Net tangible book value per share consists of total assets minus intangible
assets and liabilities, divided by the total number of common shares issued and
outstanding. Artwork and Beyond has no shares of preferred stock outstanding.
Artwork and Beyond has 100,000 warrants issued and outstanding.
a) At December 31, 2000, the date of the audited financial statements,
Artwork and Beyond had a net tangible book value of $581,578, or
$.2450 per share; and
b) Assuming the consummation of the transaction described herein,
Artwork and Beyond will have a net tangible book value of
$1,181,671, or $.4260 per share.
18
Concurrent offering
The registration statement of which this prospectus is a part also
includes a prospectus with respect to an offering of up to 600,000 shares of
Artwork and Beyond common stock, all of which may be sold in the open market, in
privately negotiated transactions or otherwise, directly by one (1) selling
securityholder.
We will not receive any proceeds from the sale of such 600,000 shares
of common stock. The selling securityholder is paying all of the expenses
associated with this offering and the concurrent offering. See "Certain
Relationships and Related Transactions." Sales of such 600,000 shares of common
stock by the selling securityholder or the potential of such sales may have a
material adverse effect on the market price of the common stock offered hereby.
19
Directors, Executive Officers, Promoters and Control Persons
Officers and directors
The names and ages of the directors and executive officers of
Artwork and Beyond are set forth below. All Directors are elected annually by
the stockholders to serve until the next annual meeting of the stockholders and
until their successors are duly elected and qualified. Officers are elected
annually by the Board of Directors to service at the pleasure of the Board.
Name Age Position(s) with the Company
---- --- ----------------------------
Howard Blum 41 Chief Executive Officer,
Co-Chairman of the Board
Jay Camina 40 Co-Chairman of the Board
William Lane 67 Director
J. R. LeShufy 76 Director
Background of Executive Officers, Directors and Significant Employees
Howard Blum Mr. Blum has served as Chief Executive Officer and Co-Chairman of
the Board of the company since August 1999. Howard Blum has spent 17 years in
the investment industry. He has worked for firms such as Schroder Wertheim,
Oppenheimer, and Bluestone Capital and is currently employed at Global Emerging
Markets, North America, a U.K.-based investment group and venture capital firm.
Mr. Blum spent the early part of his career managing funds for high net-worth
individuals and corporations. He has managed funds in excess of $50 million
dollars. For the last five years, Mr. Blum has been involved in structuring
various investment and merchant banking transactions and has raised over $100
million dollars for companies in technology, entertainment, and industrial
manufacturing. Mr. Blum graduated with a BA in Economics from New York
University.
Jay Camina Mr. Camina has served as Co-Chairman of the Board of the Company
since August 1999. Jay Camina has spent his entire career in the art and picture
framing industry. From 1979-1981 Mr. Camina was manager of a 30,000 square foot
custom framing facility for Frame King, a franchise of 28 custom frame shops.
This facility was the sole manufacturer of frames for the company's franchises.
From 1981-1988 Mr. Camina worked for a fund-raising art auction company where he
became familiar with all aspects of the art auction industry and was responsible
for managing the manufacturing facility. From 1988 to the present, Mr. Camina
has been sole owner and President of Ross Galleries. Ross Galleries, who has 25
employees, is vertically integrated, housing purchasing, manufacturing, sales
and operations all under one roof. Mr. Camina's company has grown to become one
of the leading fund-raising art auction companies in the country, conducting
over 400 events each year.
20
William Lane Mr. Lane has served as Director since September 2000.
Chairman-CEO/Director, of Emerson Radio Corp. from 1973-1991 where he grew sales
from $14 million to $1 billion. From 1959-1973, Mr. Lane was Chairman/Director
of Major Electronics Corp. the predecessor company to Emerson Radio Corp. He was
President of Majorete Enterprises, Chairman of Majexo Exco Imports and Vice
Chairman/Director of Chia Hsin Corp. trading company. Mr. Lane has been
Chairman/Director of Emerson Italy, Emerson Spain and Emerson Hong Kong. Mr.
Lane was a Director or Officer for H.H. Scott, Inc., Atlantic Shore 400
Consulting Corp., Emerson Investments, Inc., Major Realty Corp., Emteck
Technologies (HK) Ltd., Emerson Equities, Emerson Computer Corp. He is currently
President of W. Lane & Assoc. LLC. a consulting, real estate and private
investment company. Mr. Lane graduated with a BA from Brooklyn College and an
MBA from Cornell University.
J.R. LeShufy Mr. LeShufy has served as Director since September 2000. J.R.
LeShufy was founder of Collectors' Guild Ltd. and Consolidated Fine Arts, the
country's largest club for collectors of limited editions of graphics and
sculpture. He was privileged to work with and publish some of the leading
artists of the 20th Century, such as: Picasso, Chagall, Miro, Calder, Dali,
Manzu, Siquieros, Tamayo, Soyer and Ben Shahn, amongst others. Mr. LeShufy is
President of Trilenium Corp., a research and development company in computer
software and hardware. He has spent several years working with various divisions
of the Russian Academy of Sciences developing the transfer of intellectual
property to the West. Mr. LeShufy serves on the boards of InKine Pharmaceutical
Company, Inc. and TeleServices Internet Group, Inc.
Advisory Board
Artwork and Beyond has an Advisory Board comprised of the following individuals:
Todd Lindsley - Todd Lindsley is a national fund raising consultant. He has over
18 years of direct fund-raising and consulting experience, during which he has
organized or overseen 30 national campaigns which raised over $1 billion
cumulatively in charitable gift support. Earlier in his career he served
Hartwick College, Glimmerglass Opera, and The University of North Carolina at
Chapel Hill as Director of Alumni Relations, Director of Development/Campaign
Director, and Assistant Dean for Development and External Affairs. He currently
serves as President for his own fund-raising consulting firm where he serves as
counsel to museums, hospitals, colleges, and other non-profit organizations. He
holds a B.A. in Government from the College of William and Mary in Virginia.
Karen LeShufy - Karen LeShufy has been a fine art publisher/distributor for 20
years and is President of Editions Des Legendes, which has an exclusive
agreement with the Toulouse-Lautrec family to recreate the works of Henri de
Toulouse-Lautrec. Ms. LeShufy has been a consultant and worked on joint ventures
with The Rockefeller Collection, American Express, Diners' Club, Fox
Broadcasting and The New York Daily News. Karen has created and marketed
programs for direct sale to galleries and the public, as well as direct
marketing/mail order via television and print media. Ms. LeShufy has published
for artists such as Dali, Tamayo, Siquieros, Manzu, Burton Morris, Bill Gallo,
Gartner, Charon, Noyer and Salinas.
21
Cynthia Kacar - Ms. Kacar, President and founder of CircaVentures, has been a
strategic growth and investment banking advisor and consultant to numerous
Internet technology and content companies in Silicon Valley and throughout the
U.S. She has worked with a range of companies from technology start-ups to large
Internet portal companies. She has been an investment banking advisor and
liaison with major venture capital and investment banking groups for Internet
companies that span from content and technology start-ups in pre-IPO mode to
public companies seeking secondary financing on the public equity markets or M &
A strategies. Ms. Kacar was formerly a consultant with McKenna High Tech
Strategies, where she worked on Internet strategies for companies such as
Matsushita and Motorola. Ms. Kacar is the owner/founder/board advisor of several
Internet companies including TENonline, a travel Internet company and
SuperTuner, a company pioneering a video aggregation technology. She holds a BA
in Biology from Lehigh University and an MBA in Finance and Marketing from the
University of St. Thomas in Houston, Texas.
Compensation
Artwork and Beyond has no stock option, retirement, incentive, defined
benefit, actuarial, pension or profit-sharing programs for the benefit of its
officers or directors, but the Board of Directors may recommend adoption of one
or more such programs in the future. We have no employment contract or
compensatory plan or arrangement with any officer of Artwork and Beyond.
Each director of Artwork and Beyond is entitled to receive reasonable
out-of-pocket expenses incurred in attending meetings of the Board of Directors
of Artwork and Beyond but do not receive compensation for services that they
have provided as directors. There is no compensation committee and no
compensation policies have been adopted. Artwork and Beyond may elect to pay
non-cash consideration in the form of options to directors in the future. In the
future, we may elect a cash payment as well as a non-cash consideration.
22
Security ownership of certain beneficial owners and management
The following table sets forth information, as of April 23, 2001 with
respect to the beneficial ownership of the outstanding shares of our common
stock, $.001 par value, as of such date plus, where relevant for particular
beneficial owners, shares which such beneficial owner has the right to acquire)
by (i) any holder known to us owning more than five percent (5%) of the
outstanding shares; (ii) our officers and directors; and (iii) the directors and
officers of Artwork and Beyond as a group:
Number of Shares Percentage (%) of
Name of Beneficial Owners* Common Stock Ownership
-------------------------- ---------------- -----------------
Howard Blum(1) 3,791,752 42%
Jay Camina(2) 3,791,752 42%
William Lane(3) 0 0
J.R. LeShufy(4) 0 0
Giltner B. Stevens 1,197,113 13.3%
Biofarm, Inc. 600,000 6.67%
All Officers and Directors as
a group (2 persons) 7,583,504 84%
* Unless otherwise indicated, the address of all persons listed in this section
is c/o Artwork and Beyond, Inc., 761 Coates Avenue, Holbrook, New York 11741.
(1) Howard Blum is the Chief Executive Officer and Co-Chairman of the Board of
Directors.
(2) Jay Camina is the Co-Chairman of the Board of Directors.
(3) William Lane is a Director of Artwork and Beyond.
(4) J.R. Le Shufy is a Director of Artwork and Beyond.
23
Our business
Summary
Artwork and Beyond is a Delaware corporation which was formed on August
5, 1999. The Company's primary business is the sale of art, in two major areas:
1. Online retail sale of art which is conducted through its online
retail division, ArtinaClick.com; and
2. Internet based charity art auctions which are conducted through our
internet based charity art auction division,
ArtAuctionFundraiser.com.
The Company's online retail division, ArtinaClick.com, provides the
consumer with a "one-stop" shopping experience for the purchase of art online.
ArtinaClick.com offers a vast selection of images ranging from originals,
lithographs, serigraphs, limited editions, prints and posters, to sports
memorabilia and collectables. Items range in price from $5.00 to $1500 with the
average sale being approximately $85.00. Items offered are at substantial
savings from traditional retail galleries. The company believes that its
business strategy combined with targeted marketing and fulfillment will make it
the premiere Internet site for art buying in the e-commerce space.
The Company's emphasis for the consumer is ease-of-use, separating
artwork into five unique galleries, coupled with a sophisticated and powerful
search engine. In particular, the site tries to avoid the competitions mistake
of offering to many framing options and images. It is management's belief that
the consumer will not feel intimidated by lack of taste or knowledge and Artwork
and Beyond will provide the consumer with a highly satisfying shopping
experience.
The E-commerce divisions sales plan is based on the idea that there is
a pervasive frustration with the normal channels for buying art, as the industry
still functions mainly as a cottage industry. Through careful marketing and
strategic alliances, we will aggregate demand and drive traffic to our site. We
believe that there is significant unrealized demand for art in the sub-luxury
category and it is a product that is highly suitable for web purchases. The
Company believes that the online shopping experience has significant advantages
over the traditional method of purchasing art. Artwork and Beyond will create
the perception of these advantages in the minds of the buying public, through a
skilled marketing plan, thereby driving traffic to the site. Once at the site,
visitors will be transformed into buyers through the value proposition
articulated above.
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The Company's Internet based charity art auction division,
ArtAuctionFundraiser.com intends to capitalize on the expertise of both its
supplier Ross Galleries and ArtinaClick.com, to provide online charity art
auctions. There are numerous organizations including, alumni groups, religious
organizations, schools, and health care organizations whose members are
geographically dispersed. These organizations are constantly looking to raise
funds to meet their operating budgets. We believe that an online auction would
enable organizations to raise funds from their members no matter how
geographically dispersed they may be.
We believe that the online auction is at this point a proven concept,
given sites such as eBay and Amazon, and little or no consumer resistance needs
to be overcome. In addition, barriers to entry for newcomers wishing to offer
charity auctions are significant, as credibility working with charities is
difficult to build. We have entered into a fulfillment agreement with Ross
Galleries located in Holbrook, NY. Ross Galleries has 25 full-time employees in
a 20,000 sq. ft. facility. Ross Galleries has been in the charity art business
for 13 years, has worked with 1700 different organizations, and conducted over
4000 land-based auctions. Management believes that the cost of implementing
online charity auctions will be minimal, given Ross Galleries existing
infrastructure.
Online sales of art
Artwork and Beyond's retail web site www.ArtinaClick.com was designed
with enhanced functionality to provide consumers with the ideal "one-stop shop"
online art experience. The site carefully focuses potential buyers on product
selection via virtual galleries that are thematically organized, as well as
education and consultation to supplement the galleries. The following features
are offered to prospective consumers:
Product Selection:
The e-commerce site consists of five unique galleries:
o Collector's Gallery -- This gallery consists of customized framed
originals and limited edition lithographs and serigraphs
custom-framed by well known as well as up-and-coming artists. Among
the featured artists are Thomas McKnight, Michel Delacroix, Bev
Doolittle, Leroy Neiman, and Thomas Kinkade.
o Great Masters -- This gallery consists of elegantly framed works by
the great masters such as Renoir, Monet, Rembrandt and Chagall in
various media such as etchings, serigraphs and artagraphs.
o Print Shoppe -- This gallery currently consists of approximately
15,000 images available with a choice of three decorator framing
selections. Artists include names such as Ansel Adams, Howard
Behrens, and Tarkay.
o Sports Expo -- This gallery consists of custom-framed autographed
photos by sports heroes and celebrities. A Certificate of
Authenticity accompanies all items sold from a handwriting expert
guaranteeing each signature.
25
o "Art Express"-- This gallery contains a subset of selected
merchandise from the above galleries that can be shipped the next
business day. Artwork and Beyond has approximately 1,000 pieces of
art that are featured in this gallery at all times. It is the
opinion of management that no company will be able to successfully
compete with Artwork and Beyond in this offering, as it is
extremely unlikely that the competition will have such a wide
selection of framed artwork in stock that can be shipped the next
business day. The relationship with Ross Galleries enables Artwork
and Beyond to implement this service, because the inventory will be
culled from Ross Galleries's offline inventory. Ross Galleries in
conjunction with Artwork and Beyond has carefully selected the
artwork in Art Express based on items sold over twelve years at
Ross Galleries. Management believes that this data will permit us
to determine consumer preferences and increase inventory turnover.
Consumer Service: Artwork and Beyond offers the services of a
customer-care representative who will be available by e-mail or telephone on a
24 hours, seven days a week, 365 days a year basis to assist with consumer
questions such as the status of orders and shipments, upcoming events, and
questions about site offerings and navigation.
Site Specific Features: The Artwork and Beyond site offers the user an
internal search engine giving shoppers the ability to search by keyword,
subject, artist, style, price range, title, size and medium. This helps create
an easy-to-use shopping environment and enhance the buying experience. The "My
Gallery" pages will allow online users to track their purchases as well as save
favorite selections for later viewing.
Education: Artwork and Beyond anticipates having educational
components, such as interactive tutorials, will help users to understand
contemporary art and to gain confidence in their own preferences. Feature
articles on art collecting, museum and gallery exhibits as well as other
art-related events will keep art lovers up to date on the events, opinions and
controversies animating the art world. Moreover, customers will get information
on featured artists, providing insights into the creative development process.
All this will help aggregate consumer demand by creating the "stickiness" that
accompanies successful online community building.
Marketing and Sales Strategy
Technology creates not only great opportunities but also many risks for
online merchants. Low barriers to entry encourage competitors to quickly
replicate successful e-offerings, literally overnight. Artwork and Beyond
recognizes this ever-present danger and believes that the first step in
preserving site identity is to offer non-technical benefits that are difficult
to imitate - primarily a high level of service, since service that exceeds
consumer expectations will always be appreciated. The Company intends to adapt
an aggressive online and offline marketing strategy which, when combined with
strategic partnerships and joint venture opportunities we believe will help to
position us as the market leader. Currently, ArtinaClick.com is a premiere
merchant in Microsoft's e-shop as well as in Lycos shopping. In addition, the
company has a storefront as a z merchant in Amazon.com.
26
We are intent on building an online community, building trust and brand
loyalty, thereby facilitating sales revenue and repeat visits. Customers at the
e-commerce site will be given several incentives to join Artwork and Beyond's
growing family - from loyalty-based coupons to contests and redeemable points.
Thus, we believe, the site will build a large demographic database, from which
it will be able to "mine" relevant marketing information.
In the e-commerce sphere, direct marketing to the target audience will
be the key to the site's success. One aspect of Artwork and Beyond's marketing
strategy will be to co-brand its product line with top regional and national
home furnishing outlets. We believe that these strategic alliances will enable
Artwork and Beyond to attract both male and female shoppers. Artwork and Beyond
will then strive to differentiate between male and female shoppers by creating
gender and lifestyle-specific product lines. For example, Sports Memorabilia
will be targeted towards the male segment and posters towards college students.
We believe that women's purchases dominate the home decor market and therefore
will be a primary target audience of our marketing efforts. The diversity of
Artwork and Beyond's appeal should be beneficial to its brand equity, long-term
sales and profits. In short, we will follow the time-honored prescription of
"get big, get niche, or get out," reducing marketing costs through a selective
focus on the most profitable niches.
In addition, the site will employ direct mail campaigns; opt in e-mail
campaigns and revenue sharing agreements. This will help leverage the brand,
allowing for other sales opportunities and the creation of strategic alliances
with key players in related industries. There will in general be 3 types of
affiliates:
o sites (profit and non-profit) where we will advertise, returning a
commission of up to 20% of revenue generated to that site;
o affiliate membership groups and sites, whose members will get up to
a 20% discount on the our art with no commissions paid to that
group (like buyers' clubs); and
o private-label/co-branded sites, which we will design for other
outlets, collecting a percentage of sales.
Currently Artwork and Beyond is a merchant with Commission Junction,
the leading affiliate market solution provider. Within Commission Junction,
Artwork and Beyond has signed up over 1500 affiliate partners. We will also
employ limited strategic media planning techniques, such as regional
advertising. Thus, Artwork and Beyond will be able to track responses and use
targeted marketing messages. Art sites are particularly suited to this type of
Internet advertising since viewers are usually browsers looking through numerous
pages and eliciting multiple exposures.
27
Other marketing approaches will include:
Cross marketing - Create strategic alliances with resellers such as national and
regional home furnishing firms decorators, museum stores, and office and
hospitality markets. Artwork and Beyond will accomplish this in the following
manner:
o We will attempt to private-label web sites for resellers leveraging
the Artwork and Beyond name and expertise. The site will contain
custom-framed images that would be exclusive to the reseller. We
believe the reseller would induce their consumer to purchase art at
opportune times, such as when purchasing. The images, frames, and
mattes can be selected by the reseller or an Artwork and beyond
consultant. Artwork and Beyond intends to hire regional sales
representatives to offer private label services to chain stores.
The salesperson will demonstrate the private label service using a
laptop and a mock-customized web site. The benefit to the
affiliated chain store would be to eliminate tangible inventory,
increase convenience and have more extensive offerings for their
clients. If the stores have their own web sites, Artwork and Beyond
will create a link connecting both sites. In addition, Artwork and
Beyond intends to engage sales representatives to make
presentations to businesses in their respective markets.
o We could also work with representatives that are supplying
complimentary products to hotels, hospitals, restaurants, etc
enhancing their ability to offer them additional product to their
clients. Revenue-sharing agreements with related companies (for
instance, home furnishings stores) will leverage the brand,
allowing for increased sales opportunities and the creation of
strategic alliances with key players in related industries.
Professional markets (Interior decorators and corporate market) - Artwork and
Beyond intends to include decorators in its marketing effort by providing them
with password-protected access to a special "trade-only" section of the site.
Interior decorators working with Artwork and Beyond would have the ability to
immediately select appropriate images together with their clients from the web
site. Decorators would save a tremendous amount of time and effort by not having
to shop from gallery to gallery. Affiliated decorators could promote corporate
sales in a similar manner.
Joint venture alliances - We will create alliances with other online sites that
do not offer prints as well as online sites that offer prints but do not offer
on-site custom framing.
o Generate online announcements to trade publications
o Announcements to offline gallery and print consumers
o Registration with search engines and directories
o Carefully designed HTML metatags
o Announcements to artists and related trades with promotional offers
o Press releases in industry journals -- Artwork and Beyond will
advertise in trade journals that cater to physicians, attorneys,
hotels, etc. All of these represent potential business for Artwork
and Beyond.
28
o Encourage links to the Artwork and Beyond site from other key sites
which appeal to Artwork and Beyond's target consumer base
o Direct mail to art enthusiasts identified by mailing lists of
traditional competitors, as well as art magazines and other
sources.
o The development of an aggressive on- and offline advertising
campaign that will build brand awareness
On March 21, 2001, Artwork and Beyond entered into a sales and distribution
agreement with Ivana Haute Couture & Company, Inc. whereby Artwork and Beyond
will produce, package and distribute artwork for the Ivana Haute Couture &
Company, Inc. Ivana World website. Over time, we will offer other related
products and services, such as mirrors, rugs, sculptures, quilts, tapestry and
accessories. Other product concepts in the pipeline include the development of a
signature home furnishings line.
Internet based charity art auctions
It is estimated that total charitable contributions in the US are in
the billions of dollars on an annual basis. While figures do not exist for the
size of the charity art auction market, given the enormous number of
universities, hospitals, healthcare organizations clubs and other community
organizations, it is management's belief that online charity art auctions will
work extremely well with members of a particular organization. Through its art
auction division ArtAuctionFundraiser.com, Artwork and Beyond has developed an
easy-to-use online method that allows constituents and guests of organizations
to bid online for the highest quality, custom framed artwork with a percentage
of the revenues generated from the auction going back to that particular
organization. ArtAuctionFundraiser.com will plan, organize and conduct the
online auction in a manner that is extraordinarily simple to understand by all
participants, regardless of their Internet proficiency. All that is required for
organizations constituents or guests to participate are a computer with Internet
access. No special technical expertise or online auction experience is needed.
How an on-line charity art auction works
Artwork and Beyond will solicit organizations that it believes would
benefit from on online charity art auction. Once an organization has signed up
for an event, ArtAuctionFundraiser.com will send out custom online invitations
to the organizations constituents and guests via e-mail. The invitation will
detail the dates of the event, the online address (URL) to enter the auction,
and a unique password to the organizations private auction. If the organization
prefers to handle the e-mailing itself, ArtAuctionFundraiser.com will customize
an online invitation for them. In the event the organization only has mailing
addresses, ArtAuctionFundraiser.com will provide them with custom printed
invitations and a press release that can be included in their next mailing.
29
When a bidder arrives at the ArtAuctionFundraiser.com home page, there
will be simple instructions on how to navigate the auction site as well as
bidding instructions. From here, the constituents and guests of an organization
will click on their organization's name or logo, which will take them to a
welcome page that we have designed especially for that organization. This
special welcome page is designed for the group at no cost, and may feature the
colors and logo associated with the organization. This page will allow a space
where a special message from an organization's president, chairperson(s) or any
other appropriate individual may appear. The message will welcome the group's
constituents and guests to the auction and may contain other information the
organization may want to convey. It's now time to enter the auction.
Once inside the actual auction site, an organizations patrons can
peruse the wide variety of custom framed artwork and authentic sports
memorabilia. Each auction item is displayed using the finest digital imagery
available on the world wide web. Organizations supporters will have the ability
to browse through the items up for auction or use a simple search function to
locate just what they desire. Once a piece of artwork or memorabilia is found,
bidding may begin. Bidding instructions are clearly written and easy to follow.
When bidding on an item, there is immediate notification by e-mail that the bid
has been received. Additionally, the bidder is always notified if they have been
outbid, thereby enabling the opportunity to bid again. At the end of the
auction, the successful bidders are notified by e-mail. Method of payment by the
highest bidders will be secured by credit card. ArtAuctionFundraiser.com will
accept American Express, Master, Visa and Discover credit cards. The sold works
of art are then prepared for shipment directly to the successful bidders. Once
the auction has ended and all financial settlements are complete, your
organization will receive its entire commission along with a complete accounting
of all bidders names, e-mail addresses, and purchases.
Additional revenue sources
ArtAuctionFundraiser.com has programs that can produce a continuous
revenue stream for organizations in addition to the commission from the online
auction. ArtAuctionFundraiser.com offers an after sale program it can implement
on behalf of organizations. With an organization's permission,
ArtAuctionFundraiser.com would e-mail auction participants, notifying them of
specials or promotions available at Artwork and Beyond's retail art site
www.ArtinaClick. com. Should supporters respond to our e-mail and make a
purchase, the organization will earn a commission on that sale. Commission will
be paid to an organization each and every time a purchase is made.
Another program we will offer would enable organizations to become an
affiliate partner with ArtinaClick.com With this program an ArtinaClick.com
banner is placed discreetly on an organization's web site. The banner ad would
inform visitors that ArtinaClick.com is a fundraising affiliate of the
organization. When a visitor to that organizations site clicks on our banner ad,
he/she will be taken to our site. Whenever a purchase is made, the organization
will receive a commission on that sale.
30
ArtinaClick is a premiere merchant with GreaterGood.com. GreatGood.com
is one of the leading charity malls, whereby a user can purchase merchandise and
a percentage of the sale goes back to a particular organization. The GreaterGood
shopping mall is also located on approximately 5000 non for profit web sites
that are part of the GreaterGood.com network.
ArtinaClick is a premiere art merchant in MyOnlyCatalog.com.
MyOnlyCatalog is an e-shopping destination site that brings together merchants
and consumers in one convenient setting. MyOnlyCatalog allows shoppers to browse
a large selection of catalogs, searching by individual companies, product
categories, or specific items, using one shopping bag and one convenient
checkout process to purchase merchandise from hundreds of catalogs, all at one
web location.
Competition
Our primary competition in the e-commerce space includes companies such
as Art.com, ArtSelect, NextMonet and Barewalls. Our current competitors have
longer operating histories, greater name recognition, larger customer bases and
greater financial, and technical resources then Artwork and Beyond. There are a
number of companies that compete with us in the auction market, the largest of
which are eBay and Amazon.com. Both of these companies have far longer operating
histories, greater name recognition, larger customer bases and greater financial
and technical resources.
In addition, new technologies and the expansion of existing
technologies may increase competitive pressures. As a result of increased
competition, we may experience reduced operating margins, as well as loss of
market share and brand recognition. We cannot be certain that we will be able to
compete successfully against current and future competitors and competitors
could have a material adverse effect on our revenue growth and earnings.
Intellectual Property
Our ability to compete successfully and achieve future revenue growth
will depend, in part on our ability to protect our proprietary technology and
operate without infringing the rights of others. We have filed an application
for a United States Registration for "ArtinaClick.com".
Employees
As of March 15, 2000, we had 4 full-time employees and 3 part-time
employees. We have employees in production, marketing, administration, and
management. None of our employees are represented by a labor union and we have
not experienced any work stoppages. We consider our employee relations to be
good.
31
Facilities
We currently lease approximately 5,000 square feet of general office
space in Holbrook, New York which serves as our executive offices. The lease is
month-to-month and the monthly rental is $2,916.67. Our current facilities will
provide adequate space to house the business through our current growth,
however, as we continue to execute our plan, additional operational and
administrative space may be required. We believe that adequate additional space
is available on competitive terms.
Legal proceedings
There are no material legal proceedings pending to which we are a
party, and we are unaware of any contemplated material legal actions against us.
32
Plan of Operations
Artwork and Beyond is a Delaware corporation which was formed on August
5, 1999. The Company's primary business is the sale of art, in two major areas:
1. Online retail sale of art; and
2. Internet based charity art auctions.
The Company's online retail division, ArtinaClick.com, provides the
consumer with a "one-stop" shopping experience for the purchase of art online.
ArtinaClick offers a vast selection of images ranging from originals,
lithographs, serigraphs, limited editions, prints and posters, to sports
memorabilia and collectables. Items range in price from $5.00 to $1500 with the
average sale being approximately $85.00. Items offered are on average 30%-60%
below retail. (or should we use Items offered are at substantial savings from
traditional retail galleries) The company believes that its business strategy
combined with targeted marketing and fulfillment will make it the premiere
Internet site for art buying in the e-commerce space.
The Company currently markets its products and services through various
online channels. Presently ArtinaClick.com is a merchant in the shopping section
of Microsoft, Lycos, and GreaterGood. The relationship with Microsoft and Lycos
are rental in nature, in which ArtinaClick pays a monthly fee to be in their
shopping section. The relationship with GreaterGood is an affiliate relationship
whereby they receive a percentage of the gross sale. In addition, ArtinaClick is
a merchant with over 1500 affiliates in the CommissionJunction network. These
affiliates are paid on a percentage of sales generated. There are no monthly
rental fees. The Company anticipates generating additional revenue by continuing
to sign up affiliate partners and through strategic offline advertising. The
Company does not anticipate signing other agreements on a rental basis.
The Company's Internet based charity art auction division,
ArtAuctionFundraiser.com intends to capitalize on the expertise of both its
supplier Ross Galleries and ArtinaClick.com, to provide online charity art
auctions. There are numerous organizations including, alumni groups, religious
organizations, schools, and health care organizations whose members are
geographically dispersed. These organizations are constantly looking to raise
funds to meet their operating budgets. The Company believes that an online
auction would enable organizations to raise funds from their members no matter
how geographically dispersed they may be.
The Company believes that the online auction is at this point a proven
concept, given sites such as eBay and Amazon, and little or no consumer
resistance needs to be overcome. In addition, barriers to entry for newcomers
wishing to offer charity auctions are significant, as credibility working with
charities is difficult to build. We have entered into a fulfillment agreement
with Ross Galleries located in Holbrook, NY. Ross Galleries has 25 full-time
employees in a 20,000 sq. ft. facility. Ross Galleries has been in the charity
art business for 13 years, has worked with 1700 different organizations, and
conducted over 4000 land-based auctions. Management believes that the cost of
implementing online charity auctions will be minimal, given Ross Galleries
existing infrastructure.
33
The Company anticipates receiving additional funds in conjunction with
its current offering. In the event these funds are not raised the Company
believes that it has enough cash to build out its model over the next twelve
months. In the event the funds are raised, the build out will be accelerated.
Artwork and Beyond expects to hire additional employees to market its on line
charity art auctions. These employees will be commission based. At the present
time the Company does not expect any significant capital to be spend on plant
and equipment.
Certain relationships and related transactions
To the best of management's knowledge, other than as set forth below,
there were no material transactions, or series of similar transactions, or any
currently proposed transactions, or series of similar transactions, to which
Artwork and Beyond was or is to be a party, in which the amount involved exceeds
$60,000, and in which any director or executive officer, or any security holder
who is known by us to own of record or beneficially more than 5% of any class of
our common stock, or any member of the immediate family of any of the foregoing
persons, has an interest.
In November 1999, Artwork and Beyond entered into a seven year (7)
Supply Agreement with Ross Galleries, whereby Artwork and Beyond would purchase
prints of work of art, framed and unframed, including lithographs, exclusively
from Ross Galleries and Ross Galleries would supply such art to the Company
exclusively for sale on the internet. Pursuant to the agreement, the Company
shall purchase all of its requirements for art from Ross Galleries, provided,
however, that the Company may purchase art from a third party (i) if such art is
not available through Ross Galleries, or (ii) if the same quality of art offered
by Art Galleries is available from a third party at a lower price. During the
term of the agreement, Ross Galleries is prohibited from selling art through the
internet or supplying framed art to any third party for sale directly or
indirectly through the internet.
In January 2001, Biofarm, Inc., an unaffiliated entity, entered into a
Subscription Agreement with Artwork and Beyond and acquired an aggregate of
600,00 shares of Artwork and Beyond's common stock in exchange for the payment
of all of the expenses of this offering (see "Selling Securityholder" and
"Principal Shareholders" herein). In addition, Biofarm agreed to a lock-up of
the 420,000 shares of the 600,000 shares of common stock offered for sale by the
selling securityholder in this prospectus. For a period of 6 months from the
date of the closing of this offering, an aggregate of 420,000 shares being
offered by the selling securityholder will not be eligible for resale. Such
lock-up will terminate upon the (a) expiration of such 6 month period, (b) the
issuance by the company for any reason of any additional shares of common stock,
(c) mutual agreement of the company and the selling securityholder and (d)
request by the company.
34
Executive Compensation
Compensation of Directors and Executive Officers
Each director of Artwork and Beyond is entitled to receive reasonable
out-of-pocket expenses incurred in attending meetings of the Board of Directors
of Artwork and Beyond but are not compensated for services provided in their
capacities as directors. There is no compensation committee and no compensation
policies have been adopted. Artwork and Beyond may elect to pay non-cash
consideration in the form of options to directors in the future. In the future,
we may elect a cash payment as well as a non-cash consideration.
Employment Agreements
As of April 23, 2001, Artwork and Beyond does not have any employment
agreements with any of its employees.
Stock Option Plans and Agreements
Incentive Option Plan - In January 2000, our Directors adopted and the
stockholders of Artwork and Beyond approved the adoption of Artwork and Beyond
2000 Incentive Stock Option Plan ("Incentive Option Plan"). The purpose of the
Incentive Option Plan is to enable us to encourage key employees and Directors
to contribute to the success of Artwork and Beyond by granting such employees
and Directors incentive stock options ("ISOs").
The Incentive Option Plan will be administered by the Board of
Directors or a committee appointed by the Board of Directors ("Committee") which
will determine, in its discretion, among other things, the recipients of grants,
whether a grant will consist of ISOs or a combination thereof, and the number of
shares to be subject to such options.
The Incentive Option Plan provides for the granting of ISOs to purchase
Common Stock at an exercise price to be determined by the Board or the Committee
not less than the fair market value of the Common Stock on the date the option
is granted.
The total number of shares with respect to which options may be granted
under the Incentive Option Plan is 450,000 shares of common stock. ISOs may not
be granted to an individual to the extent that in the calendar year in which
such ISOs first become exercisable the shares subject to such ISOs have a fair
market value on the date of grant in excess of $100,000. No option may be
granted under the Incentive Option Plan after January 2010 and no option may be
outstanding for more than ten years after its grant. Additionally, no option can
be granted for more than five (5) years to a stockholder owning 10% or more of
our outstanding Common Stock and such options must have an exercise price of not
less than 110% of the fair market value on the date of grant.
Upon the exercise of an option, the holder must make payment of the
full exercise price. Such payment may be made in cash or in shares of common
Stock, or in a combination of both. We may lend to the holder of an option funds
sufficient to pay the exercise price, subject to certain limitations.
The Incentive Option Plan may be terminated or amended at any time by
the Board of Directors, except that, without stockholder approval, the Incentive
Option Plan may not be amended to increase the number of shares subject to the
Incentive Option Plan, change the class of persons eligible to receive options
under the Incentive Option Plan or materially increase the benefits of
participants.]
As of April 23, 2001, there were no options outstanding that were
issued to several of our employees (none of whom are executive officers or
directors).
35
Description of securities
General
The following description of our capital stock does not purport to be
complete and is subject to and qualified in its entirety by our certificate of
incorporation and bylaws, which are included as exhibits to the registration
statement of which this prospectus forms a part, and by the applicable
provisions of Delaware law.
We are authorized to issue up to 20,000,000 shares of common stock,
$.001 par value per share, of which 9,000,000 shares were issued and outstanding
as of April 23, 2001. Our certificate of incorporation authorizes 1,000,000
shares of "blank check" preferred stock, none of which are outstanding.
Common Stock
Subject to the rights of holders of preferred stock, if any, holders of
shares of our common stock are entitled to share equally on a per share basis in
such dividends as may be declared by our Board of Directors out of funds legally
available therefor. There are presently no plans to pay dividends with respect
to the shares of our common stock. Upon our liquidation, dissolution or winding
up, after payment of creditors and the holders of any of our senior securities,
including preferred stock, if any, our assets will be divided pro rata on a per
share basis among the holders of the shares of our common stock. The common
stock is not subject to any liability for further assessments. There are no
conversion or redemption privileges nor any sinking fund provisions with respect
to the common stock and the common stock is not subject to call. The holders of
common stock do not have any pre-emptive or other subscription rights.
Holders of shares of common stock are entitled to cast one vote for
each share held at all stockholders' meetings for all purposes, including the
election of directors. The common stock does not have cumulative voting rights.
All of the issued and outstanding shares of common stock are fully
paid, validly issued and non-assessable.
Preferred Stock
None of the 1,000,000 "blank check" preferred shares are currently
outstanding. Our Board of Directors has the authority, without further action by
the holders of the outstanding common stock, to issue shares of preferred stock
from time to time in one or more classes or series, to fix the number of shares
constituting any class or series and the stated value thereof, if different from
the par value, and to fix the terms of any such series or class, including
dividend rights, dividend rates, conversion or exchange rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price and the liquidation preference of such class or series.
36
Warrants
As of April 23, 2001, we have 100,000 warrants outstanding, exercisable
at $3.70 per share, which expire on April 20, 2002.
The exercise price of the warrants and the number of shares issuable
upon exercise of the warrants will be subject to adjustment to protect against
dilution in the event of stock dividends, stock splits, combinations,
subdivisions and reclassifications.
Delaware Anti-Takeover Law Provisions
As a Delaware corporation, we are subject to Section 203 of the General
Corporation Law. In general, Section 203 prevents an "interested stockholder"
(defined generally as a person owing 15% or more of a Delaware corporation's
outstanding voting stock) from engaging in a "business combination" (as defined)
with such Delaware corporation for three years following the date such person
became an interested stockholder unless (i) before such person became an
interested stockholder, the board of directors of the corporation approved the
transaction in which the interested stockholder became an interested stockholder
or approved the business combination, (ii) upon consummation of the transaction
that resulted in the interested stockholder's becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
stock held by the directors who are also officers of the corporation and by
certain employee stock plans), or (iii) following the transaction in which such
person became an interested stockholder, the business combination is approved by
the board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder. Under section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested stockholder
following the public announcement or notification of one of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of the corporation's board of directors
and if such business combination is approved by a majority of the board members
who were directors prior to any person's becoming an interested stockholder. The
provisions of Section 203 requiring a super-majority vote to approve certain
corporate transactions could have the effect of discouraging, delaying or
preventing hostile takeovers, including those that might result in the payment
of a premium over market price or changes in control or management of Artwork
and Beyond.
37
Limitation on liability of directors
Our certificate of incorporation provides that a director of Artwork
and Beyond will not be personally liable to Artwork and Beyond or its
stockholders for monetary damages for breach of the fiduciary duty of care as a
director, including breaches which constitute gross negligence. By its terms and
in accordance with the Delaware General Corporation Law, however, this provision
does not eliminate or limit the liability of a director of Artwork and Beyond
(i) for breach of the director's duty of loyalty to Artwork and Beyond or its
stockholders, (ii) for acts or omissions not in good faith or which involve
international misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, (relating to unlawful payments or
dividends or unlawful stock repurchases or redemptions), (iv) for any improper
benefit or (v) for breaches of a director's responsibilities under the Federal
Securities laws.
Dividend policy
We have not paid any dividends on our Common Stock since our inception
and do not intend to pay dividends on our common stock in the foreseeable
future. Any earnings which we may realize in the foreseeable future will be
retained to finance the growth of Artwork and Beyond.
Shares eligible for future resale
As of April 23, 2001, we had an aggregate of 9,000,000 shares of our
common stock issued and outstanding, all of which are "restricted securities,"
which may be sold only in compliance with Rule 144 under the Securities Act of
1933, as amended. Rule 144 provides, in essence, that a person holding
restricted securities for a period of one year after payment therefor may sell,
in brokers' transactions or to market makers, an amount not exceeding 1% of the
outstanding class of securities being sold, or the average weekly reported
volume of trading of the class of securities being sold over a four-week period,
whichever is greater, during any three-month period. (Persons who are not our
affiliates and who had held their restricted securities for at least two years
are not subject to the volume or transaction limitations.) The sale of a
significant number of these shares in the public market may adversely affect
prevailing market prices of the our securities.
Transfer agent and registrar
The transfer agent and registrar for our common stock is ____________.
Disclosure of commission position on indemnification for securities act
liabilities
38
Our bylaws provide that we will indemnify our officers and directors
for costs and expenses incurred in connection with the defense of actions,
suits, or proceedings against them on account of their being or having been
directors or officers of Artwork and Beyond, absent a finding of negligence or
misconduct in the performance of their duties.
Insofar as indemnification for liabilities arising under the Securities
Act, may be permitted to directors, officers or persons controlling Artwork and
Beyond pursuant to the foregoing provisions, we have been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is unenforceable.
Plan of distribution
Escrow of Offering Funds
400,000 shares will be offered on a "best efforts, all-or-none" basis.
If 400,000 shares are not sold within 60 days from the date hereof, all monies
received will be refunded to subscribers in full without interest thereon
(unless the offering is extended for an additional 30 days). Each subscriber
will receive from the Company confirmation of his subscription to purchase
shares of common stock with instructions to forward their funds to __________.
All proceeds raised in this offering will be deposited by noon of the next
business day following receipt, in an escrow account maintained at _________.
All subscriber checks will be made payable to "____ as escrow agent for Artwork
and Beyond". During the period of escrow subscribers will not be entitled to a
refund of their subscription. If at the end of the offering period, 400,000
shares have been sold, all funds in the escrow account will be released to
Artwork and Beyond.
Restrictions on Resale
Certain restrictions are applicable to the 420,000 shares of the
600,000 shares of our common stock offered for sale by the selling
securityholder in this prospectus. For a period of six months from the date of
the closing of this offering, an aggregate of 420,000 shares being offered by
the selling securityholder will not be eligible for resale. Such lock-up will
terminate upon the (a) expiration of such six month period, (b) the issuance by
the company for any reason of any additional shares of common stock, (c) mutual
agreement of the company and the selling securityholder and (d) request by the
company. See ("Certain Relationships and Related Transactions"). The sale in the
public market of such shares of common stock or the expectation of sales may
adversely affect the prevailing market price of our common stock.
Legal matters
The validity of the common stock offered hereby will be passed upon for
Artwork and Beyond by Berlack, Israels & Liberman LLP, New York, New York.
39
Experts
Certain of the financial statements of Artwork and Beyond included in
this prospectus and elsewhere in the registration statement, to the extent and
for the periods indicated in their reports, have been audited by Merdinger,
Fruchter, Rosen & Corso, P.C., independent certified public accountants, whose
reports thereon appear elsewhere herein and in the registration statement.
Available Information
Reports and other information filed by us with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, and at
the Commission's New York Regional office at Seven World Trade Center, Suite
1300, New York, New York 10048. Copies of such material can also be obtained
from the Public Reference Section of the Commission, Washington, DC 20549 at
prescribed rates.
This Registration Statement, as well as all amendments thereto and
subsequent reports, have been and will be filed through the Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system. Documents filed through
EDGAR are publicly available through the Commission's website at
http:/www.sec.gov.
Statements contained herein as to the contents of any document are
summaries of such documents and, in each instance, reference is hereby made to
the copy of such document filed as an exhibit to the Registration Statement, and
each such statement is qualified in all respects by such reference. All material
information of such exhibits are discussed in this Form SB-2. The Registration
Statement may be inspected and copied at the places set forth above.
40
ARTWORK AND BEYOND, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
ARTWORK AND BEYOND, INC.
(A Development Stage Company)
CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 1
BALANCE SHEET 2
STATEMENT OF OPERATIONS 3
STATEMENT OF STOCKHOLDERS' EQUITY 4
STATEMENT OF CASH FLOWS 5
NOTES TO FINANCIAL STATEMENTS 6-10
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF ARTWORK AND BEYOND, INC.:
We have audited the accompanying balance sheet of Artwork and Beyond, Inc. (A
Development Stage Company) as of December 31, 2000 and 1999, and the related
statements of operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Artwork and Beyond, Inc. as of
December 31, 2000 and 1999, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
Certified Public Accountants
New York, New York
February 20, 2001
ARTWORK AND BEYOND, INC.
(A Development Stage Company)
BALANCE SHEET
December 31, December 31,
2000 1999
----------------- ----------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 661,151 $ 36,081
PROPERTY AND EQUIPMENT, net 27,779 -
----------------- ----------------
Total assets $ 688,930 $ 36,081
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses $ 84,000 $ -
Notes payable - shareholder 23,259 -
----------------- ----------------
Total current liabilities 107,259 -
----------------- ----------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value;
1,000,000 shares authorized, no shares issued
and outstanding - -
Common stock, $0.001 par value;
4,000,000 shares authorized,
2,373,573 shares issued and outstanding 2,373 2,000
Additional paid-in capital 1,365,130
Deficit accumulated during
the development stage (785,832) (23,919)
----------------- ----------------
Total stockholders' equity 581,671 36,081
----------------- ----------------
Total liabilities and stockholders' equity $ 688,930 $ 36,081
================= ================
The accompanying notes are an integral part of these financial statements.
- 2 -
ARTWORK AND BEYOND, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
August 5, August 5,
1999 1999
Year Ended (inception) to (inception) to
December 31, December 31, December 31,
2000 1999 2000
----------- ------------ ------------
Revenue $ 19,113 $ - $ 19,113
Selling, general and administrative expenses 791,568 23,919 815,487
----------- ------------ -----------
Loss from operations before interest income
and provision for income taxes (772,455) (23,919) (796,374)
Interest income 10,542 10,542
-
----------- ------------ -----------
Loss before provision for income taxes (761,913) (23,919) (785,832)
Provision for income taxes - -
-
----------- ------------ -----------
Net loss $ (761,913) $ (23,919) $ (785,832)
=========== ============ ===========
Loss per common share - basic and diluted $ (0.33 ) $ (.02) $ (0.66)
=========== ============ ===========
Weighted average shares outstanding 2,300,149 1,087,700 1,194,542
=========== ============ ===========
The accompanying notes are an integral part of these financial statements.
- 3 -
ARTWORK AND BEYOND, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Accumulated
Common Stock Additional During
----------------------- Paid-in Development
Shares Amount Capital Stage Total
--------- ------------ ----------- ------------------- ----------
Balance, August 5, 1999 (inception) - $ - $ - $ - $ -
Issuance of common stock for cash
- on December 1, 1999 1,000,000 1,000 29,000 - 30,000
- on December 1, 1999 1,000,000 1,000 29,000 - 30,000
Net loss - - - (23,919) (23,919)
--------- -------- ----------- ------------ ----------
Balance, December 31, 1999 2,000,000 2,000 58,000 (23,919) 36,081
Conversion of note payable to common
stock at May 15, 2000 100,000 100 349,900 - 350,000
Issuance of common stock for cash
- on September 30, 2000 185,715 186 649,814 - 650,000
- on September 30, 2000 14,286 14 49,987 - 50,001
- on September 30, 2000 14,286 14 49,987 - 50,001
- on September 30, 2000 14,286 14 49,987 - 50,001
- on September 30, 2000 15,000 15 52,485 - 52,500
Issuance of common stock to induce
Participation - September 30, 2000 30,000 30 104,970 - 105,000
Net loss - - - (761,913) (761,913)
--------- -------- ----------- ------------ ----------
Balance, December 31, 2000 2,373,573 $ 2,373 $ 1,365,130 $ (785,832) $ 581,671
========= ======== =========== ============ ==========
The accompanying notes are integral part of these financial statements.
- 4 -
ARTWORK AND BEYOND, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
August 5, August 5,
Year 1999 1999
Ended (inception) to (inception) to
December 31, December 31, December 31,
2000 1999 2000
----------- ------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (761,913) $ (23,919) $ (785,832)
Adjustments to reconcile net loss to
Net cash provided (used) by operating activities:
Depreciation and amortization 3,034 - 3,034
Common shares issued to induce participation 105,000 - 105,000
(Decrease) Increase in:
Accrued expenses 84,000 - 84,000
----------- ------------- ------------
NET CASH USED IN OPERATING ACTIVITIES (569,879) (23,919) (593,798)
----------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (30,813) - (30,813)
----------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term note payable 23,259 - 23,259
Proceeds from issuance of convertible note 350,000 - 350,000
Issuance of common stock for cash 852,503 60,000 912,503
----------- ------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,225,762 60,000 1,285,762
----------- ------------ -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 625,070 36,081 661,151
CASH AND CASH EQUIVALENTS - Beginning of Period 36,081 - -
----------- ------------- ------------
CASH AND CASH EQUIVALENTS - End of Period $ 661,151 $ 36,081 $ 661,151
=========== ============= ============
CASH PAID DURING THE PERIOD FOR:
Interest Expense $ - $ - $ -
=========== ============= ============
Income Taxes $ - $ - $ -
=========== ============= ============
NON-CASH FINANCING ACTIVITY:
Conversion of note to common stock $ 350,000 $ - $ 350,000
=========== ============= ============
The accompanying notes are an integral part of the financial statements.
- 5 -
ARTWORK AND BEYOND, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements include the accounts
of Artwork and Beyond, Inc. (the "Company"), a Delaware
corporation formed on August 5, 1999.
The Company conducts its operations from offices located in
Holbrook, Long Island, New York.
Nature of Operations
The Company is currently a development-stage company under the
provisions of the Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards ("SFAS") NO. 7.
The Company was formed for the purpose of providing a medium for the
purchase of artwork on the internet. The Company will offer artwork
through its website on the internet and provide this artwork directly
from the supplier (see Note 4). The Company will generate revenues by
the sale of such artwork and framing, and does not currently carry any
inventory. It is the Company's goal to become the dominant provider in
the charity art auction market and retail market, both online and
offline. It is anticipated that operating revenue will accelerate
during the first quarter of the year 2001.
- 6 -
ARTWORK AND BEYOND, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
Concentration of Credit Risk
The Company places its cash in what it believes to be credit-worthy
financial institutions. However, cash balances may exceed FDIC insured
levels at various times during the year.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents and accounts payable
approximates fair value due to the relatively short maturity of these
instruments.
Property and Equipment
Property and equipment are recorded at cost. Repairs and maintenance
costs are charged to operations as incurred. Depreciation is computed
using straight-line methods calculated to amortize the cost of assets
over their estimated useful lives, generally three to seven years.
Upon retirement or other disposition of property and equipment, the
cost and related depreciation will be removed from the accounts and
the resulting gains or losses recorded.
Organization Costs
In accordance with American Institutes of Certified Public
Accountants' Statement of Position ("SOP") 98-5 "Reporting on the
Costs of Start-Up Activities", the Company expenses, as incurred,
costs related to organizational and start-up activities.
Cost of Computer Software
In accordance with SOP 98-1, "Accounting for Costs of Computer
Software Developed or Obtained for Internal Use", the Company
expenses, as incurred, such related costs.
- 7 -
ARTWORK AND BEYOND, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Taxes
Income taxes are provided for based on the liability method of
accounting pursuant to SFAS No. 109, "Accounting for Income Taxes".
Deferred income taxes, if any, are recorded to reflect the tax
consequences on future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each
year-end.
Loss per share
The computation of basic earnings per share ("EPS") is computed by
dividing income available to common stockholders by the weighted
average number of outstanding common shares during the period. Diluted
EPS gives effect to all dilutive potential common shares outstanding
during the period. The computation of diluted EPS does not assume
conversion, exercise or contingent exercise of securities that would
have an anti-dilutive effect.
Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income", establishes standards
for the reporting and display of comprehensive income and its
components in the financial statements. The items of other
comprehensive income that are typically required to be displayed are
foreign currency items, minimum pension liability adjustments, and
unrealized gains and losses on certain investments in debt and equity
securities. At December 31, 2000 and 1999, and for the period then
ended, the Company had no items of other comprehensive income and has,
therefore, not presented a Statement of Comprehensive Income.
Depreciation expense for the twelve months ended December 31, 2000 is
$3,034 and for the initial period August 5, 1999 to December 31, 1999
is $-0-.
- 8 -
ARTWORK AND BEYOND, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
NOTE 3 - INCOME TAXES
The components of the provision for income taxes follows:
2000 1999
---------- ----------
Current Tax Expense
U.S. Federal $ - $ -
State - -
---------- ----------
Total Current - -
---------- ----------
Deferred Tax Expense
U.S. Federal - -
State - -
---------- ----------
Total Deferred - -
---------- ----------
Total Tax Provision (Benefit) from
Continuing Operations $ - $ -
========== ==========
The reconciliation of the effective income tax rate to the Federal
statutory rate is as follows:
Federal Income Tax Rate 34.0% 34.0%
Effect of Valuation Allowance (34.0)% (34.0)%
--------- ---------
Effective Income Tax Rate 0.0% 0.0%
========== ==========
At December 31, 2000, the Company had net carryforward losses of
approximately $700,000. Because of the current uncertainty of
realizing the benefits of the tax carryforward, a valuation allowance
equal to the tax benefits for deferred taxes has been established. The
full realization of the tax benefit associated with the carryforward
depends predominantly upon the Company's ability to generate taxable
income during the carryforward period.
Deferred tax assets and liabilities reflect the net tax effect of
temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and amounts used for
income tax purposes. Significant components of the Company's deferred
tax assets and liabilities as of December 31, 2000 and 1999 are as
follows:
ARTWORK AND BEYOND, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
NOTE 4 - RELATED PARTY TRANSACTIONS
In November 1999, the Company entered into an agreement with a related
company (an officer, director and shareholder of the Company owns this
related company) whereby the Company will purchase prints of works of
art, framed and unframed, exclusively from this related entity. The
related entity has agreed to supply such art at competitive terms, on
an exclusive basis to the Company for sale on the internet. The
agreement is for a seven-year term, but can be terminated on 180 days
written notice by either party.
Additionally, the Company leases its office space from this related
company.
At December 31, 2000, the Company is obligated to a shareholder
pursuant to a non-interest bearing demand note for $23,259.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company entered into a month-to-month lease for its office space,
at a monthly amount of $2,917 from a related entity (see Note 4).
Rental expense was $29,150 for the twelve months ended December 31,
2000, and $-0- for the initial period ended December 31, 1999.
The Company has an employment agreement with its chief operating
officer with a one-year term commencing January 3, 2000 at a $75,000
base salary. There is a one-year option for 2001 at a base salary of
$100,000. The agreement also has certain bonus incentive clauses that
call for maximum additional compensation of $25,000 per year and
additional incentives in the form of stock options.
The Company entered into an agreement in March 2000 with an entity
whereby a fee is to be paid for general business advice, structuring
of transactions and introduction to potential investors. Additionally,
if such entity introduces a potential acquisition target and such
acquisition is consummated, a fee of 1% of the transaction value will
be paid in stock and 1/2% of the transaction value in cash. In the
fourth quarter of 2000, the Company paid fees to this entity of
$73,150. Included in accrued expenses at December 31, 2000, is
$66,150, which will be paid to the entity in the first quarter of 2001
with common stock, at the fair market value when earned of $3.50.
- 10 -
You should rely only on the information contained in this document. We
have not authorized anyone to provide you with information that is different.
This document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.
Additional risks and uncertainties not presently known or that are
currently deemed immaterial may also impair our business operations. The risks
and uncertainties described in this document and other risks and uncertainties
which we may face in the future will have a greater impact on those who purchase
our common stock. These purchasers will purchase our common stock at the market
price or at a privately negotiated price and will run the risk of losing their
entire investment.
Artwork and Beyond, Inc.
Distribution of 400,000 shares of
common stock
PROSPECTUS
April 27, 2001
[Alternate page for Selling Securityholder prospectus]
The offering
Shares offered by Selling
Securityholder............................................ 600,000 shares of common stock.
Plan of distribution........................................ The offering of our shares of common
stock is being made by a shareholder
of our company who may wish to sell
its shares. Sales of our common stock
may be made by the selling
securityholder in the open market or
in privately negotiated transactions
and at market prices, fixed prices or
negotiated prices. See "Risk
Factors-Restrictions on Resale"
Use of proceeds............................................. Artwork and Beyond will not receive
any proceeds from the sale of shares
owned by a selling securityholder.
Concurrent offering
Shares offered by Artwork and Beyond........................ 400,000 shares of common stock.
Shares to be sold by Selling Securityholder................. 600,000 shares of common stock.
Plan of distribution........................................ Artwork and Beyond will offer and sell
400,000 shares for cash at a price of
$1.50 per share.
Use of proceeds............................................. Artwork and Beyond will receive the
proceeds to be derived from the sale
of an aggregate of 400,000 shares of
its common stock.
[Alternate page for Selling Securityholder prospectus]
Use of proceeds
This prospectus is part of a registration statement that permits the
shareholder of Artwork and Beyond who is identified in this prospectus to sell
its shares of Artwork and Beyond common stock in the open market or in privately
negotiated transactions. This shareholder is referred to throughout this
prospectus as the "selling securityholder". As such, Artwork and Beyond will not
receive any proceeds from this offering.
[Alternate page for Selling Securityholder prospectus]
Concurrent offering
The registration statement of which this prospectus is a part also
includes a prospectus with respect to the offering by Artwork and Beyond for
cash of 400,000 shares of Artwork and Beyond common stock. This distribution may
have a material adverse effect on the market price of the common stock offered
by the selling securityholder.
Plan of distribution
The common stock offered by this prospectus may be sold from time to
time directly by the selling securityholder. Alternatively, the selling
securityholder may from time to time offer those shares through underwriters,
brokers, dealers, agents or other intermediaries. The selling securityholder as
of the date of this prospectus has advised us that at that time there were no
underwriting or distribution arrangements entered into with respect to the
common stock offered hereby. The distribution of the common stock by the selling
securityholder may be effected in one or more transactions that may take place
on the OTC Electronic Bulletin Board (including one or more block transaction)
through customary brokerage channels, either through brokers acting as agents
for the selling securityholder, or through market makers, dealers or
underwriters acting as principals who may resell these shares on the OTC
Electronic Bulletin Board; in privately-negotiated sales; by a combination of
such methods; or by other means. These transactions may be effected at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at other negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the selling
securityholder in connection with sales of the common stock.
The selling securityholder may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
such transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with the selling securityholder. The
selling securityholder also may sell shares short and redeliver the shares to
close out such short positions. The selling securityholder may enter into option
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus.
The selling securityholder also may loan or pledge the shares to a
broker-dealer. The broker-dealer may sell the shares so loaned, or upon a
default the broker-dealer may sell the pledged shares pursuant to this
prospectus. Any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 promulgated under the Securities Act may be sold under Rule
144 rather than pursuant to this prospectus. The selling securityholder has
advised us that they have not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of their
securities. There is no underwriter or coordinating broker acting in connection
with the proposed sale of shares by the selling securityholders.
Although the common stock covered by this prospectus is not currently
being underwritten, the selling securityholder or its underwriters, brokers,
dealers or other agents or other intermediaries that may participate with the
selling securityholder in any offering or distribution of common stock may be
deemed "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any profits realized or commissions received
by them may be deemed underwriting compensation thereunder.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), any person engaged in a
distribution of the common stock offered hereby may not simultaneously engage in
market making activities with respect to the common stock for a period of up to
five days preceding such distribution. The selling securityholder will be
subject to the applicable provisions of the Exchange Act and the rules and
regulations promulgated thereunder, including without limitation Regulation M,
which provisions may limit the timing of purchases and sales by the selling
securityholders.
In order to comply with certain state securities laws, if applicable,
the common stock offered hereby will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In certain states, the common stock
may not be sold unless they are registered or qualified for sale in such state,
or unless an exemption from registration or qualification is available and is
obtained.
All of the expenses of this offering are being paid for by the selling
securityholder. See "Certain Relationships and Related Transactions". However,
any brokerage or underwriting commissions and similar selling expenses, if any,
attributable to the sale of the common stock will be borne by the selling
securityholders.
We have agreed to indemnify certain of the selling securityholders
against certain liabilities, including liabilities under the Securities Act of
1933, or to contribute to payments to which any of those securityholders may be
required to make in respect thereof.
[Alternate page for Selling Securityholder prospectus]
Selling Securityholder
All of the 600,000 shares of Artwork and Beyond common stock being
offered by this selling securityholder's prospectus are owned by and registered
in the name of Biofarm, Inc., a Delaware corporation whose address is 1244 Main
Street, Linfield, PA 19468.
[Alternative page for Selling Securityholder prospectus]
You should rely only on the information contained in this document. We
have not authorized anyone to provide you with information that is different.
This document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.
Additional risks and uncertainties not presently known or that are
currently deemed immaterial may also impair our business operations. The risks
and uncertainties described in this document and other risks and uncertainties
which we may face in the future will have a greater impact on those who purchase
our common stock from the Selling Securityholder. These purchasers will purchase
our common stock at the market price or at a privately negotiated price and will
run the risk of losing their entire investment.
Table of contents
Summary............................................
Selected financial data............................
Risk factors.......................................
Use of proceeds....................................
Dilution...........................................
Concurrent offering................................
Plan of distribution...............................
Our business.......................................
Management's discussion of financial
condition and results of operations...........
Management.........................................
Security ownership of certain beneficial
owners and management.........................
Description of securities..........................
Legal matters......................................
Experts............................................
Disclosure of Commission's position on
Indemnification for Securities
Act liabilities...............................
Financial statements...............................
ARTWORK AND BEYOND, INC.
600,000 shares of
common stock
PROSPECTUS
April 27, 2001
[Alternative page for Selling Securityholder prospectus]
The information in this prospectus is not complete and may be changed. These
securities may not be sold 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.
PROSPECTUS Subject to Completion; dated April 27, 2001
600,000 Shares of Common Stock
of
Artwork and Beyond, Inc.
We are registering 600,000 shares of our common stock for sale by a
shareholder of our company identified in this prospectus. This shareholder is
referred to throughout this prospectus as "selling securityholder."
This individual who wishes to sell its shares of our common stock may
offer and sell its shares subsequent to the completion of the offering of the
shares of the Company. These sales may be conducted in the open market or in
privately negotiated transactions and at market prices, fixed prices or
negotiated prices. We will not receive any of the proceeds from the sales of
shares by the selling securityholder.
The shares of common stock being offered hereby will be subject to
certain restrictions. See "Risk Factors -- Restrictions on Resale" and "Plan of
Distribution -- Restrictions on Resale."
No public trading market for our common stock exists. We anticipate
that our common stock will initially be traded on the over-the-counter market
after this offering.
Our principal executive offices are located at 761 Coates Avenue,
Holbrook, New York 11741. Our telephone number is (631) 471-0065.
Our common stock being offered by this prospectus involves a high
degree of risk. You should read the "Risk Factors" section beginning on page 5
before you decide to purchase any common stock.
Neither the Securities and Exchange Commission nor any state commission
has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
The date of this Prospectus is ___________, 2001
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "GCL")
empowers a corporation to indemnify its directors and officers and to purchase
insurance with respect to liability arising out of the performance of their
duties as directors and officers. The GCL provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of stockholders or otherwise.
Article Sixth of our Certificate of Incorporation eliminates the
personal liability of directors to the fullest extent permitted by Section 102
of the GCL. Our by-laws provide for indemnification of all persons whom it shall
have the power to indemnify pursuant to Section 145 of the GCL.
The effect of the foregoing is to require Artwork and Beyond to the
extent permitted by law to indemnify the officers and directors of Artwork and
Beyond for any claim arising against such persons in their official capacities
if such person acted in good faith and in a manner that he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers or persons
controlling Artwork and Beyond pursuant to the foregoing provisions, we have
been informed that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
We do not currently have any liability insurance coverage for its
officers and directors.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by
Biofarm, Inc. in connection with the sale of the securities being registered.
All amounts are estimates except the SEC registration fee:
SEC registration fee.......................................$375.00
Printing and engraving expenses.........................$10,000.00
Accounting fees and expenses............................$20,000.00
Legal fees and expenses.................................$50,000.00
Transfer agent's fees and expenses.......................$5,000.00
Miscellaneous...........................................$10,000.00
Total..........................................$95,375.00
II-1
Item 26. Recent Sales of Unregistered Securities.
Set forth below is information regarding the issuance and sales of
Artwork and Beyond 's common stock without registration during the last three
years. Other than as set forth below, no such sales involved the use of an
underwriter and no commissions were paid in connection with the sale of any
securities.
During the fourth quarter of 1999, we issued 7,583,504 shares of
common stock to directors and officers of Artwork and Beyond, pursuant to
Section 4(2) of the Securities Act.
During the third quarter of 2000, we issued 1,416,496 shares of
common stock, at $.92 per share, to accredited investors pursuant to Section
4(2) of the Securities Act. We paid $73,150 commissions in connection with such
transaction.
During the first quarter of 2001, we issued 600,000 shares of
common stock to Biofarm, Inc. pursuant to a subscription agreement and in
accordance with Section 4(2) of the Securities Act.
Item 27. Exhibits
Exhibit
Number Name
------ ----
3.1 Restated Certificate of Incorporation
3.2 Bylaws
5.1 Opinion of Berlack, Israels & Liberman LLP**
10.1 Supply Agreement, dated as of November 1, 1999, between
Artwork and Beyond and Ross Galleries.
10.2 Lycos Network Advertising Contract, between Lycos Inc. and
Artwork and Beyond.
23.1 Consent of Merdinger, Fruchter, Rosen & Corso, P.C.,
independent certified public accountants
23.2 Consent of Counsel (see Exhibit 5.1)
**To be filed by amendment.
Item 28. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
II-2
(a) To include any prospectus required by section
10(a)(3) of Securities Act.
(b) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the commission pursuant to Rule
424(B) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(c) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant
to section 13(a) or section 15(d) of the Exchange Act that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of New York, State of New
York, on April 27, 2001.
ARTWORK AND BEYOND, INC.
By:/s/ Howard Blum
----------------------------------
Name: Howard Blum
Title: Chief Executive Officer and
Co-Chairman of the Board
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ Howard Blum Chief Executive Officer, Co-Chairman April 27, 2001
----------------- of the Board
Howard Blum
/s/ Jay Camina Co-Chairman of the Board April 27, 2001
-----------------
Jay Camina
/s/ William Lane Director April 27, 2001
-----------------
William Lane
J. R. LeShufy Director April 27, 2001
-----------------
J. R. LeShufy
II-4
Exhibit 3.1
RESTATED CERTIFICATE
OF
INCORPORATION
OF
ARTWORK AND BEYOND, INC.
FIRST: The name of the corporation is Artwork and Beyond, Inc. (the
"Corporation").
SECOND: The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle. The name of its registered agent at such address
is The Corporation Trust Company.
THIRD: The purpose or purposes of the Corporation shall be to engage in any
lawful act or activity for which corporations may be organized under
the General Corporation Law of Delaware.
FOUR: The aggregate number of shares which the Corporation is authorized to
issue is twenty one million (21,000,000), divided into classes as
follows:
A. Twenty million (20,000,000) shares of common stock, $.001
par value per share (hereinafter called the "Common
Stock"), and
B. One million (1,000,000) shares of preferred stock, $.001
par value per share to be issued in series (hereinafter
called the "Preferred Stock").
The outstanding and authorized Common Stock will be split on a
3.7917519-for-1 basis so that the Corporation will be issuing 3.7917519
newly issued shares of Common Stock for each 1 share of the Company's
issued and outstanding Common Stock as of the close of business on
April 25, 2001 (the "Split"). No fractional shares will be issued by
the Corporation as a result of the Split. In lieu thereof each
Stockholder whose shares are not evenly divisible on such 3.71-for 1
basis will receive cash. All shares of the Corporation shall be issued
for such consideration or considerations as the Board of Directors may
from time to time determine
The following is a statement of the designations, powers,
preferences and rights, and the qualifications, limitations or
restrictions with respect to the Preferred Stock of the Corporation:
The shares of Preferred Stock may be issued in one or more series, and
each series shall be so designated as to distinguish the shares thereof
from the shares of all other series. Authority is hereby expressly
granted to the Board of Directors of the Corporation to fix, subject to
the provisions herein set forth, before the issuance of any shares of a
particular series, the number, designations, and relative rights,
preferences, and limitations of the shares of such series including (1)
voting rights, if any, which may include the right to vote together as
a single class with the Common Stock and any other series of the
Preferred Stock with the number of votes per share accorded to shares
of such series being the same as or different from that accorded to
such other shares, (2) the dividend rate per annum, if any, and the
terms and conditions pertaining to dividends and whether such dividends
shall be cumulative, (3) the amount or amounts payable upon such
voluntary or involuntary liquidation, (4) the redemption price or
prices, if any, and the terms and conditions of the redemption, (5)
sinking fund provisions, if any, for the redemption or purchase of such
shares, (6) the terms and conditions on which such shares are
convertible, in the event the shares are to have conversion rights, and
(7) any other rights, preferences and limitations pertaining to such
series which may be fixed by the Board of Directors pursuant to the
Delaware General Corporation Law.
FIFTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter
or repeal the by-laws of the Corporation.
SIXTH: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director except for liability (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived any improper personal
benefit.
Exhibit 10.1
SUPPLY AGREEMENT
SUPPLY AGREEMENT ("Agreement"), dated as of November 1, 1999, by and
between ARTWORK AND BEYOND, INC., a Delaware corporation, with a principal place
of business located at 761 Coates Avenue, Holbrook, New York 11741 (the
"Corporation"), and ROSS GALLERIES, INC., a New York corporation, with a
principal place of business located at 761 Coates Avenue, Holbrook, New York
("Ross").
RECITALS
The purpose of this agreement is to set out the terms on which the
Corporation will purchase prints of works of art, framed and unframed, including
lithographs, serigraphs, artagraphs and photographs ("Art"), exclusively from
Ross, and Ross will supply such Art to the Corporation exclusively for sale on
the Internet.
1. TERM
This Agreement shall commence as of November 1, 1999 and shall continue
for a period of seven years. Thereafter, this Agreement is terminable on180
days' written notice of termination being delivered by either party. If not so
terminated, then this Agreement shall continue until terminated by either party
on 180 days' written notice.
2. SUPPLY COMMITMENT
Ross will supply the Corporation's requirements for Art, and the
Corporation shall purchase all of the Corporation's requirements for Art from
Ross; provided, however, that the Corporation may purchase Art from a party
other than Ross (i) if such Art is not available through Ross or (ii) if the
same quality of Art offered by Ross is available from a third party at a lower
price. During the term of this Agreement, Ross shall not sell Art through the
Internet nor shall Ross supply framed Art to any party (other than the
Corporation) for sale directly or indirectly through the Internet. Ross shall
cooperate with the Corporation to develop an inventory management system under
which the Corporation will be able to determine Ross' inventory of Art available
for purchase by the Corporation's customers.
3. PRICE
A schedule of agreed prices of the Art is attached as Schedule I to
this Agreement. These prices can be varied by Ross upon ten days' written notice
to the Corporation. From time to time, Ross will deliver to the Corporation a
written supplement to Schedule I setting forth a list of additional available
works of Art and their prices and deleting works of Art that are no longer
available.
4. PAYMENT
A schedule of agreed payment terms is attached as Schedule II to this
Agreement. These terms can only be varied by written agreement between the
parties. The Corporation shall ensure that Ross receives payment on or before
the relevant due date specified in Schedule II.
5. CHANGE IN CIRCUMSTANCES
Both parties will consult with each other in the event of any
significant change in circumstances in their businesses affecting this
Agreement.
6. DELIVERY
Ross will use its best efforts to supply all orders "On Time and In
Full". Unless otherwise agreed between the Corporation and Ross, Ross shall
deliver all Art directly to the Corporation's customers f.o.b. Ross' warehouse
in accordance with the Corporation's instructions. The Corporation and Ross will
amend this Agreement to add the manner of shipment and payment terms for
shipping Art to the Corporation's customers.
7. CONFIDENTIALITY
Each party will take all proper steps to keep confidential all
Confidential Information (as defined in this Section 7) of the other which is
disclosed to or obtained by it pursuant to or as a result of this Agreement, and
will not divulge the same to any third party and will allow access to the same
to only such staff as may be involved in carrying out this agreement and then on
the basis that they will respect such Confidential Information, except to the
extent that any such Confidential Information becomes public through no fault of
that party. The parties acknowledge that Ross shall have the right to use
Confidential Information obtained from the Corporation to satisfy Ross'
obligations to the Corporation under this Agreement. Upon termination of this
Agreement each party will return to the other any written data (without
retaining copies thereof) provided for the purposes of this Agreement.
Notwithstanding the termination or expiration of this Agreement for whatever
reason the obligations and restriction in this clause shall be valid for a
period of five years from the date of signature hereof. "Confidential
Information" means all information disclosed by one party to the other in
writing or otherwise, provided that each such item of information would appear
to a reasonable person to be confidential or either contains or bears thereon,
in either case a prominent position, or is accompanied by a written statement
that the same is confidentia1 or proprietary.
8. FORCE MAJEURE
If either party is prevented from carrying out any of its obligations
under this Agreement by circumstances beyond its control (such circumstances
hereinafter being referred to as "Force Majeure") then for so long as such Force
Majeure continue neither party shall be liable to the other for a failure to
perform such obligations as a result of Force Majeure; provided, however, that
each party shall as soon as reasonably practicable on becoming aware of
circumstances constituting Force Majeure notify the other of the nature of the
Force Majeure and its likely duration. In the case of force majeure affecting
Ross, the Corporation may, if it so elects, employ another company, business or
person to perform any obligations so affected by Force Majeure until such Force
Majeure terminates and Ross is again able to satisfy its obligations under this
Agreement.
9. MISCELLANEOUS.
9.1 Notices. All notices, requests and demands to or upon the
respective parties to this Agreement shall be in writing and shall be deemed to
have been given or made when delivered by hand or sent by certified or
registered United States mail, return receipt requested, addressed to the
parties at their respective addresses set forth herein or to such other address
as a party shall designate by notice to the other parties in the manner provided
herein for giving notice.
9.2 Further Assurances. The parties hereto shall at any time make,
execute and deliver any and all such further and other agreements, documents,
and instruments as may be reasonably required for the purposes of giving full
force and effect to this Agreement and to the provisions hereof.
9.3 Entire Agreement: Amendments. This Agreement constitutes the
entire agreement of the parties hereto with respect to the matters contained
herein and supersedes all prior agreements of the parties, whether written or
oral. The provisions of this Agreement may from time to time be amended,
supplemented or otherwise modified or waived only by a written agreement signed
by all of the parties hereto.
9.4. Governing Law. This Agreement and the rights, and obligations
of the parties hereunder shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
9.5 Gender. Words of the masculine gender used in this Agreement
mean and include correlative words of the feminine and neuter genders and words
imparting the singular number mean and include the plural number and vice versa.
9.6. Waiver. Any waiver by any party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provisions of this
Agreement. The failure of a party to insist upon strict adherence to any terms
of this Agreement on one or more occasions shall not be considered a waiver of,
or deprive that party of the right thereafter to insist upon strict adherence
to, that term or any other term of this Agreement. Any waiver must be in
writing.
9.7 Severability. If any provision of this Agreement is invalid,
illegal, or unenforceable, the balance of this Agreement shall remain in effect,
and if any provision is inapplicable to any person or circumstances, it shall
nevertheless remain applicable to all other persons and circumstances.
9.8 Counterparts. This Agreement may be executed by one or more of
the parties hereto in any number of separate counterparts, and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.
9.9 Headings. Any headings preceding the text of the several
sections hereof shall be solely for convenience of reference and shall not
constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by each of the parties hereto on the day and year first above written.
ARTWORK AND BEYOND, INC.
By: /s/ Howard Blum
--------------------------
Name: Howard Blum
Title: President
By: /s/ Jay Camina
--------------------------
Name: Jay Camina
Title: Vice President
ROSS GALLERIES, INC.
By: /s/ Jay Camina
--------------------------
Name: Jay Camina
Title: President
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