term expires on June 17, 2005. From 1999 to 2002,
Mr. Marcolin served as the Vice President of Operations for Goodlife Brands,
Inc. where he managed and coordinated all in and out bound logistics with an
annual operating budget of over $2.8 million. From 2002 to the present, Mr.
Marcolin has been an owner and operator of Olivier's Candies Ltd., an old
fashion candy and chocolate manufacturer located in Calgary, Alberta Canada. In
1983, Mr. Marcolin earned a Diploma in Business Administration from Camosun
College in Victoria, British Columbia. In 1999, Mr. Marcolin earned an Executive
Masters of Business Administration Program (E.M.B.A.) from the University of
Calgary in Calgary Alberta. Mr. Marcolin has not served as an officer or
director in any other public company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth, as of August 23, 2005, certain information with
respect to the beneficial ownership of our common and preferred stock by (i)
each director and officer of Worldwide, (ii) each person known to Worldwide to
be the beneficial owner of 5% or more of the outstanding shares of common stock,
with such person's address, and (iii) all of the directors and officers as a
group. Unless otherwise indicated, the person or entity listed in the table is
the beneficial owner of the shares and has sole voting and investment power with
respect to the shares indicated.
- --------------------------------------------------- ------------------- --------
Name of Beneficial Owner Common Shares
or Name of Officer or Director Beneficially Owned Percent
- --------------------------------------------------- ------------------- --------
Guy Peckham 2,500,000 10.0%
1203-1005 Beach Ave Vancouver, B.C.
V6E 3W2
- --------------------------------------------------- ------------------- --------
Bruce Hannan 2,500,000 10.0%
125 Sommerset Park SW Calgary, AB
T2Y 3H5
- --------------------------------------------------- ------------------- --------
425001 Alberta Ltd. (Jeff Fearn and Jean Bundschuh) 2,500,000 10.0%
44 Church Ranches Close NW Calgary, AB T3R 1C1
- --------------------------------------------------- ------------------- --------
Wally Marcolin 0 0
128 Sunharbour Crescent S.E Calgary, AB
T2X 3B3
- --------------------------------------------------- ------------------- --------
Total Director/Officer/ 7,500,000 30.0%
5% Owners
- --------------------------------------------------- ------------------- --------
18
DESCRIPTION OF SECURITIES
The following description is a summary of the material terms of our capital
stock. This summary is subject to and qualified in its entirety by our Articles
of Incorporation, as amended, and Bylaws, as amended, and by the applicable
provisions of Nevada law.
The authorized capital stock of Worldwide consists of 100,000,000 shares of
common stock having a par value of $.001 per share.
Common Stock
Each outstanding share of common stock entitles the holder thereof to one vote
per share on all matters. The Articles of Incorporation do not permit cumulative
voting for the election of directors which means that the holders of more than
50% of such outstanding shares voting for the election of directors can elect
all of the directors to be elected, if they so choose; in such event, the
holders of the remaining shares will not be able to elect any of our directors.
Shareholders do not have preemptive rights to purchase shares in any future
issuance of our common stock.
The holders of shares of common stock are entitled to dividends out of funds
legally available when and as declared by the Board of Directors. The Board of
Directors has never declared a dividend and does not anticipate declaring a
dividend in the foreseeable future. In the event of liquidation, dissolution or
winding up of the affairs of the company, holders are entitled to receive,
ratably, the net assets available to shareholders after payment of all
creditors.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No "Expert" or "Counsel" as defined by Item 509 of Regulation S-B promulgated
pursuant to the Securities Act of 1933, whose services were used in the
preparation of this Form SB-2 was hired on a contingent basis or will receive a
direct or indirect interest in the Company.
DESCRIPTION OF BUSINESS
The Company
Worldwide Promotional Products Corporation was originally incorporated in the
State of Nevada on October 28, 1999, as "Victor James, Inc.". We were a dormant
corporation since our inception and had never engaged in any prior business or
financing activities prior to July 1, 2004.
On June 16, 2004, we filed a Certificate of Amendment with the Nevada Secretary
of State changing our name from Victor James, Inc. to Worldwide Promotional
Products Corporation.
On July 1, 2004, we entered into a Share Exchange Agreement with Globestuff.com,
Inc, an Alberta corporation ("Globestuff"), whereby we acquired 100% of the
outstanding common stock of Globestuff for 5,000,000 shares of our common stock.
.. The merger was accounted for as a stock exchange reverse acquisition.
Worldwide Promotional Products Corporation is the surviving legal entity with
GlOBESTUFF.COM, INC. the surviving historical accounting entity whose financials
statements are provided for reporting purposes. GLOBESTUFF.COM, INC changed its
name to Worldwide Promotional Products 2004 Corporation on October 15, 2005 and
19
DESCRIPTION OF BUSINESS - continued
is operated as a wholly owned subsidiary of the Company. There were no finders'
fees or other compensation paid in consideration of this transaction.
Globestuff was originally incorporated in the Province of Alberta on January 9,
2003. Since inception the company has operated as a promotional products
distributor in the city of Calgary, Alberta.
On April 19, 2004, we accepted the return of 400,000 shares from our former sole
officer and director. Kevin Ericksteen, to treasury. Concurrently, we forward
split our common stock 39 for 1.
On June 17, 2004, we accepted the return of 5,025,000 shares from Mr. Ericksteen
to treasury. Thereafter, we had 15,165,000 shares of our common stock
outstanding. We then issued 5 million shares to the shareholders of
Globestuff.com,Inc. After this acquisition, we had 20,165,000 shares of common
stock issued and outstanding.
On September 1, 2004 we entered into an Asset Purchase Agreement with the
shareholders of Tradepointe Inc. to purchase the trade name "Tradepointe", and
the associated goodwill. We issued 100,000 common shares and paid $28,200 CDN in
this transaction. The operations of Tradepointe were combined with the
operations of our subsidiary Globestuff.com Inc.
On August 4, 2005 our subsidiary entered into an Asset Purchase agreement with
the shareholders of 425001 Alberta Ltd. to purchase the assets, liabilities and
associated goodwill. We paid $157,647.33 CDN in this transaction. We also issued
2,500,000 common shares to the shareholders of 425001 Alberta Ltd. as part of a
5-year management services agreement to retain the services of Jeff Fearn and
Jean Bundschuh.
The Business
Worldwide Promotional Products was formed to bring a severely segmented and
unstructured industry to centralize and develop a structure that would allow an
organization to capitalize on the $2.1 billion dollar promotional products
industry in Canada.
A promotional product is described as useful and/or symbolic products, which are
used in advertising and communication as communication vehicles, goodwill
reminders, signs, gifts and incentives.
With over 4000 independent distributors and over 1000 suppliers of promotional
product related items in Canada there is a strong need to develop a system that
will enhance the business.
Our business model is being noted as a need to the industry to have a structure
that is designed to bring a level of development and professionalism that has
come to be labeled as trinkets and trash. There is a lack of professionalism and
camaraderie that we hope to develop as we expand our organization.
The membership is designed to offer the small independent distributor the
marketing and administrative tools and services required to offer a competitive
advantage to their clients. This includes access to suppliers and products that
may not be available to them otherwise.
20
DESCRIPTION OF BUSINESS - continued
Our business operation would compare to that of a sub-distributor whereby we
market suppliers' products through a suite of tools that would be cost
prohibitive to a small independent company. This includes the availability of
our supplier product sample lending library, showroom facilities, company
branded websites, industry bulletin board, online ordering, e-mail marketing
brochures and listed supplier specials.
We continue to source suppliers and have secured special pricing, rebates,
rebate incentives and commissions in exchange to market supplier products to our
membership. We are a membership-based sales, marketing and administrative
support organization for suppliers and distributors of promotional products.
Administrative services include order process, tracking and financial services
including the opportunity to finance our members' accounts receivable. The
financial services have not yet been implemented and will be dependent on the
reception in the market.
We offer our member distributors:
1) Marketing and administrative support - Providing the marketing
solutions such as e-solution technology, mass mail-outs, and
convenient tools to ease the burden of additional marketing and
administration expenses to our members.
E-solution technology refers to the ability of member distributors to search,
view and manipulate promotional product data from a variety of promotional
products suppliers on one website - specifically http://www.webcatalogues.ca.
Using the product search engine distributors can use one of several custom
developed web based tools to recalculate their profit margins and develop quotes
to directly email to their client or save for later reference. The ability to
source, calculate, quote and communicate from this central location will assist
distributors in reducing the time required on these administrative and marketing
costs. There is no charge for this service.
Member distributors have the ability to develop their websites to display a
sub-set of this product information ensuring their client's product searches are
limited to those suppliers who are also Worldwide members. An example of this is
available on the web at http://example.webcatalogues.ca. The charges (in CDN$)
associated with this service are:
Option 1. Build Your Own website $99.00
Distributor chooses from a number of templates and builds their own website,
which is in turn a sub-domain of webcatalogues.ca displaying only retail data.
They are also offered an email address. An example of this system is available
at http://sitebuilder.webcatalogues.ca
Option 2. Product search, specials and wish list for an existing site - $99.00
Worldwide creates three pages through webcatalogues.ca for the distributor to
add to their own website. Also includes one email address.
Option 3. Worldwide Built website -$199.00
Same as option 1 but Worldwide is responsible for choosing and adding to the
template. Additional web development charged at $50.00 hour.
21
DESCRIPTION OF BUSINESS - continued
Option 4. Full Package $349.00 plus $19.99 month hosting
Same as option 3 plus Worldwide will register a domain name on the distributor's
behalf and host that domain on Worldwide's server. An unlimited number of email
addresses are included.
2) Accesses to a larger variety of suppliers - Many Suppliers do not have
marketing representatives that build their brand awareness. Their
marketing program consists of a catalogue and hope that a distributor
will show it. Worldwide will offer the facilities and promote these
lines for a commission-based fee that will also include a member
incentive program. This service is part of our Tradepointe showroom.
3) Receivable factoring - Entering into strategic alliances with
financing companies and providing A/R service will allow the
distributor to reduce administration and improve cash flow. This also
decreases the system requirements for the distributor. This service is
not currently offered and will be dependent on the response in the
marketplace. Distributors will be charged a percentage of sales for
this service.
4) Member specials - Worldwide will negotiate member specials with
suppliers to promote certain products to be featured throughout the
year. These specials are currently promoted through email blasts to
our membership.
5) Ease of ordering - Worldwide's online catalogue will allow distributor
members to browse through products and place their orders online 24
hours a day. A customer service team is in place and we are currently
accepting distributor orders.
6) Multi-line showrooms - this provides distributors same day sampling to
their customers, with no re-stocking charge for returned samples. This
is part of Tradepointe that was purchased on September 1, 2004. We
charge individual distributors $175 CDN per year for a Tradepointe
membership and we charge distributors with salespeople $249 CDN per
year.
7) Industry trends and knowledge - will provide member distributors with
the latest industry news and information to help gain knowledge to
grow their business. Currently this is provided through a community
discussion board located on our distributor website
www.webcatalogues.ca.
8) Product sourcing - through our list of preferred suppliers, Worldwide
will source out products that will best suit the needs of the
distributor and their client. We currently have a number of suppliers
in the program and will add more as our membership desires.
22
DESCRIPTION OF BUSINESS - continued
We offer our member suppliers:
1) Marketing and promotion - increased sales through line representation.
Worldwide will offer full time marketing personnel to work with
preferred suppliers to focus on marketing materials for e-solution
marketing, mass mail-outs and cutting edge marketing programs.
Currently all marketing materials is being provided by suppliers.
Worldwide distributes it to our membership base through email and the
bulletin board in Tradepointe.
2) Showroom and lending library - space is provided for a fee to showcase
product ensuring it is attractively displayed. Samples are managed
ensuring that they are ready to go for distributor pick-up, as well as
returned as agreed. This is part of Tradepointe.
3) Cost savings - major reduction in maintaining a physical presence; as
well as reduced shipping and tracking costs through our Tradepointe
lending library.
4) Increased exposure - access to currently over 270 distributor
companies with over 500 members.
5) Customer service - full-time staff in the Tradepointe galleries to
book appointments, manage inventory, catalogues and flyers, as well as
assist with product sourcing.
6) Membership requirement of qualified promotional product distributors
with loyalty incentive program to further drive sales and increased
market share. We currently offer distributors 1% of sales as a rebate.
7) Participation in scheduled forums and intra-organization
communications and networking amongst members through the showroom and
online bulletin board of industry related topics. This online bulletin
board is located at our distributor website www.webcatalogues.ca.
We have built an easy to use website for members that gives them more selection
and better pricing opportunities to purchase promotional products through buying
into an organization that offers pricing normally reserved only for the largest
of corporations. This website is www.webcatalogues.ca. This website is only
accessible by our member distributors and includes an online catalogue and sales
& marketing tools.
We are currently approaching the existing 2000 small to mid-size promotional
products sales people and organizations in Canada and offer them a trial of our
services, website, showroom, and accounting. Our goal is to establish Worldwide
as the leading marketing organization of promotional products in North America
by consolidating the buying and selling strengths of each of the over 2000 small
sales organizations. Currently Canada and the USA do not have a marketing and
sales organization that offers the solutions we intend to offer under one roof.
This proposed business will benefit both the suppliers and the distributors
throughout Canada by providing better margins and decreasing administration
support for the distributor, and increased sales market share for the supplier.
The industry's competitors provide the possibility of becoming members, which in
turn provides a large opportunity for a promotional solutions company.
23
DESCRIPTION OF BUSINESS - continued
We provide a professional business setting that allows customers, members and
suppliers to see the business in full production. Our approach is to have them
visit the office and understand what their membership fees are doing for them.
We currently have two facilities, one in Calgary, Alberta, which is our main
facility, and one in Vancouver. The Calgary facility offers 3000 square feet and
the Vancouver facility offers 2000 square feet of showroom, displaying different
products that are offered. There is also 3000 square feet of office space in the
Calgary facility to carry on the day-to-day operations of our organization. We
have a further 3000 square feet of silk screening and embroidery services.
Members can come directly to see what their dues are going towards versus simply
logging on to a database. We also have a small portion of these spaces dedicated
to customer service. This will allow our members direct service at our facility.
We plan to expand our level of services as we expand our membership and cash
flow.
The "no cost" membership is a part of our marketing campaign across Canada. It
allows a qualified promotional product distributor to have access to order from
Worldwide Promotional once a credit application has been approved. The order
process is where we will generate sales and commissions and rebates from our
suppliers. The independent distributor has the option to pay for our marketing
and service fees listed above. We feel the no cost fee will attract and more
rapidly expand our membership base that will allow us to continue additional
negotiations with Suppliers for expanded margins. Access to our Tradepointe
membership requires a paid membership as discussed above.
Our market is Canadian promotional product distributors. We have also discussed
opportunities with suppliers from the US who want to expand into Canada. We will
continue to build relationships to US Suppliers that may offer products or
services not available from Canadian Suppliers. We will attempt to negotiate
exclusive sub-distributor agreements from these Suppliers that will also enhance
the need to be a member of Worldwide Promotional Products.
Competition
Pricing and service will be major factors in competition. If we can provide
superior service, such as our showrooms, we expect to obtain many of our
potential competitors as members. Also, members will be provided with volume
based incentives that are not usually available to most of the distributors
within Canada. A percentage of sales will be charged to our customers for our
added benefits such as back end accounting and collections that we plan to roll
out as we are established. Our major competition is from larger distributors.
They currently enjoy a competitive advantage based on price because of their
size and buying power. As our membership increases, we become a threat to their
position. Our business differs, as we create a level playing field for other
competitors in the industry. Large distributors may pressure suppliers to not
participate in the program. We will need to sell the fact that over 50% of their
sales come from the segmented market of small to medium sized independent
distributors that will see the advantages of what we offer. A major barrier for
growing our membership is the paranoia for distributors to disclose information
in regards to their clients. This is partially due to the fact that it is such a
new concept in Canada and to change the way things have always been done is the
obstacle to overcome. We must continue to build relationships with these
distributors to show them the advantages of being part of a larger organization.
As we have initiated our membership business within the last year, we are only
just beginning to establish a market position.
24
DESCRIPTION OF BUSINESS - continued
Our direct sales division is positioned as one of the larger distributors in the
Calgary area. The action plan to acquire additional promotional product
companies will allow us to rapidly become one of the largest distributors in
Canada. This will eliminate some of the criticism from larger distributor
companies that request suppliers not participate in our program. Suppliers have
already started to see increases in their sales because we are marketing their
product lines to a large membership that possibly was not aware of some of these
Suppliers in the past.
Increase sales and market share will allow us to continue to achieve larger
rebates and incentives to add to the bottom line. Management also believes that
having the embroidery equipment housed in the same office as the sales staff
will provide a large advantage that many of the current distributors are not
able to offer, such as quality control.
Dependence on One or a Few Major Customers
We do not depend on any one or a few major customers.
Patents, Trademarks, Franchises, Concessions, Royalty Agreements,
or Labor Contracts
We have no current plans for any registrations such as patents, trademarks,
copyrights, franchises, concessions, royalty agreements or labor contracts. We
will assess the need for any copyright, trademark or patent applications on an
ongoing basis.
Need For Government Approval for its Products or Services
We are not required to apply for or have any government approval for our
products or services.
Effect of Governmental Regulations on our Business
We will be subject to common business and tax rules and regulations pertaining
to the operation of our business in the State of Nevada, as well as federal
securities laws and regulations after the effective date of this registration
statement. If our business expands outside of Canada we may be subject to import
and export regulations of Canada and the United States. Currently, as our
business is conducted solely in Canada, we are not subject to any import and
export regulations. In complying with these laws and regulations, we may incur
additional legal and accounting costs and expenses, but we do not believe such
costs and expenses shall have a material effect on our operations or liquidity.
Research and Development Costs for the Past Two Years
We have not expended funds for research and development costs in the past two
years.
Costs and Effects of Compliance with Environmental Laws and Regulations
Environmental regulations have had no materially adverse effect on our
operations to date, but no assurance can be given that environmental regulations
will not, in the future, result in a curtailment of service or otherwise have a
materially adverse effect on our business, financial condition or results of
operation. Public interest in the protection of the environment has increased
25
DESCRIPTION OF BUSINESS - continued
dramatically in recent years. The trend of more expansive and stricter
environmental legislation and regulations could continue. To the extent that
laws are enacted or other governmental action is taken that imposes
environmental protection requirements that result in increased costs, our
business and prospects could be adversely affected.
Bankruptcy
We have not been involved in any bankruptcy, receivership or similar
proceedings.
Equity Incentive Plan
We currently have no equity incentive or option plan in place.
Number of Employees
We currently have twelve (12) full time employees, one part-time and four
independent contractors. We will add more employees in the future as membership
grows. Many of the employees will be sales, customer support and administrative
staff. We will also have staff members trained in negotiating skills. These
people will also be used as collections agents. None of the employees are
subject to collective bargaining agreements. There has not been a strike and one
is not currently contemplated. Our staff structure is as follows:
o Sales personnel - Currently we have one full-time sales manager handling
supplier relations in Vancouver and one sales manager on contract handling
distributor relations also in Vancouver. Our direct sales division has one sales
manager and one commissioned salesperson, plus four independent commissioned
sales consultants.
o Embroidery Staff - staffing will be determined by the business that is
sourced, but currently we have two silkscreeners/ embroiderers plus a manager
and one person that does contract work for us. o Credit Department - 2 to 3
individuals that would be responsible for running credit applications and
collection calls of which we now have one person on staff.
o IT Department - 1 to 2 individuals that will service the website and keep it
up to date. They will also be able to offer customer support. We have one person
at the present time.
o Purchasing/Customer Service - 2 to 3 individuals to do product sourcing and
work closely with the suppliers of which have one on staff now. We may need
another person depending on the orders and capacity to process them.
o Accounting - 2 individuals to do Accounts Payable and general accounting. We
currently have one Accounting Assistant/Collections plus a manger.
Showroom - We currently have one person who manages the showroom in each of the
Vancouver and Calgary locations, plus one part-time person to assist in the
Calgary showroom.
26
DESCRIPTION OF BUSINESS - continued
Reports to Securities Holders
We intend to provide an annual report that includes audited financial
information to our shareholders. We will make our financial information equally
available to any interested parties or investors through compliance with the
disclosure rules of Regulation S-B for a small business issuer under the
Securities Exchange Act of 1934. We will become subject to disclosure filing
requirements once our SB-2 registration statement becomes effective, including
filing Form 10-KSB annually and Form 10-QSB quarterly. In addition, we will file
Forms 8-K and other proxy and information statements from time to time as
required. We do not intend to voluntarily file the above reports in the event
that our obligation to file such reports is suspended under the Exchange Act.
The public may read and copy any materials that we file with the Securities and
Exchange Commission, ("SEC"), at the SEC's Public Reference Room at 100 F.
Street NE, , Washington D. C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy
and information statements, and other information regarding issuers that file
electronically with the SEC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion is intended to provide an analysis of our financial
condition and Plan of Operation and should be read in conjunction with our
financial statements and the notes thereto set forth herein. The matters
discussed in this section that are not historical or current facts deal with
potential future circumstances and developments. Our actual results could differ
materially from the results discussed in the forward-looking statements. Factors
that could cause or contribute to such differences include those discussed
below.
Plan of Operation
Expansion of our direct sales through acquisitions of promotional products
distributors and growth of present operations including our membership is our
primary objective over the next twelve months. Plans are now in place and being
implemented for expansion of our operations. We anticipate significant growth
over the next year.
We have consolidated our current operations in Calgary from three different
locations into one larger facility with a significantly larger and more
professional showroom. We also have a showroom located in Vancouver, British
Columbia. Our business is divided into two departments of which we intend to
grow both areas over the next year. The departments are direct sales, to end
users of promotional products, and distributor memberships. These divisions are
recorded separately for management purposes, but are not considered separate
operating segments as defined in paragraph 10 of SFAS 131. Our business also
includes a manufacturing facility to personalize promotional products through
silk-screening, embroidery and embossing.
Direct sales
Revenue is generated through selling personalized promotional products to
corporate customers and sports teams. Cost of sales include, the goods purchased
for resale, plus any personalization involved. Personalization can be done
in-house in our manufacturing department, or contracted out to a third party.
Personalization involves placing a logo or crest on the product according to
27
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
customer preference. We now have two dedicated professionals selling to our
current customer base and increasing sales by adding more customers in Calgary
and surrounding areas. Our success in capturing more business will depend on our
ability to find creative and cost effective solutions for our customers. The
promotional products industry is very competitive by nature with many
distributors competing for the same customers. There are very little barriers to
entry in promotional products, and new distributors are constantly entering the
business. We must rely on the infrastructure and support we have created to meet
our customers' needs. This support includes all administration including
accounts receivable and collections, accounts payable, customer service, and
marketing.
We also have plans to rapidly expand this division through acquisitions of other
promotional product distributors. Over the next 12 months we plan on acquiring
5-10 promotional products distributors across Canada. We have identified several
potential acquisitions and will be performing our due diligence to determine
which companies will provide the best opportunity for us. Acquisitions will
require cash, shares, or a combination of both. In order to carry out successful
acquisitions, we will be required to raise additional funds through issuance of
additional shares or debt. We have completed one acquisition. This acquisition
required a combination of cash and shares. We have also entered into an
agreement with the acquired company to retain its management services for a
5-year term. This will add a great deal of experience to our team. We have
signed non-disclosure agreements with an additional 11 promotional product
distributors ranging in size from an estimated $250,000 in sales to $25,000,000
in annual sales. One of the key factors was identifying successful individuals
with several years of experience who may be at or near the retirement age. Any
discussions have been preliminary with the intent to have trading commence to
raise required capital and offer shares at closing.
Membership
Revenue is generated through goods sold to promotional products distributors, as
well as services, such as website development, collection of receivables and the
fee to use our Tradepointe showroom. Suppliers also pay a fee for space provided
in the showroom to display their products. Members can purchase their goods
through Worldwide and receive preferred pricing, in the form of rebates. Cost of
sales include, the product purchased from the supplier and general staff
overhead. Tradepointe is our showroom where members can sign-out samples to show
their customers without incurring any shipping or re-stocking fees.
Additional suppliers are being solicited and added to our supplier base. An
aggressive sales and marketing approach through mail-outs and follow-up
telephone calls has also been launched to enable suppliers to see the overall
benefit that Worldwide will provide for their company. Suppliers will be added
to our showroom on a limited basis, based on our members' needs.
Professional information packages for members outlining the concepts and
benefits of membership have been developed and have been distributed to
promotional products distributors in Alberta and British Columbia. This campaign
has met with some success, as we have had eighteen distributors sign up to
membership in June and July. Our goal is to add thirty members each month over
the next 12 months to grow the membership and increase our buying power. Our
initial focus will be distributors in Alberta and British Columbia, but we will
expand into the rest of Canada as we gain financial stability and acceptance in
the marketplace.
28
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
Manufacturing
Revenue is generated through personalization of promotional products through
embroidery, silk-screening and embossing. Cost of sales include, labor, and
general supplies such as thread, dye and fabric. The customer base is made up of
promotional products distributors, corporate customers and sports teams. Our
silk screening, embroidery, and embossing will achieve growth and profitability
as our customer base increases. As more members sign up there will be an
increased need for the services of our manufacturing business. As acquisitions
are made our focus of the manufacturing department will shift and dedicate more
time to in-house production and less to outside customers. We have no plans to
add any additional equipment to this operation, as it is not yet operating at
full capacity.
Results of Operations.
Fiscal Year Ended December 31, 2004 as compared to fiscal year ended December
31, 2003.
On July 1, 2004 the company completed a merger where it purchased all of the
outstanding stock and merged with GLOBESTUFF.COM, INC an Alberta company formed
January 9, 2003. The merger was accounted for as a stock exchange reverse
acquisition. Worldwide Promotional Products Corporation is the surviving legal
entity with GLOBESTUFF.COM, INC the surviving historical accounting entity whose
financial statements are provided for reporting purposes. GLOBESTUFF.COM, INC
changed its name to Worldwide Promotional Products 2004 Corporation on October
15, 2004 and is operated as a wholly owned subsidiary of the Company. All
material terms of the share exchange are contained in Exhibit "4.1" Stock
Purchase Agreement. Worldwide Promotional Products 2004 Corporation provides
promotional products to corporate customers and sports teams in Calgary and
surrounding areas. Approximate annual revenues are $900,000. Revenue includes
that generated from embroidery, silk-screening and embossing (manufacturing).
On September 1, 2004 we entered into an Asset Purchase Agreement with the
shareholders of Tradepointe Inc. to purchase the trade name "Tradepointe", and
the associated goodwill. We issued 100,000 common shares and paid $28,200 CDN in
this transaction. The operations of Tradepointe were combined with the
operations of our subsidiary Globestuff.com Inc. Tradepointe generates revenue
through memberships to promotional products distributors so they can visit the
showroom and borrow samples for their customers viewing. The other revenue
stream is through the space rented by suppliers to display their products.
Tradepointe has a showroom located in the same location as Worldwide's corporate
offices in Calgary, as well as a location in Vancouver, British Columbia.
Total revenues for fiscal 2004 were $767,777 as compared to $423,327 in fiscal
2003, an increase of $344,450 reflecting increased sales in fiscal 2004 as
compared to fiscal 2003. This revenue was generated completely by our
subsidiary. Our direct sales of promotional products accounted for $736,087 and
Worldwide membership (Tradepointe) generated revenue of $31,690 through supplier
rent and distributor memberships.
We had total assets of $372,112 at December 31, 2004, compared to total assets
of $123,210 at December 31, 2003, an increase of $248,902 primarily due to an
increase in cash and accounts receivable. This increase is attributable to
increased sales and investor capital.
29
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
We had total current liabilities of $346,345 at December 31, 2004 compared to
total current liabilities of $61,123 at December 31, 2003, an increase of
$285,222 resulting from an increase in accounts payable due to higher sales, as
well as an increase in short-term Notes Payable and unearned revenue. Unearned
revenue is memberships and supplier paid annually and amortized over a 12-month
period.
Cost of goods sold for fiscal 2004 increased to $474,280 from $309,711 for
fiscal 2003, due to the increase in our overall sales volume.
Interest expense for fiscal 2004 was $12,952 compared to $872 for fiscal year
2003.
We had a net loss of $(258,536) for fiscal 2004 compared to a net loss of
$(4,000) for fiscal 2003, an increase in net loss of $(254,536). The increase is
primarily due to the expenses related to the commencement of operations,
including salaries, general and administrative, professional fees and rent.
At December 31, 2004, we had $112,247 in cash and cash equivalents, compared to
$19,634 in cash and cash equivalents at the year ended December 31, 2003, an
increase of $92,613, resulting primarily from additional capital investment and
increased sales.
General and administrative expenses were $104,288 for the year ended December
31, 2004, compared to $67,170 for the year ended December 31, 2003, an increase
of $37,118. The increase is attributable to the commencement of our operations.
The Period Ended June 30, 2005 Compared to the Period Ended June 30, 2004
Total revenues for the six months ending June 30, 2005 were $476,070 as compared
to $379,944 for the same period in 2004, an increase of $96,126 reflecting the
commencement of our membership operations. Our direct sales of promotional
products accounted for $325,089, which was a slight decrease. Our membership
department including distributor sales, memberships and supplier display rental
generated revenue of $150,981.
We had total assets of $266,492 at June 30, 2005, compared to total assets of
$168,884 for the same period in 2004, reflecting additional accounts receivable
through increased sales, additional office equipment and goodwill.
We had total current liabilities of $356,60 at June 30, 2005 compared to total
current liabilities of $109,544 for the same period in 2004, resulting from
increased accounts payable, short term notes payable, and unearned revenue.
Cost of goods sold for the six months ending June 30, 2005 increased to $266,391
from $258,136 for the same period in 2004, due to the commencement of sales to
distributors.
Interest expense for the six months ending June 30, 2005 was $13,292 compared to
$6,079 for the same period in 2004, due to interest on the short term notes.
We had a net loss of $306,969 for the six months ending June 30, 2005 compared
to a net income of $13,354 for the same period in 2004. The increase is
primarily due to the expenses related to the commencement of our operations,
including salaries, general and administrative, professional fees and rent.
30
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
At June 30, 2005 we had $42,227 in cash and cash equivalents, compared to
$112,247 in cash and cash equivalents at the same period in 2004, resulting
primarily from incurring losses.
General and administrative expenses were $104,551 for the six months ending June
30, 2005, compared to $23,943 for the same period in 2004. The increase is
attributable to increased overhead related to the commencement of our
operations.
Liquidity and Capital Resources
Operating Activities
Net cash used in operating activities was $238,985 for the six months ended June
30, 2005 compared to net cash provided by operating activities of $29,344 for
the same period in the prior year. This increase is attributed primarily to the
net loss from increased expenses associated with the commencement of current
business operations. Significant changes in accounts receivable and accounts
payable in this period is due to the growth of our business as we generate
higher sales and purchase more products for resale. Inventory has not increased
significantly as we hold minimal inventory. Product is generally ordered from
suppliers as each customer order is accepted.
Investing Activities
Net cash used in investing activities increased to $6,892 during the six months
ended June 30, 2005 as compared to net cash provided in investing activities of
$147 for the same period in prior year as a result of leasehold improvement and
the purchase of office equipment.
Financing Activities
Net cash generated in financing activities increased to $175,857 during the six
months ended June 30, 2005 as compared to net cash used in financing activities
of $14,926 for the same period in prior year as a result of issuing 125,000
shares of common stock for $0.10 and 661,000 shares of common stock for $0.25.
As of June 30, 2005, we had total current assets of $213,362 and total current
liabilities of $356,608, resulting in a working capital deficit of $143,246; as
of that date, we had cash of $42,227. Our monthly burn rate is $40,000. During
the six months ended June 30, 2005, we incurred a loss $306,969, and we had an
accumulated deficit of $569,505 as of June 30, 2005. These factors raise
substantial doubt as to our ability to continue as a going concern.
The accompanying financial statements have been prepared assuming that we will
continue as a going concern. Continuing as a going concern contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. However, the ability of our company to continue as a going concern
on a longer-term basis will be dependent upon our ability to generate sufficient
cash flow from operations to meet our obligations on a timely basis, to retain
our current financing, to obtain additional financing, and ultimately attain
profitability. Our current cash flow from operations will not be sufficient to
maintain our capital requirements for the next twelve months. Accordingly, we
will need to continue raising capital through either debt or equity instruments.
We have finalized a loan agreement in the amount of $250,000 CDN that was funded
on August 9, 2005. The use of proceeds of the loan include $50,000 CDN as a down
payment on the 425001 Alberta Ltd. asset purchase. The balance will be to
31
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
finance working capital. We believe our cash will be sufficient to maintain our
capital requirements until October 2005. We have received an extension on the
short-term notes payable to October 31, 2005. We believe we will need to raise
at least an additional $500,000 within the next twelve months so we may continue
executing our business plans. Whereas we have been successful in the past in
raising capital, no assurance can be given that these sources of financing will
continue to be available to us and/or that demand for our equity/debt
instruments will be sufficient to meet our capital needs, or that financing will
be available on favorable terms. The financial statements do not include any
adjustments relating to the recoverability and classification of liabilities
that might be necessary should we be unable to continue as a going concern.
If funding is insufficient at any time in the future, we may not be able to take
advantage of business opportunities or respond to competitive pressures, or may
be required to reduce the scope of our planned operations and marketing efforts,
any of which could have a negative impact on our business and operating results.
In addition, insufficient funding may have a material adverse effect on our
financial condition, which could require us to curtail operations significantly.
To the extent that we raise additional capital through the sale of equity or
convertible debt securities, the issuance of such securities may result in
dilution to existing stockholders. If additional funds are raised through the
issuance of debt securities, these securities may have rights, preferences and
privileges senior to holders of common stock and the terms of such debt could
impose restrictions on our operations. Regardless of whether our cash assets
prove to be inadequate to meet our operational needs, we may seek to compensate
providers of services by issuance of stock in lieu of cash, which may also
result in dilution to existing shareholders.
Critical Accounting Policies
Below is a listing of the most recent accounting standards and their effect on
our company.
SFAS 148 Accounting for Stock-Based Compensation-Transition and Disclosure
Amends FASB 123 to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation.
SFAS 149 Amendment of Statement 133 on Derivative Instruments and Hedging
Activities This Statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and for
hedging activities under FASB Statement NO. 133, Accounting for Derivative
Instruments and Hedging Activities.
SFAS 150 Financial Instruments with Characteristics of both Liabilities and
Equity
This Statement requires that such instruments be classified as liabilities in
the balance sheet. SFAS 150 is effective for financial instruments entered into
or modified after June 6, 2003.
32
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
Interpretation No. 46 (FIN 46)
Effective January 31, 2003, The Financial Accounting Standards Board requires
certain variable interest entities to be consolidated by the primary beneficiary
of the entity if the equity investors in the entity do not have the
characteristics of a continuing financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. We have not invested in any
such entities, and do not expect to do so in the foreseeable future.
The adoption of these new Statements is not expected to have a material effect
on our financial position, results or operations, or cash flows.
DESCRIPTION OF PROPERTY
There are six (6) leases, two for buildings and four for equipment.
Office Facilities
The building lease is for 3404-25th Street, NE, Calgary, Alberta, Canada. The
landlord of the building is Standard Life Assurance Company of Canada. Other
than this lease, our company, officers, directors, or affiliates have no
relationship with the landlord. It is a 5-year term for $6067.33 CDN per month.
The lease commenced on October 1, 2004 and ends September 30, 2009. The premises
is 9,101 square feet, making the lease eight dollars ($8.00) per square foot per
year. The first and last months rent were paid upon signing the lease. There is
no provision to renew at this time.
The second building lease is for 3687 1st Avenue, Vancouver, British Columbia,
Canada. The landlord of the building is Kaycan Limited. Other than this lease,
our company, officers, directors, or affiliates have no relationship with the
landlord. It is a 2-year and 8-month term for $2070.75 CDN per month. The lease
commenced on March 1, 2003 and ends October 31, 2005. The premises is 2,761
square feet, making the lease nine dollars ($9.00) per square foot per year.
There is no provision to renew at this time.
Equipment Leases
The first equipment lease was made June 30, 2004, between Deep Designs and
Apparel, Inc. and Globestuff.com, Inc. The lease is for a period of five years
and terminates June 30, 2009. The lease calls for monthly payments of $1,176.99
CDN plus applicable tax on the first day of each month. The machinery included
on this lease is as follows: Happy Embroidery Machine, Ipunch Digitizing
Software, Embroidery Learning Guides, DRA Wings Digitizing Software, Hopkins
Press, Excalibur Press, Artwave Dryer, Atlas 5 Way Exposure Unit, Wash Bay,
Black Flash Spot Dryer, Ranar Spot Dryer, Light Table, Printa Pad Printer,
Rotary Attachment, Press-A-Print Pad Printer, Pad Printing Supplies, Epson
Printer, Dell Computer, Lexmark all in one, Techtronics Computer, Hix Heat
Press, Corell Draw Program, Illustrator Program, Digital Art Solutions and
accompanying inventory.
The second equipment lease is between Custom Trends Inc., and Globestuff.com,
Inc. Custom Trends Inc. is a company controlled by our Secretary-Treasurer,
Bruce Hannan. The lease commenced on July 1, 2004 and terminates on June 30,
2009, also a five year term. The payments are $1,588.79 CDN plus applicable tax
payable on the first of each month. The equipment is as follows: three Amaya
33
DESCRIPTION OF PROPERTY - continued
Single Head Embroidery Machines, one operating system for Amaya, one Dell
Computer system, one Permaboss Model TEM-705, Brother Industrial Sewing Machine,
Power Converter, Cansew Industrial Waste Band Machine, Union Special Serger,
Castman BB-125 Blade Machine, and one Industrial Steamer.
The third equipment lease was made on December 1, 2004, between MTC Leasing Inc.
and Worldwide Promotional Products 2004 Corporation. The lease is for a period
of three years and terminates on December 1, 2007. The lease calls for monthly
payments of $641.38 CDN inclusive of all Goods & Services tax payable on the
first day of each month. The equipment included on this lease is as follows:
Multiple Currency software, two MS9540 Scanners, Zebra Barcode Printer, two HP
Proliant DL380 Rackmount Servers, APC Smart UPS 1000VA, Rackmount Keyboard Tray
with Keyboard, 4 Port KVM Manual Switch w/cable kit, Intel 16 Port Rackmount 100
baseT Switch, Sonicwall Pro 2040 Core VPN Router, Sonicwall TZ170 10 User VPN
Router.
The fourth equipment lease was made on December 1, 2004 between Bodkin Capital
Corporation and Worldwide Promotional Products 2004 Corporation. The lease is
for a period of thirty (30) months and terminates on June 1, 2007. The lease
calls for monthly payments of $578.37 CDN inclusive of all Goods & Services tax
payable on the first day of each month. The equipment included on this lease is
as follows: BusinessVision 32 SQL 10 user software, Custom Pack software, Custom
Programming to install, two Windows 2000 Server with 20 CALS, five Windows 2000
Terminal Service CALS.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As stated in the above paragraph, Bruce Hannan, our Secretary-Treasurer and
Director is the controlling shareholder of Custom Trends Inc., the lessor of one
of our equipment leases.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Principal Market or Markets
Our common stock is not listed on any exchange and there is no public trading
market for the common stock.
Approximate Number of Common Stock Holders
As of June 1, 2005, we had 22,511,000 shares of common stock issued and
outstanding, held by approximately 104 shareholders. We have no outstanding
warrants or options to purchase our securities.
34
Shares Eligible for Future Sale.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - continued
We currently have 25,011,000 shares of common stock outstanding. A current
shareholder who is an "affiliate" of Worldwide, defined in Rule 144 as a person
who directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, Worldwide, will be required to
comply with the resale limitations of Rule 144.
Sales by affiliates will be subject to the volume and other limitations of Rule
144, including certain restrictions regarding the manner of sale, notice
requirements, and the availability of current public information about
Worldwide. The volume limitations generally permit an affiliate to sell, within
any three month period, a number of shares that does not exceed the greater of
one percent of the outstanding shares of common stock or the average weekly
trading volume during the four calendar weeks preceding his sale. A person who
ceases to be an affiliate at least three months before the sale of restricted
securities beneficially owned for at least two years may sell the restricted
securities under Rule 144 without regard to any of the Rule 144 limitations.
PENNY STOCK RULE
The SEC has adopted rules that regulate broker-dealer practices in connection
with transactions in "penny stocks." Penny stocks generally are equity
securities with a price of less than $5.00 (other than securities registered on
certain national securities exchanges or quoted on the NASDAQ system, provided
that current price and volume information with respect to transactions in such
securities is provided by the exchange or system). Penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
those rules, to deliver a standardized risk disclosure document prepared by the
SEC, which specifies information about penny stocks and the nature and
significance of risks of the penny stock market. A broker-dealer must also
provide the customer with bid and offer quotations for the penny stock, the
compensation of the broker-dealer, and sales person in the transaction, and
monthly account statements indicating the market value of each penny stock held
in the customer's account. In addition, the penny stock rules require that,
prior to a transaction in a penny stock not otherwise exempt from those rules,
the broker-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. These disclosure requirements may have the effect
of reducing the trading activity in the secondary market for stock that becomes
subject to those penny stock rules. If a trading market for our common stock
develops, our common stock will probably become subject to the penny stock
rules, and shareholders may have difficulty in selling their shares.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock and anticipate
that future earnings, if any, will be retained for development of our business.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the compensation
paid by Worldwide for services rendered in all capacities to Worldwide from
January 1, 2004 through the fiscal year ended December 31, 2004, of all officers
and directors of the Company. The company's two directors are not compensated
for their role as director. They are currently only compensated for their roles
as officers of the company. Neither director and officer are under a contract of
any sort, including any employment contracts and termination of employment and
change-in-control arrangements.
35
EXECUTIVE COMPENSATION - continued
Name and Principal
Underlying
Positions at Salary Bonus Compensation Options
- -------------------------------------------------------------------------------
Guy Peckham 49,914.00
Bruce Hannan 45,962.48
Wally Marcolin 0
LEGAL MATTERS
The O'Neal Law Firm, P.C., Shea Boulevard, Suite #400-D, Fountain Hills, Arizona
85268, will pass upon the validity of the shares offered hereby for Worldwide.
SECURITIES ACT INDEMNIFICATION DISCLOSURE
Worldwide's By-Laws allow for the indemnification of company officers and
directors in regard to their carrying out the duties of their offices. We have
been advised that in the opinion of the Securities and Exchange Commission
indemnification for liabilities arising under the Securities Act is against
public policy as expressed in the Securities Act, and is, therefore
unenforceable. In the event that a claim for indemnification against such
liabilities is asserted by one of our directors, officers, or other controlling
persons in connection with the securities registered, we will, unless in the
opinion of our legal counsel the matter has been settled by controlling
precedent, submit the question of whether such indemnification is against public
policy to a court of appropriate jurisdiction. We will then be governed by the
court's decision.
EXPERTS
The financial statements of Worldwide as of December 31, 2004 and 2003, included
in this prospectus have been audited by Shelley International CPA, independent
certified public accountants, as stated in the opinion, which has been rendered
upon the authority of said firm as experts in accounting and auditing.
TRANSFER AGENT
Our transfer agent is First American Transfer Company, 706 East Bell Road, #202,
Phoenix, Arizona 85022.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There have been no changes in and/or disagreements with Shelley International,
C.P.A. on accounting and financial disclosure matters.
36
PART II - FINANCIAL STATEMENTS
Financial Statements Six Months Months Ended June 30, 2005 ................. 38
Consolidated Balance Sheets June 30, 2005 and December 31, 2004
(Unaudited) ........................................................38
Consolidated statements of Operations Three Months Ended June
30, 2005 & 2004 and Six Months Ended June 30, 2005 & 2004
(Unaudited) ...................................................... 39
Statement of Stockholder's Equity January 9, 2003 (Inception) to
June 30, 2005 (Unaudited) ........................................ 40
Consolidated Statements of Cashflows Three Months Ended June 30,
2005 & 2004 and Six Months Ended June 30, 2005 & 2004
(Unaudited) ...................................................... 41
Notes to unaudited Consolidated Financial Statements (June 30,
2005, 2004) ...................................................... 42
Financial Statements Year Ended December 31, 2004 and 2003 ................. 48
Report of Independent Registered Public Accountant...................48
Consolidated Balance Sheets Year Ended December 31, 2004
and 2003 .........................................................49
Consolidated Statements of Operations Year Ended December
31, 2004 and 2003 ................................................50
Statement of Stockholders' Equity October 28, (Inception) to
December 31, 2004 ................................................51
Consolidated Statements of Cash Flows Year Ended December
31, 2004 and 2003 ...................................................52
Notes to Financial Statements .......................................53
37
Worldwide Promotional Products Corporation
Consolidated Balance Sheets
------------------------------
ASSETS
June 30,
2005 December 31,
(Unaudited) 2004
----------------- -----------------
CURRENT ASSETS
Cash $ 42,227 $ 112,247
Accounts Receivable - Net 127,076 148,958
Prepaid Expense 19,246 36,340
Inventory 24,813 21,481
----------------- -----------------
Total Current Assets 213,362 319,026
----------------- -----------------
EQUIPMENT, net 30,516 29,626
----------------- -----------------
OTHER ASSETS
Goodwill 22,614 23,460
----------------- -----------------
Total Long Term Assets 22,614 23,460
----------------- -----------------
TOTAL ASSETS $ 266,492 $ 372,112
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts Payable and Accrued Expenses $ 154,185 $ 127,155
Accrued Expenses 20,866 12,079
Notes Payable 159,578 173,435
Unearned Revenue 20,169 29,684
Accrued Interest 1,810 3,992
----------------- -----------------
Total Current Liabilities 356,608 346,345
Non-Current Liabilities
GM Card Payable 27,723 13,592
Notes Payable - Shareholder 57,935 60,102
----------------- ------------------
Total Non-Current Liabilities 85,658 73,694
----------------- -----------------
TOTAL LIABILITIES 442,266 420,039
----------------- -----------------
STOCKHOLDERS' EQUITY
Common Stock, authorized 100,000,000
shares, $0.001 par value; Issued and
outstanding June 30, 2005, 22,511,000
shares; December 31, 2004
21,665,000 shares. 22,511 21,665
Paid in Capital 361,339 178,435
Accumulated Translation Gain/(Loss) 9,881 14,509
Retained Earnings/(Deficit) (569,505) (262,536)
----------------- -----------------
Total Stockholders' Equity/(Deficit) (175,774) (47,927)
----------------- -----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 266,492 $ 372,112
================= =================
The accompanying notes are an integral part of these statements
38
Worldwide Promotional Products Corporation
Consolidated satatements of Operations
---------------------------------------
(Unaudited)
Three Months Ended June 30 Six Months Ended June 30
--------------------------------- ---------------------------------
2005 2004 2005 2004
---------------- ---------------- ---------------- ----------------
INCOME
Sales $ 306,836 $ 186,973 $ 476,042 $ 379,878
Other Income
3 46 28 66
---------------- ---------------- ---------------- ----------------
Gross Income 306,839 187,020 476,070 379,944
COST OF GOODS SOLD 178,353 129,426 266,391 258,136
---------------- ---------------- ---------------- ----------------
Gross Profit / (Loss) 128,486 57,593 209,679 121,808
---------------- ---------------- ---------------- ----------------
EXPENSES
Compensation 153,672 54,707 319,267 67,167
Professional and Consulting Fees 11,945 - 12,073 114
General and Administrative 46,386 13,541 104,551 23,943
Depreciation/Amortization 3,093 - 6,002 -
Rent Expense 29,273 1,908 55,048 2,870
Bad Debt Expense - 7,796 - 7,920
Advertising & Promotions 3,611 263 6,415 361
Interest Expense 7,841 5,718 13,292 6,079
---------------- ---------------- ---------------- ----------------
Total Expense 255,821 83,933 516,648 108,454
INCOME (LOSS) BEFORE INCOME TAXES (127,335) (26,340) (306,969) 13,354
Provision for Income Taxes
---------------- ---------------- ---------------- ----------------
NET INCOME (LOSS) $ (127,335) $ (26,340) $ (306,969) $ 13,354
================ ================ ================ ================
BASIC
Net (Loss) per Common Share a a a a
---------------- ---------------- ---------------- ----------------
Weighted Average Number of
Common Shares Outstanding 21,777,100 5,000,000 21,963,011 5,000,000
================ ================ ================ ================
DILUTED
Net (Loss) per Common Share a a a a
---------------- ---------------- ---------------- -----------------
Weighted Average Number of
Common Shares Outstanding 25,238,211 5,000,000 25,443,674 5,000,000
================ ================ ================ ================
a = less than $0.01 per share
The accompanying notes are an integral part of these statements
39
Worldwide Promotional Products Corporation
Satatement of Stockholder's Equity
-----------------------------------
(Unaudited)
January 9, 2003 (Inception) to June 30, 2005
Common Stock
----------------------------- Paid in Currency Accumulated Total
Shares Amount Capital Translation Deficit Equity
-------------- -------------- -------------- -------------- -------------- --------------
Common Shares issued for
cash to founders 5,000,000 $ 5,000 $ (5,000) $ - $ - $ -
Translation (337) $ (337)
Net (Loss) (4,000) (4,000)
-------------- -------------- -------------- -------------- -------------- --------------
Balance, December 31, 2003 5,000,000 5,000 (5,000) (337) (4,000) (4,337)
Merger and Recapitalization 15,165,000 15,165 (15,165) -
Shares issued for purchase of
assets 100,000 100 100
Shares issued for cash 1,400,000 1,400 198,600 200,000
Translation 14,846 14,846
Net (Loss) (258,536) (258,536)
-------------- -------------- -------------- -------------- -------------- --------------
Balance, December 31, 2004 21,665,000 $ 21,665 $ 178,435 $ 14,509 $ (262,536) $ (47,927)
Shares issued for cash 786,000 786 176,964 177,750
Shares issued for service 60,000 60 5,940 6,000
Translation 4,628) (4,628)
Net (Loss) (306,969) (306,969)
-------------- -------------- -------------- -------------- -------------- --------------
Balance, June 30, 2005 22,511,000 $ 22,511 $ 361,339 $ 9,881 $ (569,505) $ (175,774)
============== ============== ============== ============== ============== ==============
The accompanying notes are an integral part of these statements
40
Worldwide Promotional Products Corporation
Consolidated Statements of Cashflows
(Unaudited)
Three Months Ended June 30 Six Months Ended June 30
-------------------------------- --------------- ---------------
2005 2004 2005 2004
--------------- ---------------- --------------- ---------------
Operating Activities
Net (Loss) $ (127,335) $ (26,340) $ (306,967) $ 13,354
Significant Non-Cash Transactions
Common Stock for Services 6,000 6,000 -
Currency Translation 5,086 (1,166) (4,627) (1,176)
Depreciation/Amortization Expense 3,093 - 6,002 -
Changes in assets and liabilities
(Increase)/Decrease in Receivables (59,386) 12,814 11,641 (18,355)
(Increase)/Decrease in Inventory (6,257) (12,912) (3,332) (12,909)
(Increase)/Decrease in Prepaid Expense (6,590) 5 17,094 8
(Increase)/Decrease in Goodwill
700 - 847 -
Increase/(Decrease) in Accounts Payable 83,722 41,579 46,054 46,300
Increase/(Decrease) in Other Liabilities (6,706) (688) (9,515) 2,121
Increase/(Decrease) in Accrued Interest (5,786) - (2,182) -
--------------- ---------------- --------------- ---------------
Net Cash (Used) by Operating Activities (113,459) 13,292 (238,985) 29,344
--------------- ---------------- --------------- ---------------
Investing Activities
Purchase of Assets 73 90 (6,892) 147
Purchase of Subsidiary - -
--------------- ---------------- --------------- ---------------
Net Cash (Used) by Investing Activities 73 90 (6,892) 147
--------------- ---------------- --------------- ---------------
Financing Activities
Proceeds from Sale of Common Stock 153,750 - 177,750 -
Proceeds from Notes Payable (22,296) - (13,857) -
Proceeds from GM Card 14,215 (8,241) 14,131 (4,090)
Proceeds from Shareholder Loan (1,792) (10,467) (2,167) (10,836)
--------------- ---------------- --------------- ---------------
Cash Provided by Financing Activities 143,877 (18,708) 175,857 (14,926)
--------------- ---------------- --------------- ---------------
Net Increase/(Decrease) in Cash 30,491 (5,326) (70,020) 14,565
Cash, Beginning of Period 11,736 39,524 112,247 19,634
--------------- ---------------- --------------- ---------------
Cash, End of Period $ 42,227 $ 34,199 $ 42,227 $ 34,199
=============== ================ ================ ==============
Significant Non-Cash Transactions
See Note pertaining to Stocholders' Equity
Supplemental Information:
Period Interest $ 7,841 $ 5,718 13,292 $ 6,079
Income Taxes Paid - - -
The accompanying notes are an integral part of these statements
41
WORLDWIDE PROMOTIONAL PRODUCTS CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(June 30, 2005, 2004)
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
Worldwide Promotional Products Corporation (the Company) was organized in the
state of Nevada on November 1, 1999 under the name Victor James, Inc. On June
16, 2004 the Company changed its name to Worldwide Promotional Products
Corporation and increased its authorized common stock to 100,000,000 shares with
a par value of $.001 and 15,165,000 shares issued and outstanding.
On July 1, 2004 the company completed a merger where it purchased all of the
outstanding stock and merged with GLOBESTUFF.COM, INC an Alberta company formed
January 9, 2003. The merger was accounted for as a stock exchange reverse
acquisition. Worldwide Promotional Products Corporation is the surviving legal
entity with GLOBESTUFF.COM, INC the surviving historical accounting entity whose
financial statements are provided for reporting purposes. GLOBESTUFF.COM, INC
changed its name to Worldwide Promotional Products 2004 Corporation on October
15, 2004 and is operated as a wholly owned subsidiary of the Company.
On September 1, 2004 the Company purchased the exclusive rights to the trade
name "TradePointe" and maintains operations under that trade name
The Company operates on a December 31 fiscal year end.
The Company provides a variety of sales and marketing products and services to
businesses.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
The relevant accounting policies and procedures are listed below.
Accounting Basis
The statements were prepared following generally accepted accounting principles
of the United States of America consistently applied.
Earnings per Share
The basic earnings (loss) per share is calculated by dividing the Company's net
income available to common shareholders by the weighted average number of common
shares during the year. The diluted earnings (loss) per share is calculated by
dividing the Company's net income (loss) available to common shareholders by the
diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted
number of shares adjusted as of the first of the year for any potentially
dilutive debt or equity.
The company has issued notes payable that together with associated accrued
interest are convertible to common stock at the rate of $0.05 per share.
Conversion of the notes would have an anti-dilutive effect on earnings per
share.
The Company has not issued any options or warrants since inception.
Dividends
42
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES - continued
The Company has not yet adopted any policy regarding payment of dividends. No
dividends have been paid during the periods shown.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Translation of Currency
The company operates in Canada and maintains it financial records in $CDN. For
the sake reporting the Balance Sheet amounts were converted to $US using a
December 31, 2004 rate. Income statement amounts were converted using an average
rate for the period resulting in a Translation gain of $9,881. All amounts
reported in the accompanying financial statements are expressed in $US.
Inventory
The company inventories promotional products it has purchased.
Revenue Recognition
The Company recognizes revenue on the shipment of orders or when service is
provided. Membership revenue is amortized over a 12-month period to the
expiration of each annual membership. Supplier rental revenue is recognized on a
monthly basis. Production revenue is recognized as goods are shipped.
Advertising Expense
Advertising, promotion and marketing costs are expensed as incurred and for 3
months ending June 30, 2005 was $3,611, and for 6 months ending June 30, 2005
was $6,415..
Income Taxes
The provision for income taxes is the total of the current taxes payable and the
net of the change in the deferred income taxes. Provision is made for the
deferred income taxes where differences exist between the period in which
transactions affect current taxable income and the period in which they enter
into the determination of net income in the financial statements.
NOTE 3. ACCOUNTS RECEIVABLE
Accounts receivable is net of $16,578 Allowance for Doubtful Accounts.
NOTE 4. GOODWILL AND TRADE NAME PURCHASE
On September 1, 2004 the Company paid $23,360 ($28,200 CDN) and issued 100,000
common shares valued at $100 to TradePointe Inc., an Alberta company, to acquire
the exclusive rights to the trade name "TradePointe." The Company assumed
TradePointe Inc.'s interest in a building sublease between Kaycan Limited and
TradePoint Inc. made February 14, 2003 and continues to maintain operations
43
NOTE 4. GOODWILL AND TRADE NAME PURCHASE - continued
under the purchased trade name. No other assets or liabilities were exchanged in
this transaction. Goodwill in the amount of $22,614 is recorded for this
purchase.
NOTE 5. STOCKHOLDERS' EQUITY
Common Stock
Worldwide Promotional Products Corporation (the Company) was organized in the
state of Nevada on November 1, 1999 under the name Victor James, Inc. On June
16, 2004, in preparation for merger the Company changed its name to Worldwide
Promotional Products Corporation, completed a 39:1 forward stock split and
increased its authorized common stock to 100,000,000 shares with a par value of
$.001 and with 15,165,000 shares issued and outstanding at July 1, 2004.
On July 1, 2004 the company completed a merger wherein it traded 5,000,000
common shares for all of the outstanding stock of GLOBESTUFF.COM, INC an Alberta
company formed January 9, 2003. The merger was accounted for as a stock exchange
reverse acquisition. Worldwide Promotional Products Corporation is the surviving
legal entity with Worldwide Promotional Products 2004 Corporation (formerly
GLOBESTUFF.COM, INC) the surviving historical accounting entity whose financial
statements are provided for reporting purposes.
On September 1, 2004 the Company paid $23,360 ($28,200 CDN) and issued 100,000
common shares valued at $100 to acquire the rights to the trade name
"TRADEPOINTE" with the associated goodwill.
During November and December 2004 the company issued 1,000,000 common shares for
$100,000 cash and 400,000 common shares for $100,000 cash.
During January 2005 the company issued 125,000 common shares for $12,500 and an
additional 46,000 common shares for $11,500.
During May 2005 the company issued 615,000 common shares for $153,750 and an
additional 60,000 shares for services rendered.
NOTE 6. ACCRUED EXPENSES
Accrued expenses include inventory received but not invoiced which totals
$6,559, payroll taxes payable to Receiver General which totals $10,867, hourly
employee accrued vacation which totals $923 and Goods and Services tax payable
to Revenue Canada which totals $2,516.
NOTE 7. UNEARNED REVENUE
Unearned revenue includes memberships paid annually with revenue recognized over
a 12-month period. Also included is supplier rent paid annually with revenue
recognized over a 12-month period.
44
NOTE 8. NOTES PAYABLE
The following notes payable and associated accrued interest are convertible at
any time by the holder to common stock at the rate of 20 shares for ever $1.00
converted:
12/31/04
-----------
Unsecured 8% Note, Dated August 18, 2004
Final interest and principle Due March 31, 2005. $79,388
Unsecured 8% Note, Dated November 11, 2004
Final interest and principle Due March 31, 2005. 80,190
Accrued Interest to March 31, 2005 1,810
---------
Total Notes Payable $161,388
===========
NOTE 9. PROVISION FOR INCOME TAXES
The Company provides for income taxes under Statement of Financial Accounting
Standards NO. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of
an asset and liability approach in accounting for income taxes. Deferred tax
assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in
effect when these differences are expected to reverse.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred tax asset is $56,878, which is calculated by multiplying a 22%
estimated tax rate by the items making up the deferred tax account (Net
Operating Loss $258,536). The total valuation allowance is a comparable
$(56,878). The provision for income taxes is comprised of the net changes in
deferred taxes less the valuation account plus the current taxes payable as
shown in the chart below.
12/31/04
-----------
Net changes in Deferred Tax Benefit $56,878
Valuation account (56,878)
Current Taxes Payable 0
-----------
Net Provision for Income Taxes $ 0
===========
NOTE 10. OPERATING LEASES AND OTHER COMMITMENTS:
The Company has two equipment leases that it acquired with its purchase of
GLOBESTUFF that expires on June 1, 2009 with a total monthly rental of $2,218
($2,766 CDN), for a yearly total of $26,617 ($33,189 CDN).
The Company has two computer equipment leases that began on December 1, 2004.
One expires on June 1, 2007 with a monthly rental of $514 ($641 CDN), for a
yearly total of $6,168 ($7,692 CDN). The other expires on December 1, 2007 with
a monthly rental of $463 ($578 CDN) for a yearly total of $5,562 ($6,936 CDN).
45
NOTE 10. OPERATING LEASES AND OTHER COMMITMENTS - continued
The company has two building leases. The first lease was taken over with its
purchase of the trade name "TRADEPOINTE" that expires on October 31, 2005 with a
total monthly rental of $1,661 ($2,071 CDN), for a yearly total of $19,929
($24,852 CDN). The second lease began on October 31, 2004 with a total monthly
rental of $4,865 ($6,067 CDN), for a yearly total of $58,382 ($72,804 CDN).
NOTE 11. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. The Company has sustained a $127,335
loss in the 3 months ended June 30, 2005, and a $306,969 loss in the 6 months
ended June 30, 2005. This raises substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from this uncertainty.
Management continues to seek funding from its shareholders and other qualified
investors to pursue its business plan.
NOTE 12. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Below is a listing of the most recent accounting standards and their effect on
the Company.
SFAS 148 Accounting for Stock-Based Compensation-Transition and Disclosure
Amends FASB 123 to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation.
SFAS 149 Amendment of Statement 133 on Derivative Instruments and Hedging
Activities This Statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and for
hedging activities under FASB Statement NO. 133, Accounting for Derivative
Instruments and Hedging Activities.
SFAS 150 Financial Instruments with Characteristics of both Liabilities and
Equity
This Statement requires that such instruments be classified as liabilities in
the balance sheet. SFAS 150 is effective for financial instruments entered into
or modified after May 31, 2003. Interpretation No. 46 (FIN 46) Effective January
31, 2003, The Financial Accounting Standards Board requires certain variable
interest entities to be consolidated by the primary beneficiary of the entity if
the equity investors in the entity do not have the characteristics of a
continuing financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. The Company has not invested in any such entities,
and does not expect to do so in the foreseeable future.
Statement No. 151 Inventory Costs-an amendment of ARB No. 43, Chapter 4 (Issued
11/04)
This statement amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing,
to clarify the accounting for abnormal amounts of idle facility expense,
46
NOTE 12. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS - continued
freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43,
Chapter 4, previously stated that "...under some circumstances, items such as
idle facility expense, excessive spoilage, double freight and re-handling costs
may be so abnormal ass to require treatment as current period charges...." This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities.
Statement No. 152 Accounting for Real Estate Time-Sharing Transactions
(Amendment of FASB Statements No. 66 and 67)
This Statement amends FASB Statement No. 66, Accounting for Sales of Real
Estate, to reference the financial accounting and reporting guidance for real
estate time-sharing transactions that is provided in AICPA Statement of Position
(SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions.
This Statement also amends FASB Statement No. 67, Accounting for Costs and
Initial Rental Operations of Real Estate Projects, states that the guidance for
(a) incidental operations and (b) costs incurred to sell real estate projects
does not apply to real estate time-sharing transactions. The accounting for
those operations and costs is subject to the guidance in SOP 04-2.
Statement No. 153 Exchanges of Non-monetary Assets (Amendment of APB Opinion No.
29)
The guidance in APB Opinion No. 29, Accounting for Non-monetary Transactions, is
based on the principle that exchanges of non-monetary assets should be measured
based on the fair value of the assets exchanged. The guidance in that Opinion,
however, includes certain exceptions to the principle. This Statement amends
Opinion 29 to eliminate the exception for non-monetary exchanges of similar
productive assts and replaces it with a general exception for exchanges of
non-monetary assets that do not have commercial substance. A non-monetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange.
The adoption of these new Statements is not expected to have a material effect
on the Company's financial position, results or operations, or cash flows.
47
Financial Statements Year Ended December 31, 2004 and 2003
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANT
To the Board of Directors/Audit Committee
Worldwide Promotional Products Corporation
We have audited the accompanying balance sheet of Worldwide Promotional Products
Corporation, a Nevada corporation, as of December 31, 2004 and 2003 and the
related statement of operations, stockholders' equity, and cash flows for period
from January 9, 2003 (inception) to December 31, 2004. 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 the auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Worldwide Promotional Products
Corporation as of December 31, 2004 and 2003 and the results of its operations
and cash flows for the period from January 9, 2003 (inception) to December 31,
2004 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 the note 11 to the
financial statements, the Company has sustained a loss in the period ended
December 31, 2004. This raises substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from this uncertainty.
Shelley International CPA
August 22, 2005
Mesa, Arizona
This is a restatement to effect the acquisition of GLOBESTUFF.COM, INC. as a
reverse acquisition rather than as a purchase. See Note 1 for description.
48
Worldwide Promotional Products Corporation
CONSOLIDATED BALANCE SHEETS
----------------------------
December 31, 2004 and 2003
ASSETS
December 31, December 31,
2004 2003
-------------- --------------
CURRENT ASSETS
Cash $ 112,247 $ 19,634
Accounts Receivable - Net 148,958 99,056
Prepaid Expense 36,340 236
Inventory 21,481 198
-------------- --------------
Total Current Assets 319,026 119,125
-------------- --------------
EQUIPMENT, net 29,626 4,085
-------------- --------------
OTHER ASSETS
Goodwill 23,460 -
-------------- --------------
Total Long Term Assets 23,460 -
-------------- --------------
TOTAL ASSETS $ 372,112 $ 123,210
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts Payable $ 127,155 $ 61,095
Accrued Expenses 12,079 -
Notes Payable 173,435 -
Unearned Revenue 29,684 28
Accrued Interest 3,992 -
-------------- --------------
Total Current Liabilities 346,345 61,123
Non-Current Liabilities
GM Card Payable 13,592 4,090
Notes Payable - Shareholder 60,102 62,334
-------------- --------------
Total Non-Current Liabilities 73,694 66,424
-------------- --------------
TOTAL LIABILITIES 420,039 127,547
-------------- --------------
STOCKHOLDERS' EQUITY
Common Stock, authorized 100,000,000 shares,
$0.001 par value; Issued and outstanding
December 31, 2004, 21,665,000 shares;
December 31, 2003 5,000,000 shares. 21,665 5,000
Paid in Capital 178,435 (5,000)
Accumulated Translation Gain/(Loss) 14,509 (337)
Retained Earnings/(Deficit) (262,536) (4,000)
-------------- --------------
Total Stockholders' Equity/(Deficit) (47,927) (4,337)
-------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 372,112 $ 123,210
============== ==============
The accompanying notes are an integral part of these statements
49
Worldwide Promotional Products Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Year Year
Ended Ended
December 31, December 31,
2004 2003
-------------- --------------
INCOME
Sales $ 767,576 423,325
Other Income 201 2
-------------- --------------
Gross Income 767,777 423,327
COST OF GOODS SOLD 474,280 309,711
-------------- --------------
Gross Profit / (Loss) 293,497 113,616
-------------- --------------
EXPENSES
Compensation 323,991 37,232
Professional and Consulting Fees 30,911 364
General and Administrative 104,288 67,170
Depreciation/Amortization 5,002 -
Rent Expense 41,974 9,864
Bad Debt Expense 29,353 113
Advertising & Promotions 3,562 2,001
Interest Expense 12,952 872
-------------- --------------
Total Expense 552,033 117,616
-------------- --------------
(LOSS) BEFORE INCOME TAXES (258,536) (4,000)
Provision for Income Taxes
-------------- --------------
NET (LOSS) $ (258,536) (4,000)
============== ==============
BASIC
Net (Loss) per Common Share a a
-------------- --------------
Weighted Average Number of
Common Shares Outstanding 12,758,730 5,000,000
============== ==============
DILUTED
Net (Loss) per Common Share a a
-------------- --------------
Weighted Average Number of
Common Shares Outstanding 13,265,560 5,000,000
============== ==============
a = less than $0.01 per share
The accompanying notes are an integral part of these statements
50
Worldwide Promotional Products Corporation
CONSOLIDATED STATMENT OF STOCKHOLDER'S EQUITY
-----------------------------------------------
January 9, 2003(Inception)to December 31, 2004
Common Stock
------------- ------------- Paid in Accumulated Accumulated Total
Shares Amount Capital Translation Deficit Equity
------------- ------------- ------------ ------------- ------------- -------------
Common Shares issued
to founders 5,000,000 5,000 $ (5,000) $ - $ - $ -
Translation (337) (337)
Net (Loss) (4,000) (4,000)
------------- ------------- ------------ ------------- ------------- --------------
Balance, December 31, 2003 5,000,000 5,000 (5,000) (337) (4,000) (4,337)
Merger and Recapalization 15,165,000 15,165 (15,165) -
Shares issued for purchase of
assets 100,000 100 100
Shares issued for cash 1,400,000 1,400 198,600 200,000
Translation 14,846 14,846
Net (Loss) (258,536) (258,536)
------------- ------------- ------------ ------------- ------------- -------------
Balance, December 31, 2004 21,665,000 $ 21,665 $ 178,435 $ 14,509 $ (262,536) $ (47,927)
============= ============== =========== ============ ============= =============
The accompanying notes are an integral part of these statements
51
Worldwide Promotional Products Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------
Year Year
Ended Ended
December 31, December 31,
2004 2003
-------------- -------------
Operating Activities
Net (Loss) $ (258,536) $ (4,000)
Significant Non-Cash Transactions
Common Stock for Asset Purchase
100
Currency Translation 14,845 (337)
Depreciation/Amortization Expense 3,503
Changes in assets and liabilities
(Increase)/Decrease in Receivables (49,902) (99,056)
(Increase)/Decrease in Inventory (21,283) (198)
(Increase)/Decrease in Prepaid Expense (36,104) (236)
Increase/(Decrease) in Accounts Payable 66,060 61,095
Increase/(Decrease) in Other Liabilities 41,735 28
Increase/(Decrease) in Accrued Interest 3,992
-------------- -------------
Net Cash (Used) by Operating Activities (235,590) (42,704)
-------------- -------------
Investing Activities
Purchase of Assets (29,044) (4,085)
Purchase of Goodwill (23,460) -
-------------- -------------
Net Cash (Used) by Investing Activities (52,504) (4,085)
-------------- -------------
Financing Activities
Proceeds from Sale of Common Stock 200,000
Proceeds from Notes Payable 173,435
Proceeds from GM Card 9,502 4,090
Proceeds from Shareholder Loan (2,230) 62,333
-------------- -------------
Cash Provided by Financing Activities 380,707 66,423
-------------- -------------
Net Increase/(Decrease) in Cash 92,613 19,634
Cash, Beginning of Period 19,634 -
-------------- -------------
Cash, End of Period $ 112,247 $ 19,634
============== =============
Significant Non-Cash Transactions
See Note pertaining to Stocholders' Equity
Supplemental Information:
Period Interest $ 12,952 $ 872
Income Taxes Paid - -
The accompanying notes are an integral part of these statements
52
WORLDWIDE PROMOTIONAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(December 31, 2004, 2003)
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
Worldwide Promotional Products Corporation (the Company) was organized in the
state of Nevada on November 1, 1999 under the name Victor James, Inc. On June
16, 2004 the Company changed its name to Worldwide Promotional Products
Corporation and increased its authorized common stock to 100,000,000 shares with
a par value of $.001 and 15,165,000 shares issued and outstanding.
On July 1, 2004 the company completed a merger where it purchased all of the
outstanding stock and merged with GLOBESTUFF.COM, INC an Alberta company formed
January 9, 2003. The merger was accounted for as a stock exchange reverse
acquisition. Worldwide Promotional Products Corporation is the surviving legal
entity with GLOBESTUFF.COM, INC the surviving historical accounting entity whose
financial statements are provided for reporting purposes. GLOBESTUFF.COM, INC
changed its name to Worldwide Promotional Products 2004 Corporation on October
15, 2004 and is operated as a wholly owned subsidiary of the Company.
On September 1, 2004 the Company purchased the exclusive rights to the trade
name "TradePointe" and maintains operations under that trade name
The Company operates on a December 31 fiscal year end.
The Company provides a variety of sales and marketing products and services to
businesses.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
The relevant accounting policies and procedures are listed below.
Accounting Basis
The statements were prepared following generally accepted accounting principles
of the United States of America consistently applied.
Earnings per Share
The basic earnings (loss) per share is calculated by dividing the Company's net
income available to common shareholders by the weighted average number of common
shares during the year. The diluted earnings (loss) per share is calculated by
dividing the Company's net income (loss) available to common shareholders by the
diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted
number of shares adjusted as of the first of the year for any potentially
dilutive debt or equity.
The company has issued notes payable that together with associated accrued
interest are convertible to common stock at the rate of $0.05 per share.
Conversion of the notes would have an anti-dilutive effect on earnings per
share.
The Company has not issued any options or warrants since inception.
53
Notes to Financial Statements - continued.
Dividends
The Company has not yet adopted any policy regarding payment of dividends. No
dividends have been paid during the periods shown.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Translation of Currency
The company operates in Canada and maintains it financial records in $CDN. For
the sake reporting the Balance Sheet amounts were converted to $US using a
December 31, 2004 rate. Income statement amounts were converted using an average
rate for the period resulting in a Translation gain of $14,509. All amounts
reported in the accompanying financial statements are expressed in $US.
Inventory
The company inventories promotional products it has purchased.
Revenue Recognition
The Company recognizes revenue on the shipment of orders or when service is
provided. Membership revenue is amortized over a 12-month period to the
expiration of each annual membership. Supplier rental revenue is recognized on a
monthly basis. Production revenue is recognized as goods are shipped.
Advertising Expense
Advertising, promotion and marketing costs are expensed as incurred and for the
period ended December 31, 2004 was $3,201.
Income Taxes
The provision for income taxes is the total of the current taxes payable and the
net of the change in the deferred income taxes. Provision is made for the
deferred income taxes where differences exist between the period in which
transactions affect current taxable income and the period in which they enter
into the determination of net income in the financial statements.
NOTE 3. ACCOUNTS RECEIVABLE
Accounts receivable is net of $19,441 Allowance for Doubtful Accounts.
54
Notes to Financial Statements - continued.
NOTE 4. GOODWILL AND TRADE NAME PURCHASE
On September 1, 2004 the Company paid $23,360 ($28,200 CDN) and issued 100,000
common shares valued at $100 to TradePointe Inc., an Alberta company, to acquire
the exclusive rights to the trade name "TradePointe." The Company assumed
TradePointe Inc.'s interest in a building sublease between Kaycan Limited and
TradePoint Inc. made February 14, 2003 and continues to maintain operations
under the purchased trade name. No other assets or liabilities were exchanged in
this transaction. Goodwill in the amount of $23,460 is recorded for this
purchase.
NOTE 5. STOCKHOLDERS' EQUITY
Common Stock
Worldwide Promotional Products Corporation (the Company) was organized in the
state of Nevada on November 1, 1999 under the name Victor James, Inc. On June
16, 2004, in preparation for merger the Company changed its name to Worldwide
Promotional Products Corporation, completed a 39:1 forward stock split and
increased its authorized common stock to 100,000,000 shares with a par value of
$.001 and with 15,165,000 shares issued and outstanding at July 1, 2004.
On July 1, 2004 the company completed a merger wherein it traded 5,000,000
common shares for all of the outstanding stock of GLOBESTUFF.COM, INC an Alberta
company formed January 9, 2003. The merger was accounted for as a stock exchange
reverse acquisition. Worldwide Promotional Products Corporation is the surviving
legal entity with Worldwide Promotional Products 2004 Corporation (formerly
GLOBESTUFF.COM, INC) the surviving historical accounting entity whose financial
statements are provided for reporting purposes.
On September 1, 2004 the Company paid $23,360 ($28,200 CDN) and issued 100,000
common shares valued at $100 to acquire the rights to the trade name
"TRADEPOINTE" with the associated goodwill.
During November and December 2004 the company issued 1,000,000 common shares for
$100,000 cash and 400,000 common shares for $100,000 cash.
NOTE 6. ACCRUED EXPENSES
Accrued expenses include, payroll taxes payable to Receiver General of $11,871,
and Goods and Services tax payable to Revenue Canada of $208.
NOTE 7. UNEARNED REVENUE
Unearned revenue includes memberships paid annually with revenue recognized over
a 12-month period. Also included is supplier rent paid annually with revenue
recognized over a 12-month period.
55
Notes to Financial Statements - continued.
NOTE 8. NOTES PAYABLE
The following notes payable and associated accrued interest are convertible at
any time by the holder to common stock at the rate of 20 shares for ever $1.00
converted:
12/31/04
Unsecured 8% Note, Dated August 18, 2004
Final interest and principle Due March 31, 2005. $94,601
Unsecured 8% Note, Dated November 11, 2004
Final interest and principle Due March 31, 2005. 78,834
---------
Subtotal Notes Payable 173,435
Accrued Interest to December 31, 2004 3,992
---------
Total Notes and Interest Payable $177,427
=========
NOTE 9. PROVISION FOR INCOME TAXES
The Company provides for income taxes under Statement of Financial Accounting
Standards NO. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of
an asset and liability approach in accounting for income taxes. Deferred tax
assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in
effect when these differences are expected to reverse.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred tax asset is $56,878, which is calculated by multiplying a 22%
estimated tax rate by the items making up the deferred tax account (Net
Operating Loss $258,536). The total valuation allowance is a comparable
$(56,878). The provision for income taxes is comprised of the net changes in
deferred taxes less the valuation account plus the current taxes payable as
shown in the chart below.
12/31/04
Net changes in Deferred Tax Benefit $56,878
Valuation account (56,878)
Current Taxes Payable 0
----------
Net Provision for Income Taxes $ 0
==========
56
Notes to Financial Statements - continued.
NOTE 10. OPERATING LEASES AND OTHER COMMITMENTS:
The Company has two equipment leases that it acquired with its purchase of
GLOBESTUFF that expires on June 1, 2009 with a total monthly rental of $2,300
($2,766 CDN), for a yearly total of $27,610 ($33,189 CDN).
The Company has two computer equipment leases that began on December 1, 2004.
One expires on June 1, 2007 with a monthly rental of $538 ($641 CDN), for a
yearly total of $6,399 ($7,692 CDN). The other expires on December 1, 2007 with
a monthly rental of $481 ($578 CDN) for a yearly total of $5,772 ($6,936 CDN).
The company has two building leases. The first lease was taken over with its
purchase of the trade name "TRADEPOINTE" that expires on October 31, 2005 with a
total monthly rental of $1,723 ($2,071 CDN), for a yearly total of $20,674
($24,852 CDN). The second lease began on October 31, 2004 with a total monthly
rental of $5,047 ($6,067 CDN), for a yearly total of $60,566 ($72,804 CDN).
NOTE 11. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. The Company has sustained a $258,536
loss in the period ended December 31, 2004. This raises substantial doubt about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustments that might result from this uncertainty.
Management continues to seek funding from its shareholders and other qualified
investors to pursue its business plan.
NOTE 12. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Below is a listing of the most recent accounting standards and their effect on
the Company.
SFAS 148 Accounting for Stock-Based Compensation-Transition and Disclosure
Amends FASB 123 to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation.
SFAS 149 Amendment of Statement 133 on Derivative Instruments and Hedging
Activities This Statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and for
hedging activities under FASB Statement NO. 133, Accounting for Derivative
Instruments and Hedging Activities.
SFAS 150 Financial Instruments with Characteristics of both Liabilities
and Equity
This Statement requires that such instruments be classified as liabilities in
the balance sheet. SFAS 150 is effective for financial instruments entered into
or modified after May 31, 2003. Interpretation No. 46 (FIN 46) Effective January
31, 2003, The Financial Accounting Standards Board requires certain variable
interest entities to be consolidated by the primary beneficiary of the entity if
the equity investors in the entity do not have the characteristics of a
continuing financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. The Company has not invested in any such entities,
and does not expect to do so in the foreseeable future.
57
Notes to Financial Statements - continued.
Statement No. 151 Inventory Costs-an amendment of ARB No. 43, Chapter 4 (Issued
11/04)
This statement amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing,
to clarify the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43,
Chapter 4, previously stated that "...under some circumstances, items such as
idle facility expense, excessive spoilage, double freight and re-handling costs
may be so abnormal ass to require treatment as current period charges...." This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities.
Statement No. 152 Accounting for Real Estate Time-Sharing Transactions
(Amendment of FASB Statements No. 66 and 67)
This Statement amends FASB Statement No. 66, Accounting for Sales of Real
Estate, to reference the financial accounting and reporting guidance for real
estate time-sharing transactions that is provided in AICPA Statement of Position
(SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions.
This Statement also amends FASB Statement No. 67, Accounting for Costs and
Initial Rental Operations of Real Estate Projects, states that the guidance for
(a) incidental operations and (b) costs incurred to sell real estate projects
does not apply to real estate time-sharing transactions. The accounting for
those operations and costs is subject to the guidance in SOP 04-2.
Statement No. 153 Exchanges of Non-monetary Assets (Amendment of APB Opinion No.
29)
The guidance in APB Opinion No. 29, Accounting for Non-monetary Transactions, is
based on the principle that exchanges of non-monetary assets should be measured
based on the fair value of the assets exchanged. The guidance in that Opinion,
however, includes certain exceptions to the principle. This Statement amends
Opinion 29 to eliminate the exception for non-monetary exchanges of similar
productive assts and replaces it with a general exception for exchanges of
non-monetary assets that do not have commercial substance. A non-monetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange.
The adoption of these new Statements is not expected to have a material effect
on the Company's financial position, results or operations, or cash flows.
58
PART III - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Articles of Incorporation provide that we must indemnify our directors and
officers to the fullest extent permitted under Nevada law against all
liabilities incurred by reason of the fact that the person is or was a director
or officer or a fiduciary of Worldwide. The effect of these provisions is
potentially to indemnify our directors and officers from all costs and expenses
of liability incurred by them in connection with any action, suit or proceeding
in which they are involved by reason of their affiliation with us. Pursuant to
Nevada law, a corporation may indemnify a director, provided that such indemnity
shall not apply on account of:
(a) acts or omissions of the director finally adjudged to be intentional
misconduct or a knowing violation of law;
(b) unlawful distributions; or
(c) any transaction with respect to which it was finally adjudged that such
director personally received a benefit in money, property, or services
to which the director was not legally entitled.
Our Bylaws provide that we will indemnify our officers and directors for costs
and expenses incurred in connection with the defense of actions, suits, or
proceedings against them on account of their being or having been directors or
officers of Worldwide, absent a finding of negligence or misconduct in office.
Our Bylaws also permit us to maintain insurance on behalf of our officers,
directors, employees and agents against any liability asserted against and
incurred by that person whether or not we have the power to indemnify such
person against liability for any of those acts.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses incurred or (expected) relating to this Registration Statement and
distribution are as follows: The amounts set forth are estimates except for the
SEC registration fee:
Amount
SEC registration fee $ 117.88
Printing and engraving expenses $ 500.00
Legal fees and expenses $ 20,000.00
Accountants' fees and expenses $ 7,500.00
Transfer agent's and registrar's fees $ 750.00
and expenses
Miscellaneous $ 0.00
--------------
Total $28,867.88
Worldwide will bear all of the expenses shown above.
RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding the issuance and sales of our
securities without registration for the past three (3) years from the date of
this Registration Statement. No such sales involved the use of an underwriter,
no advertising or public solicitation were involved, the securities bear a
restrictive legend and no commissions were paid in connection with the sale of
any securities.
59
RECENT SALES OF UNREGISTERED SECURITIES - continued
On July 1, 2004, we issued 5,000,000 for 100% of the outstanding common stock of
Globestuff.com Inc. an Alberta Corporation.
From November 2004 through January 2005, we issued 1,185,000 shares of our
common stock to approximately 24 investors for an aggregate cash price of
$118,500, or $0.10 per share.
From January 2005 through May 2005, we issued 1,061,000 shares of our common
stock to approximately 25 investors for an aggregate cash price of $265,250, or
$0.25 per share.
We relied upon Section 4(2) of the Securities Act of 1933, as amended (the
"Act"). Each investor was provided an opportunity to meet with management to ask
questions and was provided with information about our company. Our officers and
directors determined the sophistication of our investors, as the investors were
either business associates of, or personally known to, our officer and director.
Each investor completed a subscription agreement whereby the investors certified
that they were purchasing the shares for their own accounts, with investment
intent. This offering was not accompanied by general advertisement or general
solicitation and the shares were issued with a Rule 144 restrictive legend.
EXHIBITS
The following exhibits are filed as part of this Registration Statement:
Exhibit
Number Description
3.1 Articles of Incorporation of Worldwide (1)
3.2 Certificate of Amendment of Articles of Incorporation of Worldwide (1)
3.3 Bylaws of Worldwide (1)
3.4 Articles of Incorporation of Globestuff.com, Inc. (1)
3.5 Bylaws of Globestuff.com, Inc. (1)
4.1 Share Exchange Agreement (1)
4.2 Asset Purchase Agreement made the 4th day of August, 2005 (2)
4.3 Asset Purchase Agreement (2)
4.4 Lease Plus Services Inc. Lease Agreement (2)
4.5 MTC Leasing Inc. Lease (2)
4.6 LEASE dated as of this 25th day of August. 2004 (2)
4.7 Custom Trends Inc. Equipment Lease Agreement (2)
4.8 Deep Designs and Apparel Inc. Equipment Lease Agreement (2)
5.1 Legal Opinion and Consent of Counsel
23.1 Consent of Independent Auditors
(1) Incorporated by reference from Form SB-2 filed June 14, 2005.
(2) Incorporated by reference from Form SB-2/A filed August 31, 2005.
60
UNDERTAKINGS
The undersigned registrant hereby undertakes:
1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which is
being registered) any deviation from the high or low end of the
estimated maximum range may be reflected in the form of prospectus
filed with the commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(c) To include any additional or changed material information on the plan
of distribution.
2) For determining 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.
3) File a post-effective amendment to remove from registration any of the
securities being registered, which remain unsold at the end of the offering.
4) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling Worldwide
pursuant to provisions of the State of Nevada or otherwise, we have been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by us of expenses incurred or paid by a director, officer or
controlling person of us 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, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
us is against public policy as expressed in the Securities Act and we will be
governed by the final adjudication of such issue.
61
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, we certify
that we have reasonable grounds to believe that we meets all of the requirements
for filing on Form SB-2 and authorized this registration statement to be signed
on our behalf by the undersigned, thereunto duly authorized, in the City of
Calgary, Province of Alberta, Canada.
Worldwide Promotional Products, Inc.
By: /s/Guy Peckham Date: September 7, 2005
--------------
Guy Peckham
Principal Executive Officer
By: /s/ Bruce Hannan Date: September 7, 2005
----------------
Bruce Hannan
Principal Financial Officer
By: /s/ Bruce Hannan Date: September 7, 2005
----------------
Bruce Hannan
Principal Accounting Officer
In accordance with the requirements of the Securities Act of 1933, the following
persons in the capacities and on the date stated have signed this registration
statement.
By: /s/ Guy Peckham Date: September 7, 2005
-----------------
Guy Peckham
Director
By: /s/ Bruce Hannan Date: September 7, 2005
----------------
Bruce Hannan
Director
By: /s/ Wally Marcolin Date: September 7, 2005
------------------
Wally Marcolin
Director
62