U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
SB-2
REGISTRATION
STATEMENT UNDER
THE
SECURITIES ACT OF 1933
ART
DESIGN, INC.
(Exact
name of registrant as specified in its charter)
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Colorado
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5020
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86-1061005
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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3636
S. Jason
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Englewood,
Colorado 80113
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(303)
781-7280
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(Address,
including zip code, and telephone number,
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including
area code, of registrant's principal executive
offices)
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Kathy
Sheehan
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President
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Art
Design, Inc
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3636
S. Jason
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Englewood,
Colorado 80113
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(303)
781-7280
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(Name,
address, including zip code, and telephone number,
including
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area
code, of agent for service)
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With
a Copy to:
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David
J. Wagner, Esq.
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David
Wagner & Associates, P.C.
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Penthouse
Suite
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8400
East Prentice Avenue
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Greenwood
Village, Colorado 80111
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Office(303)
793-0304
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Fax
(303) 409-7650
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Approximate
date of commencement of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
If
this
Form is filed to register additional securities for an offering pursuant
to Rule
462(b) under the Securities Act, check the following box and list the
Securities
Act Registration Statement number of the earlier effective Registration
Statement for the same offering. [ ]
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under
the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for
the same
offering. [ ]
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under
the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for
the same
offering. [ ]
If
delivery of the prospectus is expected to be made pursuant to Rule 434,
check
the following box. [ ]
________________________
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(1)
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Represents
the minimum registration fee.
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(2)
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We
intend to offer a minimum of 400,000 shares of our common stock
(the
"Shares") up to a maximum of 800,000 Shares. We will establish
an escrow
account and all proceeds will be deposited into said account
until such
time as the minimum subscription, or $100,000 is raised, at
which time the
funds will be released to us for use in operations. In the
event we do not
raise the minimum proceeds before the expiration date of the
offering, all
funds raised will be returned promptly to the subscribers without
deductions or interest.
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(3)
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Estimated
solely for purposes of calculating the registration fee pursuant
to Rule
457(c).
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______________________________
The
Registrant hereby amends this registration statement on such date or
dates as
may be necessary to delay its effective date until the registrant shall
file a
further amendment which specifically states that this registration
statement
shall
thereafter become effective in accordance with section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective
on such
date as the Securities and Exchange Commission, acting pursuant to such
Section
8(a), may determine.
PROSPECTUS
ART
DESIGN, INC.
400,000
shares of common stock (Minimum Offering)
800,000
shares of common stock (Maximum Offering)
$0.25
Per Share
This
is
the initial offering of common stock of Art Design, Inc. No public market
currently exists for these shares. Art Design, Inc. is offering for sale
a
minimum of 400,000 shares, up to a maximum of 800,000 shares of its common
stock
on a "self-underwritten", best efforts basis, which means our officers
and
directors will attempt to sell the shares. The shares will be offered
at a price
of $0.25 per share for a period of one hundred and twenty (120) days
from the
date of this prospectus, subject to a ninety (90) day extension. There
is no
minimum number of shares required to be purchased.
Art
Design, Inc. is a company with a limited operating history. Any investment
in
the shares offered herein involves a high degree of risk. You should
only
purchase shares if you can afford a complete loss of your investment.
Before
investing, you should carefully read this prospectus and, particularly,
the
"Risk Factors" section, beginning on
page 6
.
Neither
the U.S. Securities and Exchange Commission nor any state securities
division
has approved or disapproved these securities, passed upon the truthfulness
or
accuracy, or determined if this prospectus is current or complete. Any
representation to the contrary is a criminal offense.
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Public
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Underwriting
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Offering
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or
Sales
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Proceeds
to
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Price
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Commissions
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Art
Design, Inc.
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Common
Stock
(1)
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Total
Offering -
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Minimum
Offering
(2)(3)
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$0.25
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$
0
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$100,000
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Maximum
Offering
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$0.25
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$
0
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$200,000
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The
information in this prospectus is not complete and may be changed. We
may not
sell these securities until the registration statement filed with the
U.S.
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.
_______________
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(1)
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As
of the date of this prospectus, there is no public trading
market for our
common stock and no assurance that a trading market for our
shares will
ever develop.
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(2)
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Pending
sale of the $100,000 minimum, all proceeds will be held in
escrow by the
Escrow Agent for this offering. The Escrow Agent is Community
Banks of
Colorado. Funds will be deposited in this escrow account no
later than
noon on the business day following receipt. In the event the
minimum is
not sold within the 120-day offering period or any extension
of an
additional 90 days at our discretion, this offering will terminate
and all
funds will be returned promptly to subscribers by the Escrow
Agent without
any deductions or payment of interest. Subscribers will not
be entitled to
a return of funds from such escrow during the 120-day offering
period or
any extension period. See "Use of Proceeds" and "Plan of
Distribution".
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(3)
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The
proceeds to the Company are shown before deduction for legal,
accounting,
printing, and other expenses, estimated at $27,000. See "Use
of Proceeds"
and "Dilution".
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_______________
Subject
to Completion, Dated ________, 2006
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F-1
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ART
DESIGN, INC.
3636
S. Jason
Englewood,
Colorado 80113
Art
Design, Inc. was incorporated in the State of Colorado on January 16,
2002.
References in this document to "us," "we," or "Company" refer to Art
Design,
Inc.
We
are a
provider of custom framed artwork, accessories, and interior design consulting.
We currently operate exclusively in Colorado We market and sell our products
and
services to commercial and professional business offices, along with
residential
clients. Our headquarters are located at 3636 S. Jason, Englewood, Colorado
80113. Our phone number at our headquarters is (303) 781-7280. Our fiscal
year
end is December 31.
Following
is a brief summary of this offering. Please see the Plan of Distribution;
Terms
of the Offering section for a more detailed description of the terms
of the
offering.
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Securities
Being Offered
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A
minimum of 400,000 shares and up to a
maximum
of 800,000 shares of common
stock,
par value $.001.
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Offering
Price per Share
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$0.25
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Offering
Period
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The
shares are being offered for a period not to exceed 120 days,
unless
extended by our board of directors for an additional 90
days.
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Gross
Proceeds to Our Company
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$100,000
(Minimum Offering)
$200,000
(Maximum Offering)
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Use
of Proceeds
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We
intend to use the proceeds to pay for offering expenses and
to develop our
current business operations.
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Number
of Shares Outstanding Before the Offering:
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10,300,000
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Number
of Shares Outstanding After the Offering:
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10,700,000
(minimum offering)
11,100,000
(maximum offering)
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Escrow
Account
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Pending
sale of the $100,000 minimum, all proceeds will be held in
escrow by the
Escrow Agent for this offering. The Escrow Agent is Community
Banks of
Colorado. Funds will be deposited in this escrow account no
later than
noon on the business day following receipt. In the event the
minimum is
not sold within the 120-day offering period or any extension
of an
additional 90 days at our discretion,
this
offering will terminate and all funds will be returned promptly
to
subscribers by the Escrow Agent without any deductions or payment
of
interest. Subscribers will not be entitled to a return of funds
from such
escrow during the 120-day offering period or any extension
period. See
"Use of Proceeds" and "Plan of
Distribution".
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5
An
investment in these securities involves an exceptionally high degree
of risk and
is extremely speculative in nature. In addition to the other information
regarding our company contained in this prospectus, you should consider
many
important factors in determining whether to purchase the shares. Following
are
what we believe are all of the material risks involved if you decide
to purchase
shares in this offering.
We
have had a history of losses and may not be able to develop
profitability.
We
had a
net loss of $2,953 on revenues of $62,009 for the fiscal year ended December
31,
2005, compared to a net loss of $15,784 on revenues of $73,558 for the
fiscal
year ended December 31, 2004. For the six months ended June 30, 2006,
we had a
net loss of $5,015 on revenues of $16,135. We cannot assure you that
we will
generate profits in the future, even if our sales increase dramatically.
We will
need to generate greater revenues and improved margins to achieve and
maintain
profitability in the future. If our operating losses continue on a long-term
basis, we may experience a shortage of working capital that could adversely
affect our business or our ability to continue our business, in which
case our
stock price may decline, perhaps significantly, and you could lose the
value of
your investment.
Because
we had incurred continuing operating losses, our accountants have expressed
doubts about our ability to continue as a going concern.
For
the
fiscal year ended December 31, 2005, our accountants have expressed doubt
about
our ability to continue as a going concern as a result of our continued
net
losses. Our ability to achieve and maintain profitability and positive
cash flow
is dependent upon:
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·
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our
ability to locate clients who will purchase our products and
use our
services;
and
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·
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our
ability to generate revenues.
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Based
upon current plans, we expect to incur operating losses in future periods
because we will be incurring expenses and not generating sufficient revenues.
We
expect approximately $35,000 in operating costs over the next twelve
months. We
cannot guarantee that we will be successful in generating sufficient
revenues or
other funds in the future to cover these operating costs. Failure to
generate
sufficient revenues will cause us to go out of business.
Our
limited operating history makes it difficult for us to evaluate our future
business prospects and make decisions based on those estimates of our
future
performance.
The
concept for our business model was developed in 2002. Even though we
have
operated independently for some time, we have a limited operating history
in our
current form, which makes it difficult to evaluate our business on the
basis of
historical operations. As a consequence, our past results may not be
indicative
of future results. Although this is true for any business, it is particularly
true for us because of our limited operating history. Reliance on historical
results may hinder our ability to anticipate and timely adapt to increases
or
decreases in sales, revenues or expenses. For example, if we overestimate
our
future sales for a particular period or periods based on our historical
growth
rate, we may increase our overhead and other operating expenses to a
greater
degree than we would have if we correctly anticipated the lower sales
level for
that period and reduced our controllable expenses accordingly. If we
make poor
budgetary decisions as a result of unreliable historical data, we could
be
continue to incur losses, which may result in a decline in our stock
price.
Our
clients have no obligation to purchase from us, which may result in sudden
declines in sales.
Our
client mix currently consists of approximately ninety percent commercial
and
professional business offices, and ten percent high-end residential homes.
We do
not have supply agreements or other volume commitments that are binding
on our
clients, and our sales originate solely from individual purchase orders
that we
negotiate with our individual clients. As a consequence, our clients
are not
obligated to purchase any amount of our products and they may choose
to stop or
decrease their level of product purchases from us at any time, without
giving us
prior notice. This could cause our sales to fluctuate, and we could experience
a
sudden and unexpected decline in sales. We could experience unexpected
operational losses if our
6
client
sales were to decline significantly without notice. Furthermore, our
revenue
projections are subject to greater uncertainty than if we had volume
commitments
from one or more of our largest clients. Our two top clients in fiscal
year 2004
accounted for approximately 26% of our revenues, in fiscal year 2005
accounted
for approximately 52% of our revenues, and approximately 77% of our revenues
for
the three months ended June 30, 2006.We cannot assure you that these
clients, or
any of our clients, will continue to purchase our products in significant
volume, or at all.
We
are implementing a strategy to grow and expand our business, which is
expensive
and may not generate increases in our revenues.
We
intend
to expand our business, and we plan to incur expenses associated with
our growth
and expansion. Although we recently raised funds through private offerings
to
implement our growth strategy, these funds may not be adequate to offset
all of
the expenses we incur in expanding our business. We will need to generate
greater revenues to offset expenses associated with our growth, and we
may be
unsuccessful in achieving greater revenues, despite our attempts to grow
our
business. If our growth strategies do not result in increased revenues,
we may
have to abandon our plans for further growth or may even reduce the current
size
of our operations.
We
may need to raise additional funds, and these funds may not be available
when we
need them.
Based
on
our current plans, we have adjusted our operating expenses so that cash
generated from operations and from working capital financing is expected
to be
sufficient for the foreseeable future to fund our operations at our currently
forecasted levels. However, if our forecasts are inaccurate, we will
need to
raise additional funds. In addition, we expect that we will need to raise
additional funds if we decide to pursue more rapid expansion, the development
of
new or enhanced services and products, appropriate responses to competitive
pressures, or the acquisition of complementary businesses or technologies,
or if
we must respond to unanticipated events that require us to make additional
investments. There can be no assurance that additional financing will
be
available when needed on favorable terms, or at all. If these funds are
not
available when we need them, then we may need to change our business
strategy
and reduce our rate of growth.
We
must effectively manage the growth of our operations, or we may outgrow
our
current infrastructure.
As
of
June 30, 2006, we had two employees. If we experience rapid growth of
our
operations, we could see a backlog of client orders. We can resolve these
capacity issues by hiring additional personnel and upgrading our infrastructure.
However, we cannot guarantee that sufficient additional personnel will
be
available or that we will find suitable technology to aid our growth.
In any
case, we will continue pursuing additional sales growth for our company.
Expanding our infrastructure will be expensive, and will require us to
train our
workforce, and improve our financial and managerial controls to keep
pace with
the growth of our operations.
Because
we are small and do not have much capital, we must limit our operations.
A
company in our industry with limited operations has a smaller opportunity
to be
successful.
Because
we are small and do not have much capital, we must limit our operations.
We must
limit our operations to the State of Colorado as the only geographical
area in
which we operate. Because we may have to limit our operations, we may
not
generate sufficient sales to make a profit. If we do not make a profit,
we may
have to suspend or cease operations.
We
face substantial competition from numerous sources, many of which have
access to
better resources.
Competition
in sale of art work and interior design services is intense. We compete
with a
diverse group of competitors ranging from internet businesses to traditional
brick-and-mortar companies, many of which have greater resources than
we do. We
believe that barriers to entry in this business are not significant and
start-up
costs are relatively low, so our competition may increase in the future.
Our
belief that there are minimal barriers to entry is based on our observation
that
operations such as ours do not require the ownership of warehouses, showrooms
or
factories to operate, which we think is because (i) our direct ship business
can
be operated with minimal warehousing needs and costs, which are significantly
less than traditional models, (ii) wholesale product orders can be placed
after
receipt of client orders, in order to further reduce warehousing needs,
(iii)
samples can be shown to clients at little or no cost, without the necessity
of
showroom space for actual product, (iv) if a competitor wants showroom
space, it
is typically available for lease at competitive rates in most United
States
markets, and (v) all manufacturing can be done by third party suppliers,
so
there is no need to own or lease a manufacturing facility. New competitors
may
be able to launch new businesses similar to ours, and current competitors
may
7
replicate
our business model, at a relatively low cost. If competitors with significantly
greater resources than ours decide to replicate our business model, they
may be
able to quickly gain recognition and acceptance of their business methods,
products and services through marketing and promotion. We may not have
the
resources to compete effectively with current or future competitors.
If we are
unable to effectively compete, we will lose sales to our competitors
and our
revenues will decline.
Our
directors have the ability to significantly influence any matters to
be decided
by the stockholders, which may prevent or delay a change in control of
our
company.
The
current members of our Board of Directors beneficially own, in the aggregate,
approximately 83% of our common stock, on a fully diluted basis. As a
result, if
they choose to vote in concert, our directors are collectively able to
significantly influence the outcome of any corporate matters submitted
to our
stockholders for approval, including any transaction that might cause
a change
in control, such as a merger or acquisition. It is unlikely that stockholders
in
favor of a matter, which is opposed by the Board of Directors, would
be able to
obtain the number of votes necessary to overrule the vote of the Board
of
Directors. Further, the control by the directors means that they may
make
decisions for us with which you may disagree or that you may feel is
not in our
best interests.
We
may need to substantially increase our marketing efforts in order to
grow our
business, which is expensive.
In
order
to grow our business, we will need to develop and maintain widespread
recognition and acceptance of our company, our business model, our services
and
our products. We believe that we have presented our service and product
offering
to only a small percentage of the potential market. Currently, we rely
primarily
on word of mouth from our existing clients and contacts we develop personally
through industry events to promote and market ourselves. In order to
successfully grow our company, we may need to significantly increase
our
financial commitment to creating awareness and acceptance of our company
among
retailers, which would be expensive. In fiscal year 2005, marketing and
advertising expenses were negligible. If we fail to successfully market
and
promote our business, we could lose current clients to our competitors,
or our
growth efforts may be ineffective. If we incur significant expenses promoting
and marketing ourselves, it could cause our profitability to decline.
Our
business is not diversified, which could result in significant fluctuations
in
our operating results.
All
of
our business is involved in the marketing of art work products and interior
design services, and, accordingly, is dependent upon trends in the interior
design sector. Downturns in the interior design sector could have a material
adverse effect on our business. A downturn in the interior design sector
may
reduce our stock price, even if our business is successful.
Buying
low-priced penny stocks is very risky and speculative.
The
shares being offered are defined as a penny stock under the Securities
and
Exchange Act of 1934, and rules of the Commission. The Exchange Act and
such
penny stock rules generally impose additional sales practice and disclosure
requirements
on broker-dealers who sell our securities to persons other than certain
accredited investors who are, generally, institutions with assets in
excess of
$5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 jointly with spouse, or in transactions
not recommended by the broker-dealer. For transactions covered by the
penny
stock rules, a broker-dealer must make a suitability determination for
each
purchaser and receive the purchaser's written agreement prior to the
sale. In
addition, the broker-dealer must make certain mandated disclosures in
penny
stock transactions, including the actual sale or purchase price and actual
bid
and offer quotations, the compensation to be received by the broker-dealer
and
certain associated persons, and deliver certain disclosures required
by the
Commission. Consequently, the penny stock rules may affect the ability
of
broker-dealers to make a market in or trade our common stock and may
also affect
your ability to resell any shares you may purchase in this offering in
the
public markets.
8
We
are selling this offering without an underwriter and may be unable to
sell any
shares.
This
offering is self-underwritten, that is, we are not going to engage the
services
of an underwriter to sell the shares; we intend to sell them through
our
officers and directors, who will receive no commissions. We will hold
investment
meetings and invite our friends, acquaintances and relatives in an effort
to
sell the shares to them; however, there is no guarantee that we will
be able to
sell any of the shares. In the event we are unable to sell most of the
shares in
this offering, we will be forced to reduce our proposed business operations
until such time as additional monies can be obtained, either through
loans
or
financings.
You
will incur immediate and substantial dilution of the price you pay for
your
shares.
Our
existing stockholders acquired their shares at a cost substantially less
than
that which you will pay for the shares you purchase in this offering.
Accordingly, any investment you make in these shares will result in the
immediate and substantial dilution of the net tangible book value of
those
shares from the $0.25 you pay for them. As of June 30, 2006, our net
tangible
book value (assuming that a total of 10,300,000 Common Shares were issued
and
outstanding) was $22,731 or approximately $0.002 per share. Assuming
that
$177,000 of maximum net proceeds are realized from this Offering, the
dilution
to new investors from the Offering price of $0.25 per share will be
approximately $0.232 per share, and the gain by existing investors will
be
approximately $0.011 per share. Assuming that $77,000 of minimum net
proceeds
are realized from this Offering, the dilution to new investors from the
Offering
price of $0.25 per share will be approximately $0.241 per share, and
the gain by
existing investors will be approximately $0.007 per share.
Our
common stock currently has no trading market and there
is
no guarantee a trading market will ever develop for our
securities.
There
is
presently no demand for our common stock. There is presently no public
market
for the shares being offered in this prospectus. While we do intend to
apply for
quotation in the Over-the-Counter Bulletin Board, we cannot guarantee
that our
application will be approved and our stock listed and quoted for sale.
If no
market is ever developed for our common stock, it will be difficult for
you to
sell any shares you purchase in this offering. In such a case, you may
find that
you are unable to achieve any benefit from your investment or liquidate
your
shares without considerable delay, if at all. In addition, if we
fail
to
have our common stock quoted on a public trading market, your common
stock will
not have a quantifiable value and it may be difficult, if not impossible,
to
ever resell your shares, resulting in an inability to realize any value
from
your investment.
The
over-the-counter market for stock such as ours has had extreme price
and volume
fluctuations.
The
securities of companies such as ours have historically experienced extreme
price
and volume fluctuations during certain periods. These broad market fluctuations
and other factors, such as new product developments and trends in the
our
industry and in the investment markets generally, as well as economic
conditions
and quarterly variations in our operational results, may have a negative
effect
on the market price of our common stock.
All
of our common stock is restricted but could become eligible for resale
under
Rule 144; this could cause the market price of our common stock to drop
significantly, even if our business is doing well.
Of
our
total outstanding shares following this offering, 10,300,000 or 96% (minimum)
or
93% (maximum) are restricted from immediate resale but may be sold into
the
market subject to volume and manner of sale limitations under Rule 144
beginning
in May, 2007. This could cause the market price of our common stock to
drop
significantly, even if our business is doing well. After this offering,
we will
have outstanding 11,100,000 shares (maximum) or 10,700,000 (minimum)
of common
stock based on the number of shares outstanding at June 30, 2006. This
includes
the common shares we are selling in this offering, which may be resold
in the
public market immediately.
As
restrictions on resale end, the market price of our stock could drop
significantly if the holders of restricted shares sell them or are perceived
by
the market as intending to sell them.
9
We
do not expect to pay dividends on common stock.
We
have
not paid any cash dividends with respect to our common stock, and it
is unlikely
that we will pay any dividends on our common stock in the foreseeable
future.
Earnings, if any, that we may realize will be retained in the business
for
further development and expansion.
We
have
estimated the total proceeds from this offering to be $100,000, assuming
a
minimum subscription, or $200,000, assuming all shares are sold, which
we cannot
guarantee. These proceeds do not include offering costs, which we estimate
to be
$27,000. We expect to disburse the proceeds from this offering in the
priority
set forth below, during the first 12 months after successful completion
of this
offering:
|
Minimum
|
Maximum
|
|
|
|
Offering
|
Offering
|
|
Total
Proceeds
|
$100,000
|
$200,000
|
|
Less:
Estimated Offering Expenses
|
27,000
|
27,000
|
|
Proceeds
to Us:
|
$
73,000
|
173,000
|
|
Expand
Operations
(1)
|
$
53,000
|
$153,000
|
|
Working
Capital
(2)
|
$
20,000
|
$20,000
|
__________________
|
(1)
|
We
plan to purchase additional inventory for our operations. If
we raise an
amount between the minimum and maximum, we will use it for
additional
working capital, at the discretion of our board of
directors.
|
|
(2)
|
We
plan to spend our working capital in the following areas: marketing
and
sales of the Company's services. The amount and timing of working
capital
expenditures may vary significantly depending upon numerous
factors such
as:
|
____________________
|
·
|
Sales
generated from present and anticipated
operations,
|
|
·
|
The
development of marketing and sales
resources,
|
|
·
|
Administrative
and legal expenses, and
|
|
·
|
Other
requirements not now known or
estimable.
|
Future
events which are now unforeseen may require a change in the allocation
of the
net proceeds. Any changes in proposed expenditures will be made at the
discretion of our board of directors. Until we use the net proceeds for
the
above purposes, we intend to invest such funds in short-term interest-bearing
investment grade obligations and deposit accounts.
If
we
raise an amount between the minimum and maximum, we will use it for additional
working capital, at the discretion of our board of directors.
We
believe that our available cash and existing sources of funding, together
with
the minimum proceeds of this offering and interest earned thereon, will
be
adequate to maintain our current and planned operations for at least
the next
twelve months.
10
The
offering price of the shares has been determined arbitrarily by us. We
considered no aspect of our capital structure in determining the offering
price
or the number of shares to be offered. The price does not bear any relationship
to our assets, book value, earnings, or other established criteria for
valuing a
privately held company. Accordingly, the offering price should not be
considered
an indication of the actual value of our securities.
Dilution
represents the difference between the offering price and the net tangible
book
value per share immediately after completion of this offering. Net tangible
book
value is the amount that results from subtracting total liabilities and
intangible assets from total assets. Dilution arises mainly as a result
of our
arbitrary determination of the offering price of the shares being offered.
Dilution of the value of the shares you purchase is also a result of
the lower
book value of the shares held by our existing stockholders. As of June
30, 2006,
the net tangible book value of our shares was $22,731, or approximately
$0.002
per share, based upon 10,300,000 shares outstanding.
Upon
completion of this offering, but without taking into account any change
in the
net tangible book value after completion of this offering, other than
that
resulting from the sale of the minimum (maximum) Shares and receipt of
the net
proceeds of $100,000 ($200,000), less offering expenses of $27,000, the
net
tangible book value of the 10,700,000 shares to be outstanding, assuming
a
minimum subscription, will be $99,731, or approximately $0.009 per Share.
If the
maximum number of Shares are sold, of which there can be no guarantee,
the net
tangible book value of the 11,100,000 shares to be outstanding would
be
$199,731, or approximately $0.018 per share. Accordingly, the net tangible
book
value of the Shares held by our existing stockholders will be increased
by
$0.007 per share, assuming a minimum subscription, or $0.011 per share,
assuming
a maximum subscription, without any additional investment on their part,
and the
purchasers of Shares in this Offering will incur immediate dilution (a
reduction
in net tangible book value per Share from the offering price of $0.25
per Share)
of $0.241 per share if we only sell the minimum number of shares in this
offering. If we sell the maximum amount, they will incur immediate dilution
(a
reduction in net tangible book value per Share from the offering price
of $0.25
per Share) of $0.232 per share.
After
completion of the sale of the minimum number of shares in this offering,
the new
shareholders will own approximately 4% of the total number of shares
then
outstanding, for which they will have made a cash investment of $100,000,
or
$0.25
per Share. Upon completion of the sale of the maximum number of Shares
in this
offering, the new shareholders will own approximately 7% of the total
number of
shares then outstanding, for which they will have made a cash investment
of
$200,000, or $0.25 per Share. The existing stockholders will own approximately
96% and 93% based on the minimum and maximum proceeds received of the
total
number of shares then outstanding, for which they have made contributions
of
cash and/or services and/or other assets, totaling $65,199, or $0.006
per
Share.
The
following table illustrates the per share dilution to new investors,
assuming
both the minimum and maximum number of shares being offered, and does
not give
any effect to the results of any operations subsequent to June 30, 2006
or the
date of this registration statement:
|
Minimum
Offering
|
Maximum
Offering
|
||||||
|
Public
Offering Price Per Share
|
$
|
0.25
|
$
|
0.25
|
|||
|
Net
Tangible Book Value Prior To This Offering
|
$
|
0.002
|
$
|
0.002
|
|||
|
Net
Tangible Book Value After Offering
|
$
|
0.009
|
$
|
0.018
|
|||
|
Immediate
Dilution Per Share To New Investors
|
$
|
0.241
|
$
|
0.232
|
|||
11
The
following table summarizes the number and percentage of shares purchased,
the
amount and percentage of consideration paid and the average price per
Share paid
by our existing stockholders and by new investors in this offering:
|
Total
|
||||
|
Price
Per Share
|
Number
of
Shares
Held
|
Percent
of Ownership
|
Consideration
Paid
|
|
|
Existing
Stockholders
|
$0.006
|
10,300,000
|
96%(minimum)
93%(maximum)
|
$65,199
|
|
Investors
in
This
Offering
(Minimum)
|
$0.25
|
400,000
|
4%
|
$
100,000
|
|
Investors
in
This
Offering
(Maximum)
|
$0.25
|
800,000
|
7%
|
$
200,000
|
This
offering is limited to investors resident in Colorado and Texas.
Investors
in Texas must have either: (i) a gross income of at least $65,000 in
the prior
year and a reasonable expectation of such income in the current year
and a net
worth of at least $65,000, excluding the investor's home, home furnishings
and
automobiles; or (ii) a net worth of at least $150,000, excluding the
investor's
home, home furnishings, and automobiles.
INVESTOR
SUITABILITY STANDARDS REPRESENT MINIMUM REQUIREMENTS FOR INVESTORS AND
THE
SATISFACTION OF THESE STANDARDS DOES NOT NECESSARILY MEAN THE SHARES
ARE A
SUITABLE INVESTMENT FOR ANY INVESTOR.
Each
prospective investor should consult with his, her or its own attorney,
accountant and/or financial advisor to discuss the implications of the
information contained herein and the merits and risks of an investment
in the
shares. WE reserve the right to make OUR own DETERMINATION, in OUR sole
discretion, as to whether any prospective investor meets the above suitability
standards.
Purchasers
in any subsequent trading market must comply with the applicable securities
laws
of the State in which they purchase our common stock.
This
is a
self-underwritten offering. This prospectus is part of a registration
statement
that permits our officers and directors to sell the Shares directly to
the
public, with no commission or other remuneration payable to them for
any Shares
they sell. Each of our officers and directors will be selling in this
offering.
None of these persons is a broker, dealer, or associated person with
a
broker-dealer. There are no plans or arrangements to enter into any contracts
or
agreements to sell the Shares with a broker or dealer.
The
officers and directors will not purchase Shares in this offering.
12
In
offering the securities on our behalf, our officers and directors will
rely on
the safe harbor from broker dealer registration set out in Rule 3a4-1
under the
Securities Exchange Act of 1934. We believe that Mr. Sheehan, Mrs. Sheehan
and
Mrs. Gregarek specifically meet the provisions of Rule 3a4-1(a)(1)-(3)
and
(4)(ii) because neither is subject to a statutory disqualification, as
that term
is defined under Section 3(a)39 of the Securities Exchange Act of 1934;
neither
will be compensated, directly or indirectly for his participation in
the
offering; neither will not be, at the time of his participation, an associated
person of a broker or dealer; and both will meet all of the elements
of Rule
3a4-1(a)(4)(ii).
The
Shares will be sold at the fixed price of $0.25 per Share until the completion
of this offering. There is no minimum amount of subscription
required.
This
offering will commence on the date of this prospectus and continue for
a period
of 120 days, unless we extend the offering period for an additional 90
days, or
unless the offering is completed or otherwise terminated by us (the "Expiration
Date").
Because
this is a minimum/maximum offering, all monies collected for subscriptions
will
be held in a separate escrow account at Community Banks of Colorado until
the
minimum number of shares are sold and $100,000 has been received. At
that time,
the funds will be released to us for use in the implementation of our
business
plans. (See "Use of Proceeds".) The offering will then continue until
the
maximum offering is sold and the total of $200,000 is received, or the
offering
expires, whichever first occurs. Once the maximum amount has been raised,
all
funds collected up to the maximum will be deposited directly into our
operating
bank account for use in operations. In the event the minimum offering
amount is
not sold prior to the Expiration Date, all monies will be returned to
investors,
without interest or deduction.
We
are
not involved in any pending legal proceeding nor are we aware of any
pending or
threatened litigation against us.
Each
of
our directors is elected by the stockholders to a term of one year and
serves
until his successor is elected and qualified. Each of our officers is
elected by
the board of directors to a term of one year and serves until his or
her
successor is duly elected and qualified, or until he or she is removed
from
office. The board of directors has no committees.
The
name,
address, age and position of our officers and directors is set forth
below:
|
Name
and Address
|
Age
|
Position(s)
|
|
Kathy
Sheehan
3636
S. Jason
Englewood,
Colorado 80113
|
44
|
President,
Chief Executive
Officer,
Treasurer, Chief
Financial
Officer and
Director
|
|
Todd
Sheehan
3636
S. Jason
Englewood,
Colorado 80113
|
52
|
Secretary
and Director
|
|
Rebecca
Gregarek
3636
S. Jason
Englewood,
Colorado 80113
|
51
|
Director
|
The
persons named above are expected to hold said offices/positions until
the next
annual meeting of our stockholders. These officers and directors are
our only
officers, directors, promoters and control persons. Todd and Kathy Sheehan
are
husband and wife.
13
Kathy
Sheehan has been the President Chief Executive Officer, Treasurer, Chief
Financial Officer and a Director of our company since inception in January,
2002. She has been the Chief Financial Officer, director and principal
owner of
Accessory Warehouse, Inc., a private company in the wholesale art framing
manufacturing and home furnishing warehouse business, located in Denver,
Colorado, from 1992 to the present. She attended Front Range Community
College
from 1980 to 1983. She has completed the Dale Carnegie Leadership Course.
She
will devote a minimum of forty hours per month to our operations.
Todd
Sheehan has been the Secretary and Director of our company from inception
in
January, 2002. He has been the Chief Executive Officer, director and
principal
owner of Accessory Warehouse, Inc., a private company in the wholesale
art
framing manufacturing and home furnishing warehouse business, located
in Denver,
Colorado , from 1984 to the present. He does not hold an academic degree.
He
will devote a minimum of forty hours per month to our operations.
Rebecca
Gregarek has been a Director of our company since May, 2006. She has
been
involved in the interior design business in various capacities since
1975. From
2005 to the present, she has also been an Interior Design Consultant
with By
Design Group, Englewood, Colorado. From 2001-2005, she was associated
with Home
Builders Flooring, LLC- HBF Designs, Denver, Colorado. This group worked
at the
Shea Design Center in Highlands Ranch, Colorado to develop custom window
Coverings and after-market sales for new home buyers. She oversaw a sales
team
in training and developing marketing and advertising strategies. Her
group won
the JD Powers Award for customer satisfaction for 2001, 2002 and 2003.
Ms.
Gregarek does not hold an academic degree but attended Arapahoe Community
College, with courses in Interior Design. She is a Certified Window Fashion
Designer and a member of American Society of Interior Designers. She
will devote
minimum of ten hours per month to carry out her responsibilities.
None
of
our officers and directors are compensated for the work they perform
on our
behalf. However, our officers and directors are reimbursed for any out-of-pocket
expenses they incur on our behalf. In addition, in the future, we may
approve
payment of salaries for our management, but currently, no such plans
have been
approved. In addition, none of our officers, directors or employees is
a party
to any employment agreements.
The
following table sets forth, as of the date of this prospectus, the total
number
of shares owned beneficially by each of our directors, officers and key
employees, individually and as a group, and the present owners of 5%
or more of
our total outstanding shares. The table also reflects what such ownership
will
be assuming completion of the sale of all shares in this offering, which
we
can't guarantee. The stockholder listed below has direct ownership of
his shares
and possesses sole voting and dispositive power with respect to the shares.
A
total of 10,300,000 shares are issued and outstanding.
14
|
Percentage
of Ownership
|
|||||
|
No.
of
|
No.
of
|
||||
|
Name
and Address
|
Shares
|
Shares
|
Before
|
After
Offering
|
|
|
Beneficial
|
Before
|
After
|
Offering
|
||
|
Owner(1)
|
Offering
|
Offering
|
Min.
|
Max.
|
|
|
Kathy
Sheehan(2)
3636
S. Jason
Englewood,
Colorado 80113
|
5,150,000
|
5,150,000
|
50%
|
48%
|
46%
|
|
Todd
Sheehan(2)
3636
S. Jason
Englewood,
Colorado 80113
|
5,150,000
|
5,150,000
|
50%
|
48%
|
46%
|
|
Rebecca
Gregarek(3)
3636
S. Jason
Englewood,
Colorado 80113
|
3,350,000
|
3,350,000
|
33%
|
31%
|
30%
|
|
Sanders
Huttner Partnership
651
Bering Dr. #2002
Houston,
Texas 77057
|
700,000
|
700,000
|
7%
|
7%
|
6%
|
|
All
Officers and Directors as a Group (three persons)
|
8,500,000
|
8,500,000
|
83%
|
79%
|
76%
|
_______________________
|
(1)
|
All
shares of owned beneficially or of
record.
|
|
(2)
|
Kathy
and Todd Sheehan are husband and wife. Kathy Sheehan owns 2,550,000
shares
of record. Todd Sheehan owns 2,450,000 shares of record. The
minor
children of Mr. and Mrs. Sheehan own a total of 150,000 shares
of
record.
|
|
(3)
|
Rebecca
Gregarek owns 3,200,000 shares of record. Her husband owns
100,000 shares
of record. Her minor child owns 50,000 shares of record. Her
adult child
owns 50,000 shares of record, for which she disclaims beneficial
ownership.
|
_
______________________
A
total
of 10,300,000 shares have been issued to the existing stockholders, all
of which
are restricted securities, as that term is defined in Rule 144 of the
Rules and
Regulations of the SEC promulgated under the Act. Under Rule 144, such
shares
can be publicly sold, subject to volume restrictions and certain restrictions
on
the manner of sale. Any sale of shares held by the existing stockholders
(after
applicable restrictions expire) and/or the sale of shares purchased in
this
offering (which would be immediately resalable after the offering), may
have a
depressive effect on the price of our common stock in any market that
may
develop, of which there can be no assurance.
Our
authorized capital stock consists of 50,000,000 shares of common stock,
$0.001
par value per share and 1,000,000 shares of Preferred Stock, $0.01 par
value per
share to have such preferences as our board of directors may determine
from time
to time. At June 30, 2006 a total of 10,300,000 common shares and no
shares of
Preferred Stock were issued and outstanding.
15
The
holders of common stock are entitled to one vote for each share held.
The
affirmative vote of a majority of votes cast at a meeting which commences
with a
lawful quorum is sufficient for approval of most matters upon which shareholders
may or must vote, including the questions presented for approval or ratification
at the Annual Meeting. However, amendment of the articles of incorporation
require the affirmative vote of a majority of the total voting power
for
approval. Common shares do not carry cumulative voting rights, and holders
of
more than 50% of the common stock have the power to elect all directors
and, as
a practical matter, to control the company. Holders of common stock are
not
entitled to preemptive rights, and the common stock may only be redeemed
at our
election.
Our
preferred shares are entitled to such rights, preferences and limitations
as
determined by our board of directors. At the present time, no rights,
preferences or limitations have been established for our preferred shares.
We
have
not issued any options or other derivative securities.
When
we
complete the maximum offering, we will have 11,100,000 outstanding shares
of
common stock. The 800,000 shares of our common stock sold in this offering
will
be freely transferable unless they are purchased by our affiliates, as
that term
is defined in Rule 144 under the Securities Act. The remaining outstanding
shares of our common stock will be restricted, which means they were
originally
issued in offerings that were not registered on a registration statement
filed
with the SEC. These restricted shares may be resold only through registration
under the Securities Act or under an available exemption from registration,
including the exemption provided by Rule 144.
In
general, under Rule 144, beginning 90 days after the date of this prospectus,
a
person, or persons whose shares are aggregated, including a person who
may be
deemed our affiliate, who has beneficially owned restricted shares of
common
stock
for
at least one year would be entitled to sell publicly within any three-month
period a number of shares that does not exceed the greater of:
1%
of the
number of shares of our common stock then outstanding, which will equal
approximately 100,000 shares immediately after the maximum offering;
or the
average weekly trading volume of our common stock on The Nasdaq Stock
Market's
National Market during the four calendar weeks before the filing of a
notice on
Form 144 relating to the sale.
Sales
under Rule 144 are governed by manner of sale provisions and notice requirements
and to the availability of current public information about us. As of
May, 2007,
all of the 10,300,000 restricted shares of our common stock will become
eligible
for sale pursuant to Rule 144, if these volume and manner of sale limitations
are complied with. Until May, 2007, no restricted shares of our common
stock
would be eligible for sale pursuant to Rule 144. Until May, 2008, no
shares of
our common stock could become subject to sale under Rule 144(k). We are
unable
to estimate accurately the number of restricted shares that will actually
be
sold under Rule 144 because this will depend in part on the market price
of our
common stock,
the
personal circumstances of the sellers and other factors.
16
Pursuant
to the Articles of Incorporation and By-Laws of the corporation, we may
indemnify an officer or director who is made a party to any proceeding,
including a law suit, because of his position, if he acted in good faith
and in
a manner he reasonably believed to be in our best interest. In certain
cases, we
may advance expenses incurred in defending any such proceeding. To the
extent
that the officer or director is successful on the merits in any such
proceeding
as to which such person is to be indemnified, we must indemnify him against
all
expenses incurred, including attorney's fees. With respect to a derivative
action, indemnity may be made only for expenses actually and reasonably
incurred
in defending the proceeding, and if the officer or director is judged
liable,
only by a court order. The prior discussion of indemnification in this
paragraph
is intended to provide indemnification to the fullest extent permitted
by the
laws of the State of Colorado.
Insofar
as indemnification for liabilities arising under the Securities Act may
be
permitted to our directors, officers and controlling persons pursuant
to the
provisions above, or otherwise, we have been advised that in the opinion
of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act, and is, therefore,
unenforceable.
In
the
event that a claim for indemnification against such liabilities, other
than the
payment by us of expenses incurred or paid by one of our directors, officers,
or
controlling persons in the successful defense of any action, suit or
proceeding,
is asserted by one of our directors, officers, or controlling person
sin
connection with the securities being registered, we will, unless in the
opinion
of our counsel the matter has been settled by controlling precedent,
submit to a
court of appropriate jurisdiction the question whether such indemnification
is
against public policy as expressed in the Securities Act, and we will
be
governed by the final adjudication of such issue.
Art
Design, Inc. was incorporated in the State of Colorado on January 16,
2002. We
are a provider of custom framed artwork, accessories and interior design
consulting. We market and sell our products and services to commercial
and
professional business offices, along with residential clients. We believe
we
have developed a presence in the State of Colorado for creating custom
framed
mirrors, art, and design furnishings.
Our
headquarters are located at 3636 S. Jason, Englewood, Colorado 80113.
Our phone
number at our headquarters is (303) 781-7280. Our fiscal year end is
December
31.
We
believe that we have created a differentiated business model that enables
us to
provide products and services to our clients in a more convenient, efficient
and
economical manner.
We
established our business strategy on the premise that on site consulting
is a
valuable service. We believe that most people do not have the time or
expertise
to furnish their offices or living spaces with art, mirrors, or other
accessories.
We
provide products that we believe share an aesthetic appeal and feature
distinctive design elements, superior quality and authenticity. We combine
these
products with our interior design consulting, to give our clients a complete
package of goods and services. We provide detailed information regarding
the
designer and key design and functional elements about each product. We
obtain
our merchandise from select domestic designers and manufacturers that
meet our
stringent requirements for design, quality, packaging, and consistency
of
production and flow. We believe that our unique assortment of products
serves as
a competitive advantage and provides our clients with a distinctive experience.
17
We
believe our success requires the development and maintenance of a broad
base of
residential and commercial clients. Our clients include commercial and
professional business offices, along with high end homes. We target educated
consumers focused on quality of life and interested in self-enrichment.
Historically, our residential customers have been almost as likely to
be male as
female, have spanned a wide range of ages and typically have had household
incomes greater than $75,000. We sell to the following commercial clients,
who
we believe are representative of our commercial client base in a number
of
different industries, including: architects, doctors, lawyers, and accountants.
We
believe that businesses have begun to place more emphasis on design.
A November
2003 article in Fortune magazine highlighted organizational initiatives
at
several major corporations, which have created new positions for design
professionals and promoted other design professionals, reflecting the
growing
importance of design in selling their products or services.
We
believe small businesses, which account for all of our commercial sales,
historically have also had difficulties gaining access to design furnishings.
We
believe that the design furnishings industry has generally marketed and
sold
most design products in a manner that effectively excludes small businesses
as
buyers. Factors that contribute to the exclusion of small businesses
from the
market for design products include: the imposition of minimum order requirements
that often exceed such buyers’ requirements, limited physical presence of
product sellers in smaller markets; and lack of interest from product
distributors to sell to smaller buyers, among others. We believe this
large
segment of the commercial market has traditionally been underserved and
will
continue to be particularly receptive to our product offerings.
We
believe our business model makes design-oriented products available for
convenient purchase to a broad array of residential and commercial consumers,
helping us further expand and penetrate the market for design products.
We
believe that initially operating from one location will be central to
our
overall success. Our plan is to concentrate our operations in the State
of
Colorado. We have no plans to operate in additional locations.
We
have
two full-time employees, not including our two officers. As we expand,
we intend
to hire additional employees. However, we have no present plans to do
so. We may
hire part-time help as needed from time-to-time for specific
projects.
While
our
Mr. and Mrs. Sheehan have had extensive experience in our business, we
must
eventually recruit additional personnel. We will strive to maintain quality
and
consistency through the careful training and supervision of personnel
and
the
establishment of, and adherence to, high standards relating to personnel
performance and client service. We believe that we will be able to attract
high
quality, experienced personnel by paying competitive wages and salaries.
We
plan
to market through direct contact with prospective clients. We have no
sales
representative who solicits potential clients. However, Mr. and Mrs.
Sheehan,
along with Mrs. Gregarek, plan to use their contacts to continue to generate
the
clients and will attempt to develop repeat business from every
project.
We
do not
currently have any patent or trademark protection. If we determine it
is
feasible to file for such trademark protection, we still have no assurance
that
doing so will prevent competitors from using the same or similar names,
marks,
concepts or appearance.
18
The
market for residential and commercial furnishings is fragmented with
no single
company holding a dominant market position. The market includes numerous
smaller
specialty retailers, as well as department stores, larger mass merchandisers
and
interior design stores, with department stores commanding a decreasing
percentage of the furnishings industry compared to specialty retailers.
In
recent years, the industry has been characterized by consolidation, the
withdrawal of certain retailers from the marketplace and a de-emphasis
by
traditional department stores on upscale merchandise, leaving fewer large
competitors focused exclusively on this segment of the furnishings market.
We
face
competition from several sources, including the following:
|
·
|
design
companies selling solely through catalog and online;
|
|
·
|
regional
retailers specializing in design;
|
All
of
our competitors are larger than us and have substantially greater financial,
marketing and other resources than we do.
The
U.S.
retail industry, along with the catalog and online commerce sectors are
highly
competitive, dynamic in nature and have undergone significant change
over the
past several years. Our ability to anticipate and respond successfully
to these
changes is critical to our long-term growth. If we are unable to maintain
or
increase our market share or compete effectively in the furnishings market,
our
business, financial condition and operating results would be adversely
affected.
We
believe that the ability to compete successfully is determined by a variety
of
factors, including quality of product selection, effective product presentation,
client service and pricing. We believe that we can compete favorably
on the
basis of these factors.
We
also
believe that we offer our clients flexibility and cost savings because
our
overhead is lower than many of our competitors. However, we cannot guarantee
that we will be able to successfully compete.
We
are
not subject to any material government or industry regulation.
We
have
two full-time employees, not including our two officers. As we expand,
we intend
to hire additional employees. However, we have no present plans to do
so. We may
hire part-time help as needed from time-to-time for specific projects.
We do not
pay salaries to our two officers. However, we reimburse them for any
out-of-pocket expenses they incur on our behalf. In addition, in the
future, we
may approve the payment of salaries for our management, but currently,
no such
plans have been approved. We do not currently pay for vacation, holidays
or
provide major medical coverage. None of our officers or directors is
a party to
any employment agreement. However, we may adopt such plans in the
future.
19
CONDITION
AND RESULTS OF OPERATIONS
The
following table provides selected financial data about us for the year
ended
December 31, 2005 and for the six months ended June 30, 2006. For detailed
financial information, see the audited and unaudited Financial Statements
included in this prospectus.
We
have a
history of losses. We have never been profitable. Furthermore, our losses
may
continue into the future. We had a net loss of $5,015on revenues of $16,135for
the fiscal quarter ended June 30, 2006. We had a net loss of $2,953 on
revenues
of $62,009 for the fiscal year ended December 31, 2005, compared to a
net loss
of $15,784 on revenues of $73,558 for the fiscal year ended December
31,
2004.
Costs
of
goods sold include all direct costs incurred in selling products. We
do not
separate sales of different product lines into operating segments.
The
difference between total sales and costs of goods is gross profit. Our
costs of
goods for the fiscal quarter ended June 30, 2006 was $15,227. Our costs
of goods
for the fiscal year ended December 31, 2005 was $54,183, compared to
$62,484 for
the fiscal year ended December 31, 2004.
Operating
expenses, which includes depreciation and general and administrative
expenses
for the fiscal quarter ended June 30, 2006 was $5,923.Our operating expenses
for
the fiscal year ended December 31, 2005 was $10,806, compared to $26,908
for the
fiscal year ended December 31, 2004. The major components of operating
expenses
include professional fees, salaries and associated payroll costs, rent
and
telephone expenses.
We
believe that overhead cost in current operations should remain fairly
constant
as sales improve. Each additional sale and correspondingly the gross
profit of
such sale have minimal offsetting overhead cost. Thus, additional sales
could
become profit at a higher return on sales rate as a result of not needing
to
expand overhead at the same pace.
As
of
June 30, 2006, we had cash or cash equivalents of $53,232.
Net
cash
provided by operating activities was $242for the period ended June 30,
2006. We
anticipate that overhead costs in current operations will remain fairly
constant
as sales improve.
Cash
flows used by investing activities were $-0-for the period ended June
30,
2006.
20
Cash
flows provided by financing activities accounted for $46,900 for the
period
ended June 30, 2006. These cash flows were all related to sales of
stock.
Over
the
next twelve months our capital costs will be approximately $10,000 to
$12,000
primarily to expand our current operations. We plan to buy additional
equipment
to be used in our operations.
The
offering will provide sufficient capital in the short term for our current
level
of operations, which includes becoming profitable. Additional resources
will be
needed to expand into additional locations.
Otherwise,
we do not anticipate needing to raise additional capital resources in
the next
twelve months.
Until
the
offering is complete and the current operations become cash flow positive,
our
officers and directors will fund the operations to continue the business.
At
this time we have no other resources on which to get cash if needed without
their assistance.
Our
principle source of liquidity is our operations. Our variation in revenues
is
based upon the level of our sales activity and will account for the difference
between a profit and a loss. Also business activity is closely tied to
the
economy of Denver and the U.S. economy. A slow down in interior design
work will
have a negative impact to our business. In any case, we try to operate
with
minimal overhead. Our primary activity will be to seek to expand the
interior
design projects and, consequently, our sales. If we succeed in expanding
our
client base and generating sufficient sales, we will become profitable.
We
cannot guarantee that this will ever occur. Our plan is to build our
company in
any manner which will be successful.
Our
plan
is to operate for this fiscal year at a profit or at break even.
Currently,
we are conducting business in only one location in the Denver Metropolitan
area.
We have no plans to expand into other locations or areas. The timing
of the
completion of the milestones needed to become profitable are not directly
dependent on the success of this Offering. We believe that we can achieve
profitability as we are presently organized with sufficient
business.
Other
than the shares offered by this prospectus no other source of capital
has been
identified or sought.
If
we are
not successful in our operations we will be faced with several
options:
|
1.
|
Cease
operations and go out of business;
|
|
2.
|
Continue
to seek alternative and acceptable sources of
capital;
|
|
3.
|
Bring
in additional capital that may result in a change of control;
or
|
|
4.
|
Identify
a candidate for acquisition that seeks access to the public
marketplace
and its financing sources.
|
Currently,
we have sufficient capital to implement our proposed business operations
or to
sustain them for the next twelve months. If we can become profitable,
we could
operate at our present level indefinitely.
If
we
raise less than the maximum in this offering, we will use the funds raised
as
disclosed in "Use of Proceeds" as discussed in this registration
statement.
To
date,
we have never had any discussions with any possible acquisition candidate
nor
have we any intention of doing so.
At
the
present time, we are operating from one location in the Denver Metropolitan
area. Our plan is to make our operation profitable during the current
fiscal
year. We estimate that we must generate at least $10,000 in sales per
month to
be profitable.
21
We
believe that we can be profitable or at break even by the end of the
current
fiscal year, assuming sufficient sales.
If
the
net proceeds received from this Offering are not enough to accomplish
the above,
we will be forced to seek alternate sources of capital through an additional
offering, bank borrowing or capital contributions from existing shareholders.
We
do not anticipate the need to raise additional capital resources in the
next
twelve months unless we are more successful than we have anticipated,
and we
determine to expand further go into other cities in this period. In such
a case,
we expect the source of such funding to be generated internally or and
through
another offering.
No
commitments to provide additional funds have been made by management
or current
shareholders. There is no assurance that additional funds will be made
available
to us on terms that will be acceptable, or at all, if and when needed.
We expect
to continue to generate and increase sales, but there can be no assurance
we
will generate sales sufficient to continue operations or to expand.
We
also
are planning to rely on the possibility of referrals from clients and
will
strive to satisfy our clients. We believe that referrals will be an effective
form of advertising because of the quality of service that we bring to
clients.
We believe that satisfied clients will bring more and repeat
clients.
In
the
next 12 months, we do not intend to spend any funds on research and development
and do not intend to purchase any large equipment.
We
do not
expect the adoption of any recently issued accounting pronouncements
to have a
significant impact on our net results of operations, financial position,
or cash
flows.
We
do not
expect our sales to be impacted by seasonal demands for our products
and
services.
We
currently own various items of office equipment. We rent office and production
space under a verbal month to month lease at a cost of $500 per month
from
Accessory Warehouse, an entity owned by Kathy and Todd Sheehan, who are
our
principal shareholders. This office and production space is located at
3636 S.
Jason, Englewood, Colorado 80113. We carry no inventory and have no other
property.
We
rent
office and production space under a verbal month to month lease at a
cost of
$500 per month from Accessory Warehouse, an entity owned by Kathy and
Todd
Sheehan, who are our principal shareholders.
We
have a
note payable to Todd Sheehan, who is one of our principal shareholders
The note
is unsecured and payable on demand. It bears interest at the rate of
8% per
annum. The outstanding principal balance on June 30, 2006 was
$34,201.
On
June
30, 2006, we had payables to Accessory Warehouse of $9,646 for materials,
services and rent advanced to us. On December 31, 2004 and 2005, the
respective
payables were $10,551 and $6,646.
No
public
market currently exists for shares of our common stock. Following completion
of
this offering, we intend to apply to have our common stock listed for
quotation
on the Over-the-Counter Bulletin Board. As of June 30, 2006, we had thirty-eight
holders of our common stock.
22
The
Securities and Exchange Commission has also adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks.
Penny
stocks are generally equity securities with a price of less than $5.00
(other
than securities registered on certain national securities exchanges or
quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange
or
system).
A
purchaser is purchasing penny stock which limits the ability to sell
the stock.
The shares offered by this prospectus constitute penny stock under the
Securities and Exchange Act. The shares will remain penny stocks for
the
foreseeable future. The classification of penny stock makes it more difficult
for a broker-dealer to sell the stock into a secondary market, which
makes it
more difficult for a purchaser to liquidate his/her investment. Any
broker-dealer engaged by the purchaser for the purpose of selling his
or her
shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities
and
Exchange Act. Rather than creating a need to comply with those rules,
some
broker-dealers will refuse to attempt to sell penny stock.
The
penny
stock rules require a broker-dealer, prior to a transaction in a penny
stock not
otherwise exempt from those rules, to deliver a standardized risk disclosure
document prepared by the Commission, which:
|
·
|
contains
a description of the nature and level of risk in the market
for penny
stocks in both public offerings and secondary
trading;
|
|
·
|
contains
a description of the broker's or dealer's duties to the customer
and of
the rights and remedies available to the customer with respect
to a
violation to such duties or other requirements of the Securities
Act of
1934, as amended;
|
|
·
|
contains
a brief, clear, narrative description of a dealer market, including
"bid"
and "ask" prices for penny stocks and the significance of the
spread
between the bid and ask price;
|
|
·
|
contains
a toll-free telephone number for inquiries on disciplinary
actions;
|
|
·
|
defines
significant terms in the disclosure document or in the conduct
of trading
penny stocks; and
|
|
·
|
contains
such other information and is in such form (including language,
type, size
and format) as the Securities and Exchange Commission shall
require by
rule or regulation;
|
The
broker-dealer also must provide, prior to effecting any transaction in
a penny
stock, to the customer:
|
·
|
the
bid and offer quotations for the penny
stock;
|
|
·
|
the
compensation of the broker-dealer and its salesperson in the
transaction;
|
|
·
|
the
number of shares to which such bid and ask prices apply, or
other
comparable information relating to the depth and liquidity
of the market
for such stock; and
|
|
·
|
monthly
account statements showing the market value of each penny stock
held in
the customer's account.
|
In
addition, the penny stock rules require that prior to a transaction in
a penny
stock not otherwise exempt from those rules; the broker-dealer must make
a
special written determination that the penny stock is a suitable investment
for
the purchaser and receive the purchaser's written acknowledgment of the
receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements will have the effect of reducing the trading
activity in the secondary market for our stock because it will be subject
to
these penny stock rules. Therefore, stockholders may have difficulty
selling
their securities.
Once
our
registration statement under Form SB-2 has been declared effective, we
will be
subject to certain reporting requirements and will furnish annual financial
reports to our stockholders, certified by our independent accountants,
and will
furnish unaudited quarterly financial reports in our quarterly reports
filed
electronically with the SEC. All reports and information filed by us
can be
found at the SEC website, www.sec.gov.
23
The
stock
transfer agent for our securities is Mountain Share Transfer, located
at 1625
Abilene Drive, Broomfield, Colorado 80020. Their telephone number is
(303)460-1149.
We
will
accept no subscriptions or indications of interest until our registration
statement is effective. At that point, all subscriptions must be made
by the
execution and delivery of a subscription agreement, a form of which is
attached
to this prospectus as Annex A. By executing the subscription agreement,
each
purchaser will agree to pay the purchase price of the shares subscribed
for at
the closing at which such subscription is accepted. We have the right
to revoke
any offers made under this prospectus and to refuse to sell shares to
a
particular subscriber if the subscriber does not promptly supply all
information
we request or if we disapprove the sale. Subscriptions are not binding
until
accepted. We will refuse any subscription by giving written notice to
the
subscriber by personal delivery or first-class mail. We may reject any
subscription at any time prior to acceptance, in whole or in part, in
our sole
discretion.
In
order
to subscribe for shares, a prospective investor must deliver the following
documents to the placement agent:
1.
a
complete and executed subscription agreement, in the form attached to
this
prospectus as Annex A;
2.
a
complete and executed investor suitability questionnaire, in the form
provided
by us; and
3.
t
he
full
amount of the subscription price paid in United States dollars in cash
or by
check, bank draft or money order made payable to Art Design, Inc.-Community
Banks of Colorado Escrow Account.
Our
financial statements included in this prospectus have been audited by
independent certified public accountants. We include those financial
statements
in reliance on the report of the firm of Ronald R. Chadwick, P.C., of
Aurora,
Colorado, given upon their authority as experts in accounting and
auditing.
The
law
firm of David Wagner & Associates, P.C. of Greenwood Village, Colorado has
passed upon the validity of the shares being offered and certain other
legal
matters and is representing us in connection with this offering. An affiliate
of
this firm owns 200,000 shares of our common stock.
We
have
filed this registration statement on Form SB-2, of which this prospectus
is a
part, with the U.S. Securities and Exchange Commission. Upon completion
of this
registration, we will be subject to the informational requirements of
the
Exchange
Act and, in accordance therewith, will file all requisite reports, such
as Forms
10-KSB, 10-QSB and 8-KSB, proxy statements, under Sec.15(d) of the Exchange
Act,
and other information with the Commission. Such reports, proxy statements,
this
registration statement and other information, may be inspected and copied
at the
public reference facilities maintained by the Commission at 100 F. Street
N.E.,
Washington, D.C. 20549. Copies of all materials may be obtained from
the Public
Reference Section of the Commission's Washington, D.C. office at prescribed
rates. The Commission also maintains a Web site that contains reports,
proxy and
information statements and other information regarding registrants that
file
electronically with the Commission at http://www.sec.gov.
24
Annex
A
Form
of Common Stock Subscription Agreement
Art
Design, Inc.
3636
S.
Jason
Englewood,
Colorado 80113
Gentlemen:
This
subscription agreement relates to the offer made Art Design, Inc., a
Colorado
corporation (the "Company"), to sell between $100,000 (the "Minimum Offering")
and $200,000 (the "Maximum Offering") in shares of Company common stock
(the
"Shares"), pursuant to the prospectus filed with the SEC, and as same
may be
amended or supplemented from time to time (the "Prospectus'). The undersigned
has received a copy of the Prospectus and wishes to purchase Shares on
the
terms, and subject to the conditions, set forth below and in the
Prospectus.
|
1.
|
Subscription.
|
|
1.1
|
The
undersigned hereby irrevocably subscribes, in accordance with
the terms
and conditions of this Subscription Agreement (the "Agreement"),
for the
purchase of the number of Shares, at the price per Share, set
forth on the
signature page to the Agreement. The undersigned hereby delivers
to the
Company (i) an executed copy of this Agreement, (ii) an executed
copy of
the Investor Suitability Questionnaire, and. (iii) personal,
bank,
cashier's check or wire transfer for the aggregate purchase
price, as
reflected on the signature page to this Agreement (the "Purchase
Price")
payable to "Community Banks of Colorado, Escrow Agent, for
Art Design,
Inc., as Escrow agent", as follows:
|
[Escrow
Agent]
[Bank]
[ABA
Routing
No.]
[Account
No.]
[Reference]
|
1.2
|
The
Purchase Price and the executed Agreement will be held, for
the benefit of
the undersigned until accepted by the Company pursuant to Section
2 below.
If the Agreement is not accepted by _____ , 2006 in accordance
with
Section 2 of this Agreement (the "Termination Date"), then,
the Purchase
Price will be promptly returned to the
undersigned.
|
|
1.3
|
After
a determination has been made, based upon the undersigned's
representations herein, that the undersigned is a suitable
purchaser of
the Shares and the conditions set forth in Section 2 are met,
the Company
will accept this Agreement and the Escrow Agent will deliver
the Purchase
Price to the Company. Following delivery of the Purchase Price,
the
Company shall promptly deliver to the undersigned a stock certificate
representing the number of Shares for which the undersigned
hereby
subscribes.
|
|
2.
|
Acceptance
of Agreement. It is understood and agreed that the Company
shall have the
right to accept or reject this Agreement, in whole or in part,
for any
reason whatsoever. The shares will be offered at a price of
$0.25 per
share for a period of one hundred and twenty (120) days from
the date of
this prospectus, subject to a ninety (90) day
extension.
|
|
3.
|
Representations
and Warranties of Subscriber. Tie undersigned hereby represents
and
warrants to the Company (knowing that the Company will be relying
on these
matters to determine the undersigned's suitability as an investor
and the
availability of securities law exemptions)
that:
|
A-l
|
3.1
|
The
undersigned has received the Prospectus. Additionally, the
Company has
afforded the undersigned or the undersigned's representative
with access
to and an opportunity to obtain other information regarding
the Company
requested by the undersigned. The undersigned has not relied
on any oral
representations of any kind.
|
|
3.2
|
The
undersigned is an "accredited investor" as that term is defined
in Rule
501 of Regulation D under the Securities Act of 1933 (the `Securities
Act"), meaning that the undersigned has either (i) an individual
net worth
or joint net worth with the undersigned's spouse in excess
of$l,000.000,
or(ii) an individual annual income in excess of $200,000 in
each of the
two most recent years r a joint income with the undersigned's
spouse in
excess of $300,000 in each of those years, and has a reasonable
expectation of reaching the same income level (ii) the current
year, or
(iii) if a corporation. trust or partnership net formed for
the specific
purpose of the investment in the Shares, total assets in excess
of
$7,000.000. All statements made by the undersigned in the Investor
Suitability Questionnaire are true, complete and
correct.
|
|
3.3
|
Immediately
prior to the undersigned's execution of this Agreement, the
undersigned
had such knowledge and experience in financial and business
matters:
(including experience with investments of a similar nature),
that the
undersigned was capable of evaluating the merits and risks
of an
investment in the Shares.
|
|
3.4
|
The
undersigned recognizes that the purchase of the Shares is a
speculative
investment that involves a high degree of risk, including but
not limited
to those risks referred to in the Prospectus, and is suitable
only for
persons with the financial capability of making and holding
long-term
investments not readily reducible to
cash.
|
|
3.5
|
The
undersigned, if not an individual investor, is empowered and
duly
authorized to enter into tins Agreement under its governing
document,
trust instrument, pension plan, charter, certificate of incorporation,
bylaw provision and the like.
|
|
3.6
|
The
type of ownership in which the undersigned is applying to purchase
Shares
is as follows: (Check One)
|
|
_______
|
INDIVIDUAL
OWNERSHIP (One signature required)
|
|
_______
|
JOINT
TENANTS WITH RIGHT OF SURVIVORSHIP (Both parties must
sign)
|
|
_______
|
TRUST
(Please include name of trustee, date trust was formed and
a copy of the
Trust Agreement or other authorization)
|
|
_______
|
CORPORATION
(Please include Certified Corporate Resolution authorizing
signature)
|
|
_______
|
PARTNERSHIP
(Please include a copy of the Statement of Partnership or Partnership
Agreement authorizing signature)
|
|
_______
|
COMMUNITY
PROPERTY (Two signatures required)
|
|
_______
|
TENANTS-IN-COMMON
(Both parties must sign)
|
|
4.
|
Continuing
Obligation to Furnish Information. These representations and
warranties
are true, complete and accurate as of the date hereof and shall
be true,
complete and accurate as of the date of delivery of the Purchase
Price to
the Company and shall survive such delivery. If, in ally respect,
such
representations and warranties shall not be true and accurate
prior to
receipt of notice of acceptance of this Agreement, the undersigned
shall
give written notice of such fact to the Company, specifying
which
representations and warranties are not true and accurate and
the reasons
therefore.
|
A-2
|
5.
|
Miscellaneous.
|
|
5.1
|
Survival.
The representations and warranties made herein shall survive
the
consummation of the transaction contemplated
hereby.
|
|
5.2
|
Governing
Law. This Agreement shall be governed by, and construed and
enforced in
accordance with, the laws of the State of Colorado, without
regard to
principles of conflicts of laws.
|
|
5.3
|
In
the event that any dispute where to arise in connection with
this
Agreement or with the undersigned's investment in the Company,
the
undersigned agrees, prior to seeking any other relief at law
or equity, to
submit the matter to binding arbitration in accordance with
the rules of
the National Association of Securities Dealers at a place to
be designated
by the Company.
|
|
5.4
|
Entire
Agreement; Amendment. This agreement constitutes the entire
agreement
between the parties with respect to the subject matter hereof,
and
supersedes all other written or oral agreements, understandings
and
negotiations. This Agreement may not be amended except by a
writing signed
by both the Company and the
undersigned.
|
|
5.5
|
Attorneys'
Fees. If any action at law and in equity (including arbitration)
is
necessary to enforce or interpret the terms of this Agreement
the
prevailing party shall be entitled to reasonable attorney's
fees, costs
and necessary disbursements in addition to any other relief
to which such
party maybe entitled.
|
|
5.6
|
Counterparts.
This Agreement may be executed in one or more counterparts,
each of which
shall be deemed an original and all of which together shall
constitute one
instrument.
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
A-3
IN
WITNESS WHEREOF, the undersigned has executed this Agreement this _______
day of
______________________, 2006.
|
Signature(s)
|
|
|
Name(s)
of Subscriber(s)
|
|
Address
_______________________________________________
_______________________________________________
_______________________________________________
Social
Security or Tax I.D. No.
_______________________________________________
Purchaser
Representative (if any)
_______________________________________________
Name
and
Address
_______________________________________________
_______________________________________________
_______________________________________________
ACCEPTANCE
The
foregoing subscription is hereby accepted and receipt of payment is hereby
acknowledged with respect to Shares.
Dated:
________________________________
Art
Design, Inc.
By
__________________________________
Authorized Officer
A-4
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item
24. Indemnification of directors and officers.
Pursuant
to the Articles of Incorporation and By-Laws of the corporation, we may
indemnify an officer or director who is made a party to any proceeding,
including a law suit, because of his position, if he acted in good faith
and in
a manner he reasonably believed to be in our best interest. In certain
cases, we
may advance expenses incurred in defending any such proceeding. To the
extent
that the officer or director is successful on the merits in any such
proceeding
as to which such person is to be indemnified, we must indemnify him against
all
expenses incurred, including attorney's fees. With respect to a derivative
action, indemnity may be made only for expenses actually and reasonably
incurred
in defending the proceeding, and if the officer or director is judged
liable,
only by a court order. The prior discussion of indemnification in this
paragraph
is intended to be to the fullest extent permitted by the laws of the
State of
Colorado.
Indemnification
for liabilities arising under the Securities Act of 1933, as amended,
may be
permitted to directors or officers pursuant to the foregoing provisions.
However, we are informed that, in the opinion of the Commission, such
indemnification is against public policy, as expressed in the Act and
is,
therefore, unenforceable.
Item
25. Other expenses of issuance and distribution.
Expenses
incurred or (expected) relating to this Registration Statement and distribution
are as follows:
|
Legal
and consulting fees
|
$
|
20,000
|
||
|
Accounting
|
5,000
|
|||
|
Registration
fees
|
100
|
|||
|
Printing
of Prospectus
|
2,000
|
|||
|
Miscellaneous
|
900
|
|||
|
TOTAL
|
$
|
27,000
|
Item
26. Recent sales of unregistered securities.
Set
forth
below is information regarding the issuance and sales of securities without
registration since inception. No such sales involved the use of an underwriter;
no advertising or public solicitation were involved; the securities bear
a
restrictive legend; and no commissions were paid in connection with the
sale of
any securities.
On
May
17, 2006, we issued common shares at $.001 per share for cash to the
following
persons and entities:
|
Name
|
Number
of Shares
|
Consideration
|
|
Kathy
Sheehan
|
2,449,500
|
$2,449.50
cash and debt cancellation
|
|
Todd
Sheehan
|
2,449,500
|
$2,449.50
cash and debt cancellation
|
|
Rebecca
Gregarek
|
3,200,000
|
$3,200
cash
|
|
Marion
Limited Liability Company
|
200,000
|
$200
cash
|
|
Total
|
8,299,000
|
|
Mr.
and
Mrs. Sheehan previously owned 500 shares each, which they acquired in
January,
2002 for cash.
25
On
June
7, 2006, we issued common shares at $0.001 per share for cash to the
following
persons and entities:
|
Name
|
Number
of
Shares
|
|||
|
Sanders
Huttner Partnership
|
600,000
|
|||
|
Michael
Hopkins
|
200,000
|
|||
|
Don
Weir
|
100,000
|
|||
|
Mesia
Huttner
|
25,000
|
|||
|
Maury
Bell
|
25,000
|
|||
|
Chris
Bell
|
25,000
|
|||
|
Aaron
Bell
|
25,000
|
|||
|
Total
|
1,000,000
|
|||
In
the
transactions shown above, the issuance, delivery and sale of our common
stock
were made pursuant to the private offering exemption within the meaning
of
Section 4(2) of the Act because the offers were made to a limited number
of
people, all of whom received all material information concerning the
investment
and all of whom have had sophistication and ability to bear economic
risk based
upon their representations to us and their prior experience in such
investments.
On
June
21, 2006, we issued common shares at $.05 per share for cash to the following
persons and an entity.
|
Name
|
Number
of
Shares
|
|
Jarrold
Bachmann
|
50,000
|
|
Bruce
Capra
|
20,000
|
|
Gloria
Colwell
|
10,000
|
|
Denise
Fernalld
|
10,000
|
|
Shaun
Forstrom
|
5,000
|
|
Gerald
Chiasson
|
50,000
|
|
David
Gregarek
|
100,000
|
|
Mat
Gregarek
|
50,000
|
|
Natalie
Gregarek
|
50,000
|
|
Julian
Shuman
|
50,000
|
|
Mark
Kinard
|
10,000
|
|
Tim
Kuzava
|
10,000
|
|
Damon
Lascala
|
10,000
|
|
Jennifer
Livermore
|
10,000
|
|
David
Lutz
|
10,000
|
|
Michael
Hopkins
|
50,000
|
|
Mark
Middleton
|
10,000
|
|
Gary
Miles
|
10,000
|
|
Michael
Padworski
|
40,000
|
|
Ruth
Roman
|
15,000
|
|
Sanders
Huttner Partnership
|
100,000
|
|
William
Secor
|
10,000
|
|
Jack
Sheehan
|
50,000
|
|
Joel
Sheehan
|
50,000
|
|
Kathy
Sheehan
|
100,000
|
|
Paige
Sheehan
|
50,000
|
|
Donna
Tracey
|
10,000
|
|
John
Warner
|
10,000
|
|
Bob
Wonish
|
50,000
|
|
Total
|
1,000,000
|
26
The
issuance, delivery and sale of our common stock listed above was made
pursuant
to Rule 504 of Regulation D of the Act. The Company filed a Form D claiming
the
exemption for these transactions. In addition, the Company, at the time
met all
of the requirements of Rule 504.
In
all of
the transactions shown above, we have issued stop transfer orders concerning
the
transfer of certificates representing all the common stock issued and
outstanding as reported in this section.
There
have been no further issuances of securities through the date of this
Registration Statement.
Item
27. Exhibits.
The
following exhibits are filed as part of this Registration
Statement:
|
Exhibit
|
|
|
|
Number
|
|
Description
|
|
3.1
|
Articles
of Incorporation
|
|
|
3.2
|
Amended
and Restated Articles of Incorporation
|
|
|
3.3
|
Bylaws
|
|
|
5.1
|
Opinion
re: Legality
|
|
|
9.0
|
Form
of Escrow Agreement
|
|
|
23.1
|
Consent
of Independent Auditors
|
|
|
23.2
|
Consent
of Counsel (See Exhibit 5.1)
|
Item
28. Undertakings
The
undersigned registrant hereby undertakes:
1.
To
file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration
statement:
(a)
To
include any prospectus required by Section 10(a)(3) of the Securities
Act of
1933;
(b)
To
reflect in the prospectus any facts or events arising after the effective
date
of this registration statement,
or
most
recent post-effective amendment, which, individually or in the aggregate,
represent a fundamental
change
in
the information set forth in this registration statement; and
(c)
To
include any material information with respect to the plan of distribution
not
previously disclosed in this
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 of
1933, as
amended, each such post-
effective
amendment shall be deemed to be a new registration statement relating
to the
securities offered herein, 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 hereby
which
remain unsold at the termination of the offering.
Insofar
as indemnification for liabilities arising under the Securities Act may
be
permitted to our directors, officers and controlling persons pursuant
to the
provisions above, or otherwise, we have been advised that in the opinion
of the
Securities and Exchange Commission such indemnification is against public
policy
as expressed in the Securities Act, and is, therefore,
unenforceable.
27
In
the
event that a claim for indemnification against such liabilities, other
than the
payment by us of expenses incurred or paid by one of our directors, officers,
or
controlling persons in the successful defense of any action, suit or
proceeding,
is asserted by one of our directors, officers, or controlling persons
in
connection with the securities being registered, we will, unless in the
opinion
of our counsel the matter has been settled by controlling precedent,
submit to a
court of appropriate jurisdiction the question whether such indemnification
is
against public policy as expressed in the Securities Act, and we will
be
governed by the final adjudication of such issue.
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all
of the
requirements for filing on Form SB-2 and authorized this registration
statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the
City Englewood, State of Colorado.
|
Art
Design, Inc.
|
||
|
Date:
JULY 25, 2006
|
By:
|
/s/
Kathy Sheehan
|
|
Kathy
Sheehan, President
|
Pursuant
to the requirements of the Securities Act of 1933, this registration
statement
has been signed by the following persons in the capacities and on the
dates
indicated.
|
Date:
JULY 25, 2006
|
By:
|
/s/
Kathy Sheehan
|
|
Kathy
Sheehan
|
||
|
Director,
Treasurer and Chief Financial Officer
|
||
|
Date:
JULY 25, 2006
|
By:
|
/s/
Todd Sheehan
|
|
Todd
Sheehan
|
||
|
Director
and Secretary
|
||
|
Date:
JULY 25, 2006
|
By:
|
/s/
Rebecca Gregarek
|
|
Rebecca
Gregarek
|
||
|
Director
|
28
|
Page
|
||
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-1
|
|
|
FINANCIAL
STATEMENTS
|
||
|
Balance
sheets
|
F-2
|
|
|
Statements
of
operations
|
F-3
|
|
|
Statements
of
stockholders’ equity
|
F-4
|
|
|
Statements
of
cash flows
|
F-5
|
|
|
Notes
to financial statements
|
F-7
|
RONALD
R.
CHADWICK, P.C.
Certified
Public Accountant
2851
South Parker Road, Suite 720
Aurora,
Colorado 80014
Telephone
(303)306-1967
Fax
(303)306-1944
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of
Directors
Art
Design, Inc.
Englewood,
Colorado
I
have
audited the accompanying balance sheets of Art Design, Inc. as of
December 31,
2004 and 2005, 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. My responsibility is
to express an
opinion on these financial statements based on my audit.
I
conducted my audit in accordance with the standards of the Public
Company
Accounting Oversight Board (United States). Those standards require
that I 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. I believe that my audit provides
a reasonable
basis for my opinion.
In
my
opinion, the financial statements referred to above present fairly,
in all
material respects, the financial position of Art Design, Inc. as
of December 31,
2004 and 2005, and the results of its operations and its cash flows
for the
years then ended in conformity with accounting principles generally
accepted in
the United States of America.
The
accompanying financial statements have been prepared assuming that
the Company
will continue as a going concern. As discussed in Note 5 to the financial
statements the Company has suffered recurring losses from operations
and has
a
working
capital deficit
that
raise substantial doubt about its ability to continue as a going
concern.
Management's plans in regard to these matters are also described
in Note 5. The
financial statements do not include any adjustments that might result
from the
outcome of this uncertainty.
Aurora,
Colorado
/s/
Ronald R. Chadwick, P.C.
June
12,
2006
RONALD
R. CHADWICK,
P.C.
F-1
ART
DESIGN, INC.
BALANCE
SHEETS
The
accompanying notes are an integral part of the financial
statements.
F-2
ART
DESIGN, INC.
STATEMENTS
OF OPERATIONS
|
Six
Months
|
||||||||||
|
Ended
|
||||||||||
|
Year
Ended
|
Year
Ended
|
June
30, 2006
|
||||||||
|
Dec.
31, 2004
|
Dec.
31, 2005
|
(Unaudited)
|
||||||||
|
Sales
- net of returns
|
$
|
73,558
|
$
|
62,009
|
$
|
16,135
|
||||
|
Cost
of goods sold
|
62,484
|
54,183
|
15,227
|
|||||||
|
Gross
profit
|
11,074
|
7,826
|
908
|
|||||||
|
Operating
expenses:
|
||||||||||
|
Amortization
& depreciation
|
2,361
|
1,027
|
888
|
|||||||
|
General
and administrative
|
24,547
|
9,779
|
5,035
|
|||||||
|
26,908
|
10,806
|
5,923
|
||||||||
|
Gain
(loss) from operations
|
(15,834
|
)
|
(2,980
|
)
|
(5,015
|
)
|
||||
|
Other
income (expense):
|
||||||||||
|
Other
income
|
50
|
27
|
-
|
|||||||
|
50
|
27
|
-
|
||||||||
|
Income
(loss) before
|
||||||||||
|
provision
for
income taxes
|
(15,784
|
)
|
(2,953
|
)
|
(5,015
|
)
|
||||
|
Provision
for income tax
|
-
|
-
|
-
|
|||||||
|
Net
income (loss)
|
$
|
(15,784
|
)
|
$
|
(2,953
|
)
|
$
|
(5,015
|
)
|
|
|
Net
income (loss) per share
|
||||||||||
|
(Basic
and fully diluted)
|
$
|
(15.78
|
)
|
$
|
(2.95
|
)
|
$
|
(0.00
|
)
|
|
|
Weighted
average number of common shares outstanding
|
1,000
|
1,000
|
3,084,000
|
|||||||
The
accompanying notes are an integral part of the financial
statements.
F-3
ART
DESIGN, INC.
STATEMENTS
OF STOCKHOLDER'S EQUITY
|
Common
Stock
|
Stock-
|
|
||||||||||||||
|
|
|
|
|
Amount
|
|
Paid
in
|
|
Accumulated
|
|
holders'
|
|
|||||
|
|
|
Shares
|
|
($.001
Par)
|
|
Capital
|
|
Deficit
|
|
Equity
|
||||||
|
Balances
at December 31, 2003
|
1,000
|
$
|
1
|
$
|
999
|
$
|
(18,716
|
)
|
$
|
(17,716
|
)
|
|||||
|
Gain
(loss) for the year
|
(15,784
|
)
|
(15,784
|
)
|
||||||||||||
|
Balances
at December 31, 2004
|
1,000
|
$
|
1
|
$
|
999
|
$
|
(34,500
|
)
|
$
|
(33,500
|
)
|
|||||
|
Gain
(loss) for the year
|
(2,953
|
)
|
(2,953
|
)
|
||||||||||||
|
Balances
at December 31, 2005
|
1,000
|
$
|
1
|
$
|
999
|
$
|
(37,453
|
)
|
$
|
(36,453
|
)
|
|||||
|
Debt
conversion
|
4,899,000
|
4,899
|
4,900
|
-
|
9,799
|
|||||||||||
|
Issuance
of stock for cash
|
5,400,000
|
5,400
|
49,000
|
-
|
54,400
|
|||||||||||
|
Gain
(loss) for the period
|
-
|
-
|
-
|
(5,015
|
)
|
(5,015
|
)
|
|||||||||
|
Balances
at
|
||||||||||||||||
|
June
30, 2006 (Unaudited)
|
10,300,000
|
$
|
10,300
|
$
|
54,899
|
$
|
(42,468
|
)
|
$
|
22,731
|
||||||
The
accompanying notes are an integral part of the financial
statements.
ART
DESIGN, INC.
STATEMENTS
OF CASH FLOWS
|
Six
Months
|
||||||||||
|
Ended
|
||||||||||
|
Year
Ended
|
Year
Ended
|
June
30, 2006
|
||||||||
|
Dec.
31, 2004
|
Dec.
31, 2005
|
(Unaudited)
|
||||||||
|
Cash
Flows From Operating Activities:
|
||||||||||
|
Net
income (loss)
|
$
|
(15,784
|
)
|
$
|
(2,953
|
)
|
$
|
(5,015
|
)
|
|
|
|
||||||||||
|
Adjustments
to
reconcile net loss to
|
||||||||||
|
net
cash provided by (used for)
|
||||||||||
|
operating
activities:
|
||||||||||
|
Amortization
& depreciation
|
2,361
|
1,027
|
888
|
|||||||
|
Accounts
receivable
|
1,465
|
1,759
|
(2,730
|
)
|
||||||
|
Accrued
payables - related party
|
6,476
|
(3,905
|
)
|
3,000
|
||||||
|
Accrued
payables
|
-
|
235
|
4,099
|
|||||||
|
Unearned
revenue
|
-
|
(5,975
|
)
|
-
|
||||||
|
Net
cash provided by (used for)
|
||||||||||
|
operating
activities
|
(5,482
|
)
|
(9,812
|
)
|
242
|
|||||
|
Cash
Flows From Investing
Activities:
|
||||||||||
|
Fixed
assets
|
(2,001
|
)
|
-
|
-
|
||||||
|
Net
cash provided by (used for)
|
||||||||||
|
investing
activities
|
(2,001
|
)
|
-
|
-
|
||||||
(Continued
on Following Page)
The
accompanying notes are an integral part of the financial
statements.
F-5
ART
DESIGN, INC.
STATEMENTS
OF CASH
FLOWS
(Continued From Previous
Page)
The
accompanying notes are an integral part of the financial
statements.
ART
DESIGN, INC.
NOTES
TO FINANCIAL STATEMENTS
December
31, 2004 and 2005, & June 30, 2006 (Unaudited)
NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Art
Design, Inc. (the “Company”), was incorporated in the State of Colorado on
January 16, 2002. The Company
sells
art
work and interior decorating to professional and business offices.
Use
of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect reported amounts of assets and liabilities and disclosure of
contingent
assets and liabilities at the date of the financial statements and
the reported
amounts of revenues and expenses during the reporting period. Actual
results
could differ from those estimates.
Cash
and cash equivalents
The
Company considers all highly liquid investments with an original maturity
of
three months or less as cash equivalents.
Accounts
receivable
The
Company reviews accounts receivable periodically for collectability
and
establishes an allowance for doubtful accounts and records bad debt
expense when
deemed necessary. At December 31, 2004 and 2005, and June 30, 2006
the Company
had no balance in its allowance for doubtful accounts.
Property
and equipment
Property
and equipment are recorded at cost and depreciated under accelerated
methods
over each item's estimated useful life.
Revenue
recognition
Revenue
is recognized on an accrual basis as earned under contract terms, generally
when
ordered products are shipped.
Advertising
costs
Advertising
costs are expensed as incurred. The Company had no advertising costs
in 2004,
2005, or for the six months ended June 30, 2006.
F-7
ART
DESIGN, INC.
NOTES
TO FINANCIAL STATEMENTS
December
31, 2004 and 2005, & June 30, 2006 (Unaudited)
NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
Income
tax
The
Company is currently treated as an S-Corporation for income tax purposes,
and
therefore pays no income taxes at the corporate level.
Net
income (loss) per share
The
net
income (loss) per share is computed by dividing the net income (loss)
by the
weighted average number of shares of common outstanding. Warrants,
stock
options, and common stock issuable upon the conversion of the Company's
preferred stock (if any), are not included in the computation if the
effect
would be anti-dilutive and would increase the earnings or decrease
loss per
share.
Financial
Instruments
The
carrying value of the Company’s financial instruments, as reported in the
accompanying balance sheets, approximates fair value.
Long-Lived
Assets
In
accordance with Statement of Financial Accounting Standard 144 “Accounting for
the Impairment or Disposal of Long-Lived Assets”, the Company regularly reviews
the carrying value of intangible and other long-lived assets for the
existence
of facts or circumstances, both internally and externally, that may
suggest
impairment. If impairment testing indicates a lack of recoverability,
an
impairment loss is recognized by the Company if the carrying amount
of a
long-lived asset exceeds its fair value.
Products
and services, geographic areas and major customers
The
Company earns revenue from the sale of art products and design services,
but
does not separate sales of different product lines into operating segments.
In
2004 two customers accounted for 26% of sales, in 2005 two customers
accounted
for 52% of sales, and for the six months ended June 30, 2006 two customers
accounted for 77% of sales. All sales each year were domestic and to
external
customers.
F-8
ART
DESIGN, INC.
NOTES
TO FINANCIAL STATEMENTS
December
31, 2004 and 2005, & June 30, 2006 (Unaudited)
NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
Recent
Accounting Pronouncements
In
November 2004, the FASB issued SFAS No. 151, “Inventory Costs (An Amendment of
ARB No. 43, Chapter 4)”. SFAS 151 amends and clarifies financial accounting and
reporting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). The Company has adopted the
provisions of
SFAS No. 151 which are effective in general for inventory costs incurred
during
fiscal years beginning after June 15, 2005. The adoption did not have
a material
effect on the results of operations of the Company.
In
December 2004, the FASB issued SFAS No. 152, “Accounting for Real Estate
Time-Sharing Transactions (An Amendment of FASB Statements No. 66 and
67)”. SFAS
152 amends FASB 66 and 67 to reference the accounting and reporting
guidance for
real estate time-sharing transactions provided for in AICPA Statement
of
Position 04-2. of The Company has adopted the provisions of SFAS No.
152 which
are effective for financial statements for fiscal years beginning after
June 15,
2005. The adoption did not have a material effect on the results of
operations
of the Company.
In
December 2004, the FASB issued SFAS No. 153, “Exchange of Nonmonetary Assets (An
Amendment of APB No. 29)”. SFAS 153 amends Opinion 29 to eliminate the fair
value accounting exception for nonmonetary exchanges of similar productive
assets, and replaces that exception with a general exception for
nonmonetary
assets
that
do
not have commercial substance. The Company has adopted the provisions
of SFAS
No. 153 which are effective in general for nonmonetary asset exchanges
occurring
in fiscal years beginning after June 15, 2005. The adoption did not
have a
material effect on the results of operations of the Company.
In
March
2005, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment".
SFAS
123(r) requires that the cost resulting from all share-based payment
transactions be recognized in the financial statements. The Company
has adopted
the provisions of SFAS No. 123(r) which are effective in general for
transactions entered into or modified after June 15, 2005. The adoption
did not
have a material effect on the results of operations of the Company.
In
August
2005, the Financial Accounting Standards Board ("FASB") issued Statement
of
Financial Accounting Standard ("SFAS") No. 154, “Accounting Changes and Error
Corrections." SFAS 154 changes the requirements for the accounting
for and
reporting of a change in accounting principle, requiring in general
retrospective application to prior periods' financial statements of
changes in
accounting principle. The Company has adopted the provisions of SFAS
No. 154
which are effective for accounting changes and corrections of errors
beginning
after December 15, 2005. The adoption did not have a material effect
on the
results of operations of the Company.
F-9
ART
DESIGN, INC.
NOTES
TO FINANCIAL STATEMENTS
December
31, 2004 and 2005, & June 30, 2006 (Unaudited)
NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
In
March
2006, the Financial Accounting Standards Board ("FASB") issued Statement
of
Financial Accounting Standard ("SFAS") No. 155, “Accounting for Certain Hybrid
Financial Instruments." SFAS 155 resolves certain accounting issues
related to
various hybrid financial instruments. The Company has adopted the provisions
of
SFAS No. 155 which are effective for fiscal years beginning after September
15,
2006. The adoption did not have a material effect on the results of
operations
of the Company.
NOTE
2. RELATED PARTY TRANSACTIONS
The
Company has a note payable to a Company officer. The note is unsecured
and
payable upon demand. The note bears interest at 8% per annum if not
paid
promptly upon demand. The outstanding principal balance on the note
was $44,000
at December 31, 2004 and 2005, and $34,201 at June 30, 2006.
The
Company had related party payables at December 31, 2004 and 2005, and
June 30,
2006 of $10,551, $6,646 and $9,646, for materials, services and rent
advanced to
the Company.
NOTE
3. FIXED ASSETS
Fixed
asset values recorded at cost are as follows:
|
|
2004
|
|
2005
|
|
June
30,
2006
|
|||||
|
Furniture
& Fixtures
|
$
|
2,560
|
$
|
2,560
|
$
|
2,560
|
||||
|
Computers
|
6,511
|
6,511
|
6,511
|
|||||||
|
Leasehold
Improvements
|
4,198
|
4,198
|
4,198
|
|||||||
|
13,269
|
13,269
|
13,269
|
||||||||
|
Less
accumulated depreciation
|
(6,655
|
)
|
(7,682
|
)
|
(8,570
|
)
|
||||
|
Total
|
$
|
6,614
|
$
|
5,587
|
$
|
4,699
|
||||
Depreciation
expense in 2004, 2005 and for the three months ended June 30, 2006
was $2,361,
$1,027 and $888.
F-10
ART
DESIGN, INC.
NOTES
TO FINANCIAL STATEMENTS
December
31, 2004 and 2005, & June 30, 2006 (Unaudited)
NOTE
4. LEASE COMMITMENT
The
Company rents office and production space at $500 per month on a verbal
month to
month basis from a corporation under common control. Rent expense at
December
31, 2004 and 2005, and June 30, 2006 was $16,250 and $6,000 and
$3,000.
NOTE
5. GOING CONCERN
The
Company has suffered recurring losses from operations and has a large
working
capital deficit. These conditions raise substantial doubt about the
Company’s
ability to continue as a going concern. The Company may raise additional
capital
through the sale of its equity securities, through offerings of debt
securities,
or through borrowings from financial institutions. Management believes
that
actions presently being taken to obtain additional funding provide
the
opportunity for the Company to continue as a going concern.
NOTE
6. STOCK OFFERING
The
Company is currently planning to sell up to 800,000 shares of its common
stock
on a best efforts basis for $0.25 per share, or $200,000, under a Form
SB-2
offering. The costs of this offering through June 30, 2006 amounted
to $7,500.
This amount will reduce the offering proceeds if the offering is successful,
or
will be deducted as part of operations if the offering is
unsuccessful.
F-11