As Filed with the Securities and Exchange Commission on December 26, 2006 File No._______
|
UNITED STATES |
||
|
SECURITIES AND EXCHANGE COMMISSION |
||
|
Washington, D.C. 20549 FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |
||
|
HARCOM PRODUCTIONS, INC. |
||
|
(Name of small business issuer in its charter) |
||
|
Oklahoma |
7380 |
73-1556790 |
|
(State or jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
|
7401 East 46 th Place Tulsa, OK 74145 (918) 664-9933 (Address and telephone number of principal executive offices and principal place of business)
Charles Harwell 7401 E. 46 th Place Tulsa, OK 74145 (918) 664-9933 (Name, address and telephone number of agent for service)
Copies to: Diane J. Harrison, Esq. 6860 Gulfport Blvd. South No. 162, S. Pasadena, FL 33707 Telephone 941-723-7564 Facsimile: 941-531-4935 |
||
Approximate date of commencement of proposed sale to the public: As soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement 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 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. [ ]
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
CALCULATION OF REGISTRATION FEE
|
Title of Each Class of Securities to be Registered |
Amount To Be Registered |
Proposed Maximum Offering Price Per Unit |
Proposed Maximum Aggregate Offering Price (1) |
Amount of Registration Fee |
|
Common Stock par value $0.01 (2) |
1,487,500 |
$1.00 |
$1,487,500.00 |
$ 159.16 |
|
Total |
1,487,500 |
$1.00 |
$1,487,500.00 |
$ 159.16 |
|
(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. |
||||
|
(2) 1,487,500 shares of common stock relate to the Resale Offering by forty-six (46) selling security holders. This includes 987,500 shares beneficially owned by our current officers, directors and affiliated persons. |
||||
ii
The information in this prospectus is not complete and may be changed. The securities offered by this prospectus may not be sold until the Registration Statement filed with the Securities and Exchange Commission is effective. This prospectus is neither an offer to sell these securities nor a solicitation of an offer to buy these securities in any state where an offer or sale is not permitted.
PRELIMINARY PROSPECTUS
Dated December 26, 2006
|
HARCOM PRODUCTIONS, INC. |
|
|
The Securities Being Offered by Harcom Productions, Inc. Are Shares of Common Stock |
|
|
Shares offered by Security Holders: |
No Minimum - 1,487,500 Maximum |
This prospectus relates to 1,487,500 shares of which are owned as of December 26, 2006 and being offered in the Resale Offering, by the security holders named in this prospectus under the caption "Selling Security Holders." The selling security holders may use the services of participating brokers/dealers licensed by the National Association of Securities Dealers, Inc., each of which will receive a commission from the shares offered and sold by such participating broker/dealer. Both Affiliated and non-affiliated selling security holders must sell their shares at the fixed price of $1.00 per share. Our selling security holders are underwriters as defined in the Securities Act of 1933.
Should we change the offering price of our stock, we will file an amendment to this registration statement reflecting our new offering price. Our common stock is presently not traded on any market or securities exchange. There are no arrangements to place the funds raised in an escrow, trust or similar account.
The purchasers of common stock in this offering may be receiving an illiquid security.
We will not receive any proceeds from the resale of shares of common stock by the selling shareholders. We will incur all costs associated with this registration statement and prospectus.
Our common stock is not currently listed or quoted on any quotation medium and involves a high degree of risk. You should read the "RISK FACTORS" section beginning on page 2 before you decide to purchase any of our common stock.
Neither the Securities and Exchange Commission nor any state commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Nor have they made, nor will they make, any determination as to whether anyone should buy these securities. Any representation to the contrary is a criminal offense .
|
|
Per Share |
Total |
|
Price to Public, Resale Offering |
$1.00 |
$1,487,500.00 |
|
Underwriting Discounts and Commissions, Resale Offering |
-0- |
-0- |
|
Proceeds to Harcom Productions, Inc. |
-0- |
-0- |
The date of this prospectus is December 26, 2006
iii
TABLE OF CONTENTS
|
1 |
|
|
1 |
|
|
3 |
|
|
6 |
|
|
6 |
|
|
6 |
|
|
6 |
|
|
6 |
|
|
8 |
|
|
IMPACT OF THE "PENNY STOCK" RULES ON BUYING OR SELLING OUR COMMON STOCK |
9 |
|
10 |
|
|
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS |
10 |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
12 |
|
12 |
|
|
13 |
|
|
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES |
14 |
|
14 |
|
|
14 |
|
|
20 |
|
|
20 |
|
|
23 |
|
|
26 |
|
|
28 |
|
|
29 |
|
|
29 |
|
|
30 |
|
|
30 |
|
|
31 |
|
|
31 |
|
|
31 |
|
|
31 |
|
|
32 |
|
|
32 |
|
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
32 |
|
32 |
|
|
A |
|
|
33 |
|
|
33 |
|
|
33 |
|
|
33 |
|
|
33 |
|
|
35 |
|
|
35 |
|
|
36 |
iv
PART I
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information regarding Harcom Productions, Inc. (“Us,” “We,” “Our,” “Harcom,” “HPI,” the “Company,” or "the Corporation") and our financial statements and the related notes appearing elsewhere in this prospectus.
|
The Corporation |
|
|
Our Business: |
Harcom Productions, Inc. specializes in Music-on-Hold messaging systems and messaging content for businesses across the nation. Harcom has been doing business under their current name since 1999. Prior to this, it was conducting business under the name Training Systems Inc. since 1985. The Company has established a solid reputation with significant clientele and provides a complete suite of turn-key services that offers customers the convenience and cost-efficiency of one-stop sourcing for all of their on hold messaging and radio advertising needs. We sell our products to various businesses such as insurance agencies, funeral homes, mobile home dealers, automobile dealerships, and collision repair shops across the country. If they have a telephone system with Music-on-Hold capability, they are a potential customer. |
|
Harcom’s facility is designed to optimize efficiency in both sales and manufacturing of the product. The Company's experienced and qualified employees are able to present the product to the end business user directly over the telephone, play a sample for them, and have the purchasing decision made within minutes. Information is then taken from the customer over the telephone and entered onto a fact sheet. The fact sheet is passed to the scriptwriter who merges the custom information on the fact sheet with the generic version of the messages that are most appropriate to that industry to produce “scripts” from which the in house announcer can read. Our in-house announcer then reads the custom scripts and blends their voice with the music beds that Harcom owns. The production process takes about three weeks on average. Next, the client is contacted by the sales manager who originally oversaw the initial point of sale and is given the opportunity to hear the finished production over the telephone in order to make any final changes. Once perfected, the product is then stored in a digital player and shipped to the client and the invoice is generated. Customers are billed monthly until the invoice is paid in full. Because of our streamlined sales and delivery system, we offer our products at prices that are 10%-50% less than our competitors in the industry. For those clients who require a module in order to achieve Music-on-Hold capability on their phone system, they are required to purchase a module before Harcom will begin production. This is due to our cost of the modules. These clients represent approximately 45% of our customer base. |
|
|
Our State of Organization: |
We were incorporated in Oklahoma on February 5, 1999, as The Powerhouse, L.L.C. Our name was changed to Harcom Productions, LLC, on June 28, 1999 due to a conflict with a company with a similar name. We began the process of changing from a limited liability company to a “C” corporation in October of 2006. We received our approval for conversion from a limited liability company to corporation status on November 9, 2006. Our principal executive offices are located at 7401 East 46 th Place, Tulsa, Oklahoma 74145. Our phone number is (918) 664-9933. |
|
The Offering |
|
|
Number of Shares Being Offered: |
The selling security holders may sell up to 1,487,500 shares of common stock at $1.00 per share. Issuance of these shares to the selling security holders was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended. Affiliated selling security holders and Non-affiliated selling security holders will sell at the fixed price of $1.00 until we are quoted on the OTCBB or listed on a securities exchange. Our selling shareholders are underwriters as defined under the Securities Act of 1933. |
|
Number of Shares Outstanding After the Offering: |
1,487,500 shares of our common stock are issued and outstanding. We have no other securities issued. |
1
PROSPECTUS SUMMARY
Continued
|
Selected Financial Data |
|
|
|
|
As of September 30, 2006 (Unaudited) |
December 31, 2005 (Audited) |
|
Balance Sheet |
|
|
|
Total Assets |
$ 295,835 |
$ 259,273 |
|
Total Liabilities |
365,736 |
343,208 |
|
Stockholders Equity (Deficit) |
$ (69,901) |
$ (83,935) |
|
|
|
|
|
Statement of Operations |
|
As of September 30, 2005 (Unaudited) |
|
Revenue |
$ 535,264 |
$ 501,439 |
|
Cost of Goods Sold |
180,074 |
147,382 |
|
Operating Expense |
313,200 |
313,736 |
|
Other Expense |
$ 27,956 |
$ 28,890 |
|
Net Income (Loss) |
$ 14,034 |
$ 11,431 |
|
|
|
|
|
|
|
|
|
|
December 31, 2005 (Audited) |
December 31, 2004 (Audited) |
|
Balance Sheet |
|
|
|
Total Assets |
$ 259,273 |
$ 275,071 |
|
Total Liabilities |
343,208 |
377,328 |
|
Stockholders Equity |
$ (83,935) |
$ (102,257) |
|
|
|
|
|
Statement of Operations |
|
|
|
Revenue |
$ 651,978 |
$ 612,934 |
|
Cost of Goods Sold |
196,921 |
172,083 |
|
Operating Expense |
404,371 |
420,756 |
|
Other Expense |
32,364 |
31,320 |
|
Net Income (Loss) |
$ 18,322 |
$ (11,225) |
2
RISK FACTORS
Before you invest in our common stock, you should be aware that there are risks, as described below. You should carefully consider these risk factors together with all of the other information included in this prospectus before you decide to purchase shares of our common stock. Any of the following risks could adversely affect our business, financial condition, and results of operations. We have incurred substantial losses from inception while realizing limited revenues and we may never generate substantial revenues or be profitable in the future.
Risks Related To the Company
(1) Our Failure to Raise Additional Capital Will Significantly Limit Our Ability to Conduct Our Expansion of Operations .
We must raise additional capital to expand operations. Our current working capital will be sufficient to sustain our current operations for at least twelve months. Currently we are utilizing around $30,000 per month for operations. While our current method of operations follows a sound capital financing program, there is the risk that we may not be able to increase revenue and income due to an inability to generate clients or a higher cost of operations results. Without raising additional capital we may not be able to implement our planned expansion of operations. Investors may lose part or all of their investment if we cannot generate profits for distribution.
(2) We May Not Be Able to Fully Implement Our Expansion Due to Our Lack of Personnel .
On December 31, 2006, we will have completed seven years of operations. While we were successful as a music/message on hold provider, we lack experienced personnel for our expansion. We are unsure whether we will successfully obtain a significant market share without the experienced personnel we need and this could prevent us from realizing profits for distribution.
(3) We Have Generated Profits or Losses From Inception But We May Never Generate Substantial Revenues or Be Profitable in the Future.
Since we began operations, we have generated profits and losses during our operations. We do not know if our expansion of operations will generate substantial revenues or be profitable in the future. Even if we expand operations we are not certain that we will be able to generate profits thereby jeopardizing any investment in our company.
(4) We Are Dependent on Key People with No Assurance That They Will Remain with Us: Losing such Key Persons Could Mean Losing Revenue.
Our success will depend to a great extent on retaining the continued services of our President/Director, Shane Harwell, and our Director and General Manager, Charles Harwell. Neither Mr. Shane Harwell nor Mr. Charles Harwell may remain with the corporation due to the lack of an employment contract. If we lose our key persons, our business may suffer. We depend substantially on the continued services and performance of Messrs. Harwell to generate profits and investors will be at risk to lose some or all of their investment in the event they leave our company.
(5) Our Competitors Have Greater Financial, Marketing and Distribution Resources than We Do and If We Are Unable to Compete Effectively with Our Competitors, We Will Not Be Able to Increase Revenues or Generate Profits .
The market for music/message on hold services is intensely competitive. While we have extensive experience in operating as an ongoing business, we have not demonstrated the ability to be consistently profitable. Our inability to generate profits consistently is an ongoing concern. Our ability to increase revenues and generate profits is directly related to our ability to compete with our competitors. We face competition from competing companies in this same market that have possible more financial, marketing, and distribution resources than we have. These greater resources could permit our competitors to implement extensive advertising and promotional programs that we may not be able to match. There is a high degree of risk that we will not be able to compete successfully in the future.
(6) There Are Relationships Within the Music/Message on Hold Industry That must Be Maintained, and Any Interruption in These Relationships Could Have a Significant Effect on Our Ability to Compete Effectively.
3
Our president, Shane Harwell, has provided our strategic direction since 1999. Our Director, Charles Harwell, acting in his capacity as our General Manager, has provided the daily direction of our company for those same seven years. Contacts in the industry are critical to our future success; we are targeting the same business segment of the market as we did previously but on the basis of expanding operations. We are reliant upon the contacts of Messrs. Harwell as a source of future clients. Should we fail to maintain these relationships or if there is any disruption in these critical business relationships, we would have difficulty generating new contacts and, thereby, difficulty competing effectively.
Risks Related To This Offering
(7) There Is No Public Market for Our Shares, and We Do Not Know If One Will Develop Due to the Limited Demand for Stocks In the Business Services We Offer.
Purchasers of these shares are at risk of no liquidity for their investment. Prior to this offering, there has been no established trading market for our securities, and we do not know that a regular trading market for the securities will develop. Our shareholders will be offering shares for sale in a company that has very limited offering of music/message on hold services. Due to the limited services we offer, we anticipate that demand for our shares will not be very high. If a trading market does develop for the securities offered hereby, we do not know if it will be sustained. We plan to list the common stock for trading on the over-the-counter (“OTC”) Electronic Bulletin Board. Such application will be filed with the National Association of Securities Dealers (“NASD”). We must obtain the services of an NASD approved market maker to file an application for our company and we do not know if such market maker will be able to obtain a listing or if an established market for our common stock will be developed.
(8) Since We Are Selling up to 1,487,500 Shares of Our Common Stock on a Self-underwritten Basis, Purchasers, If Any, Will Not Have the Benefit of an Underwriter or Broker Selling Our Shares.
We are selling in our resale offering up to a maximum of 1,487,500 shares of our common stock on a self-underwritten basis. We are less likely to sell the shares we are offering on a self-underwritten basis than if we were selling the shares through an underwriter. By selling our stock on a self-underwritten basis, we will not be able to utilize the services of an underwriter to offer or sell our securities for us. We will undertake efforts on our own to market and sell the securities to the public. We have not set a minimum with respect to the amount of our securities that we intend to sell. Even if a purchaser buys shares of our common stock, we may not be able to sell any other additional shares proposed for sale pursuant to this offering. This may cause our stockholders to lose all or a substantial portion of their investment.
(9) Because it May Be Difficult to Effect a Change in Control of Harcom Productions, Inc. Without Current Management Consent, Management May Be Entrenched Even Though Stockholders May Believe Other Management May Be Better and a Potential Suitor Who May Be Willing to Pay a Premium to Acquire Us May Not Attempt to Do So.
Shane Harwell, President and Director, currently holds approximately 31.51% of our outstanding voting stock. In addition, there is approximately another 37% of shares owned by relatives of Mr. Harwell. If Mr. Harwell and his relatives choose to keep all of their stock (that is, they sell none of their stock during this offering), Mr. Harwell and his family could retain their status as controlling security holders. Such concentration of ownership may have the effect of delaying, deferring or preventing a change in control of us and entrenching current management even though stockholders may believe other management may be better. Potential suitors who otherwise might be willing to pay a premium to acquire us may decide not to acquire us because it may be difficult to effect a change in control of us without current management's consent. Mr. Harwell has the ability to control the outcome on all matters requiring stockholder approval, including the election and removal of directors; any merger, consolidation or sale of all or substantially all of our assets; and the ability to control our management and affairs.
(10) The Possible Sales of Shares of Common Stock by Our Selling Security Holders May Have a Significant Adverse Effect on the Market Price of Our Common Stock Should a Market Develop.
The 1,487,500 shares of common stock owned by the selling security holders will be registered with the U.S. Securities Exchange Commission. The security holders may sell some or all of their shares immediately after they are registered. In the event that the security holders sell some or all of their shares, the price of our common stock could decrease significantly.
Our ability to raise additional capital through the sale of our stock in a private placement may be harmed by these competing re-sales of our common stock by the selling security holders. Potential investors may not be interested in purchasing shares of our common stock if the selling security holders are selling their shares of common stock. The selling of stock by the security
4
holders could be interpreted by potential investors as a lack of confidence in us and our ability to develop a stable market for our stock. The price of our common stock could fall if the selling security holders sell substantial amounts of our common stock. These sales may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate because the selling security holders may offer to sell their shares of common stock to potential investors for less than we do.
(11) Our Lack of Business Diversification Could Result in the Devaluation of Our Stock if our Revenues From Our Primary Products Decrease .
We expect our business to solely consist of business to business on-hold messaging system sales. We do not have any other lines of business or other sources of revenue if we are unable to compete effectively in the marketplace. While our lack of diversification has not hurt our profitability in the past, our expansion of operations may impact our lack of diversity. This lack of business diversification could cause you to lose all or some of your investment if we are unable to generate additional revenues since we do not expect to have any other lines of business or alternative revenue sources.
(12) Changes in the Prices of Our Services Can Be Volatile and These Changes Will Significantly Impact Our Financial Performance and the Value of Your Investment .
Our results of operations and financial condition will be significantly affected by the cost and supply of our services as well as those of our competitors. Changes in the price and supply of equipment and appropriate voice talent for recording messages are subject to and determined by market forces over which we have no control. Generally, higher costs of equipment and voice talent will produce lower profit margins. This is especially true if market conditions do not allow us to pass through increased costs to our customers. There is no assurance that we will be able to pass through such costs through higher prices. If we experience a sustained period of higher costs, such costs will reduce our ability to generate revenues and our profit margins may significantly decrease or be eliminated and you may lose some or all of your investment.
(13) There Has Been No Independent Valuation of the Stock, Which Means That the Stock May Be Worth less than the Purchase Price.
The per share purchase price has been determined by us without independent valuation of the shares. We established the offering price based on our estimate of capital and expense requirements, not based on perceived market value, book value, or other established criteria. We did not obtain an independent appraisal opinion on the valuation of the shares. The shares may have a value significantly less than the offering price and the shares may never obtain a value equal to or greater than the offering price.
(14) Investors May Never Receive Cash Distributions Which Could Result in an Investor Receiving Little or No Return on His or Her Investment.
Distributions are payable at the sole discretion of our board of directors. We do not know the amount of cash that we will generate, if any, once we have more productive operations. Cash distributions are not assured, and we may never be in a position to make distributions.
(15) The Penny Stock Rules Could Restrict the Ability of Broker-dealers to Sell Our Shares Having a Negative Effect on Our Offering.
The SEC has adopted penny stock regulations which apply to securities traded over-the- counter. These regulations generally define penny stock to be any equity security that has a market price of less than $5.00 per share or an equity security of an issuer with net tangible assets of less than $5,000,000 as indicated in audited financial statements, if the corporation has been in continuous operations for less than three years. Subject to certain limited exceptions, the rules for any transaction involving a penny stock require the delivery, prior to the transaction, of a risk disclosure document prepared by the SEC that contains certain information describing the nature and level of risk associated with investments in the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Monthly account statements must be sent by the broker-dealer disclosing the estimated market value of each penny stock held in the account or indicating that the estimated market value cannot be determined because of the unavailability of firm quotes. In addition, the rules impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and institutional accredited investors (generally institutions with assets in excess of $5,000,000). These practices require that, prior to the purchase, the broker-dealer determined that
5
transactions in penny stocks were suitable for the purchaser and obtained the purchaser's written consent to the transaction. If a market for our common stock does develop and our shares trade below $5.00 per share, it will be a penny stock. Consequently, the penny stock rules will likely restrict the ability of broker-dealers to sell our shares and will likely affect the ability of purchasers in the offering to sell our shares in the secondary market. Trading in our common stock will be subject to the "penny stock" rules. Due to the thinly traded market of these shares investors are at a much higher risk to lose all or part of their investment. Not only are these shares thinly traded but they are subject to higher fluctuations in price due to the instability of earnings of these smaller companies. As a result of the lack of a highly traded market in our shares investors are at risk of a lack of brokers who may be willing to trade in these shares.
A NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and uncertainties. We use words such as "anticipates," "believes," "plans," "expects," "future," "intends," and similar expressions to identify these forward-looking statements. Prospective investors should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by Harcom Productions, Inc. described in "Risk Factors" and elsewhere in this prospectus. For example, a few of the uncertainties that could affect the accuracy of forward-looking statements include:
(a)
an abrupt economic change resulting in an unexpected downturn in demand;
(b)
governmental restrictions or excessive taxes on our products;
(c)
over-abundance of companies supplying on hold music/message systems;
(d)
economic resources to support the promotion of new products and services;
(e)
expansion plans, access to potential clients, and advances in technology; and
(f)
lack of working capital that could hinder the promotion and distribution of products and services to a broader based business and retail population.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock offered through this Prospectus by the selling shareholders.
DETERMINATION OF OFFERING PRICE
The price of the shares we are offering was arbitrarily determined by us. The offering price bears no relationship whatsoever to our assets or earnings. Among factors considered were:
(a)
Our capital structure,
(b)
Our relative cash requirements, and
(c)
Our management expertise.
DILUTION
1,487,500 shares of the common stock to be sold by the selling shareholders is common stock that is currently issued and outstanding. Accordingly, it will not cause dilution to our existing shareholders.
SELLING SECURITY HOLDERS
This prospectus will be used for the offering of shares of our common stock owned by selling security holders. The selling security holders may offer for sale up to 1,487,500 of the 1,487,500 shares of our common stock issued to them. Selling security holders, Affiliates and Non-affiliates must sell their shares at $1.00 for the duration of this offering. We will not receive any proceeds from such sales. The resale of the securities by the selling security holder is subject to the prospectus delivery and other requirements of the Securities Act. All selling security holders have been advised to notify any purchaser of their shares that none of the proceeds from the sale of their stock will go to the company. All expenses of this offering are being paid for by us on behalf of selling security holders. The following table sets forth information on our selling security shareholders.
6
Table 1.0 Selling Security Holders
|
Name of security holder |
Shares beneficially owned as of the date of this prospectus (1) (3) |
Percent owned as of the date of this prospectus |
Maximum number of shares to be sold pursuant to this prospectus |
Percent owned after offering is complete (2) |
Position, office or other material relationship to the company within last three years |
|
Shane Harwell |
468,750 |
31.51% |
468,750 |
31.51% |
President, Secretary, Director, Husband of Treasurer |
|
Susan Harwell |
468,750 |
31.51% |
468,750 |
31.51% |
Treasurer, Director, Wife of President |
|
Charles Harwell |
12,500 |
0.84% |
12,500 |
0.84% |
Director, Father of President |
|
Meredith Hutcherson |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Stephen Ellison |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Johnna Ellison |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Carolyn Ott |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Russell Allshouse |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Luigi Balletto |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
James McMasters |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Cynthia Caldwell |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Gary Troyanowski |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Donna Troyanowski |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Gregg Troyanowski |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Veronica Hutcherson |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Rick Hutcherson |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Zachary Gomez |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
William Geier |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Gabriel Cap |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Mary Anne Whitenack |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Don Whitenack |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Janell Vonigas |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Derek Vonigas |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Thomas Newman |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Susan Newman |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Cheryl Newman |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Scott Hendrickson |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Andrew Maris |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Richard Maris |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Julie Maris |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Melinda Gilbert |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Caleb Gilbert |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Rhett Harwell |
12,500 |
0.84% |
12,500 |
0.84% |
Brother of President |
|
Michelle Harwell |
12,500 |
0.84% |
12,500 |
0.84% |
Sister-in-Law of President |
|
Linda Harris |
12,500 |
0.84% |
12,500 |
0.84% |
|
|
Scarlet M. Pepin |
12,500 |
0.84% |
12,500 |
0.84% |
Sister of President |
7
All of the shares offered by this prospectus may be offered for resale, from time to time, by the selling shareholders, pursuant to this prospectus, in one or more private or negotiated transactions, in open market transactions in the over-the-counter market, or otherwise, or by a combination of these methods, at fixed prices that may be changed, at negotiated prices, or otherwise. The selling shareholders may effect these transactions by selling their shares directly to one or more purchasers or to or through broker-dealers or agents. The compensation to a particular broker-dealer or agent may be in excess of customary commissions. Each of the selling shareholders is an "underwriter" within the meaning of the Securities Act in connection with each sale of shares. The selling shareholders will pay all commissions, transfer taxes and other expenses associated with their sales. In the event the selling security holders sell all of their shares in the secondary offering they will own no shares in the company upon completion of the secondary offering.
PLAN OF DISTRIBUTION
Resale Offering
Our affiliated and non-affiliated selling security holders, or their pledgees, donees, transferees, or any of their successors in interest selling shares received from the selling security holders as a gift, partnership distribution or other non-sale-related transfer after the date of this prospectus (all of whom may be selling security holders), may sell their shares of common stock from time to time at the fixed price of $1.00 per share, or their pledgees, donees, transferees, or any of their successors in interest selling shares received from the selling security holders as a gift, partnership distribution or other non-sale-related transfer after the date of this prospectus (all of whom may be selling security holders), may sell their shares of common stock from time to time at the fixed price of $1.00 per share. In a post-effective amendment to this registration we will disclose pledgees, donees and other transferees of the selling security holders, if any, as selling security holders. The selling security holders may sell their shares of common stock by one or more of the following methods, without limitation:
(a)
block trades in which the broker or dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
(b)
purchases by a broker or dealer as principal and resale by the broker or dealer for its own account pursuant to this prospectus;
(c)
ordinary brokerage transactions and transactions in which the broker solicits purchases;
(d)
privately negotiated transactions;
(e)
short sales;
(f)
through the distribution of the shares by the selling security holder to its partners, members or stockholders;
(g)
one or more underwritten offerings on a firm commitment or self-underwritten basis; and
(h)
any combination of any of these methods of sale.
In the event any of our selling security holders agree to sell their shares to a broker-dealer as a principal and the broker-dealer acts as an underwriter, we will file a post-effective amendment to our registration statement disclosing the name of the broker-dealer, providing information on the plan of distribution, and reflecting any other necessary changes. Any broker-dealer that will be involved must seek and obtain clearance of the underwriting compensation and arrangements from the NASD (National Association of Securities Dealers) Corporate Finance Department prior to the sale of any securities by the broker-dealer.
8
The selling security holders may also transfer their shares by gift.
We do not know of any arrangements by the selling security holders for the sale of any of their shares. The selling security holders may engage brokers and dealers, and any brokers or dealers may arrange for other brokers or dealers to participate in effecting sales of the shares. These brokers, dealers or underwriters may act as principals, or as an agent of the selling security holders. Broker-dealers may agree with the selling security holders to sell a specified number of the shares at a stipulated price per share. If a broker-dealer is unable to sell shares acting as agent for the selling security holders, it may purchase as principal any unsold shares at the stipulated price. Broker-dealers that acquire shares as principals may thereafter resell the shares from time to time in transactions on any stock exchange or automated interdealer quotation system on which the shares are then listed, at prices and on terms then prevailing at the time of sale, at prices related to the then-current market price or in negotiated transactions. Broker-dealers may use block transactions and sales to and through broker-dealers, including transactions of the nature described above.
The selling security holders may also sell their shares in accordance with Rule 144 under the Securities Act, rather than pursuant to this prospectus, regardless of whether the shares are covered by this prospectus. From time to time, the selling security holders may pledge, hypothecate, or grant a security interest in some or all of the shares owned by them. The pledgees, secured parties, or persons to whom the shares have been hypothecated will, upon foreclosure in the event of default, be deemed to be selling security holders. The number of selling security holders' shares offered under this prospectus will decrease as and when they take such action. The plan of distribution for the selling security holders' shares will otherwise remain unchanged. In addition, a selling security holder may, from time to time, sell the shares short, and, in those instances, this prospectus may be delivered in connection with the short sales and the shares offered under this prospectus may be used to cover short sales.The selling security holders and any broker-dealers participating in the distributions of the shares may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act. Any profit on the sale of shares by the selling security holders and any commissions or discounts given to any such broker-dealer may be deemed to be underwriting commissions or discounts.
There can be no assurance that the selling security holders will sell any or all of the offered shares.
Under the Securities Exchange Act of 1934 and the regulations thereunder, any person engaged in a distribution of the shares of our common stock offered by this prospectus may not simultaneously engage in market making activities with respect to our common stock during the applicable "cooling off" periods prior to the commencement of such distribution. Also, the selling security holders are subject to applicable provisions that limit the timing of purchases and sales of our common stock by the selling security holders.
We have informed the selling security holders that, during such time as they may be engaged in a distribution of any of the shares we are registering with the U.S. Securities Exchange Commission, they are required to comply with Regulation M. In general, Regulation M precludes the selling security holders, any affiliated purchasers, and any broker-dealer or other person who participates in a distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase, any security which is the subject of the distribution until the entire distribution is complete. Regulation M defines a "distribution" as an offering of securities that is distinguished from ordinary trading activities by the magnitude of the offering and the presence of special selling efforts and selling methods. Regulation M also defines a "distribution participant" as an underwriter, prospective underwriter, broker, dealer, or other person who has agreed to participate or who is participating in a distribution.
Regulation M prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security, except as specifically permitted by Rule 104 of Regulation M. These stabilizing transactions may cause the price of our common stock to be more than it would otherwise be in the absence of these transactions. We have informed the selling security holders that stabilizing transactions permitted by Regulation M allow bids to purchase our common stock if the stabilizing bids do not exceed a specified maximum. Regulation M specifically prohibits stabilizing that is the result of fraudulent, manipulative, or deceptive practices. The selling security holders and distribution participants are required to consult with their own legal counsel to ensure compliance with Regulation M.
IMPACT OF THE "PENNY STOCK" RULES ON BUYING OR SELLING OUR COMMON STOCK
The SEC has adopted penny stock regulations which apply to securities traded over-the- counter. These regulations generally define penny stock to be any equity security that has a market price of less than $5.00 per share or an equity security of an issuer with net tangible assets of less than $5,000,000 as indicated in audited financial statements, if the corporation has been in
9
continuous operations for less than three years. Subject to certain limited exceptions, the rules for any transaction involving a penny stock require the delivery, prior to the transaction, of a risk disclosure document prepared by the SEC that contains certain information describing the nature and level of risk associated with investments in the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Monthly account statements must be sent by the broker-dealer disclosing the estimated market value of each penny stock held in the account or indicating that the estimated market value cannot be determined because of the unavailability of firm quotes. In addition, the rules impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and institutional accredited investors (generally institutions with assets in excess of $5,000,000). These practices require that, prior to the purchase, the broker-dealer determined that transactions in penny stocks were suitable for the purchaser and obtained the purchaser's written consent to the transaction. If a market for our common stock does develop and our shares trade below $5.00 per share, it will be a penny stock. Consequently, the penny stock rules will likely restrict the ability of broker-dealers to sell our shares and will likely affect the ability of purchasers in the offering to sell our shares in the secondary market.
Trading in our common stock will be subject to the "penny stock" rules.
LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings nor are any contemplated by us at this time.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
The names and ages of our directors and executive officers are set forth below. Our By-Laws provide for not less than one and not more than fifteen directors. All directors are elected annually by the stockholders to serve until the next annual meeting of the stockholders and until their successors are duly elected and qualified.
Table 2.0 Directors and Executive Officers
|
Name |
Age |
Position |
|
Shane Harwell |
41 |
President, Secretary and Chairman of the Board of Directors (1) |
|
Susan Harwell |
41 |
Treasurer/Director (2) |
|
Charles Harwell |
67 |
Director (3) |
|
(1) This is the first Directorship of a reporting company held by Mr. Harwell. |
||
|
(2) This is the first Directorship of a reporting company held by Ms. Harwell. |
||
|
(3) This is the first Directorship of a reporting company held by Mr. Harwell. |
||
Background of Executive Officers and Directors
- Shane Harwell has served as our President/Chairman of the Board of Directors since our incorporation in October 2006, prior to which he was our Member/Manager since February 1999. Mr. Harwell began his tenure at the company being responsible for all of the day-to-day operations. This included sales, running of the audio studio, bookkeeping/accounting and the maintenance of the equipment. The responsibility of hiring and training all new employees fell on Mr. Harwell. He developed the necessary job descriptions and company manual providing all the policies and procedures of the company. In coordination with his accountants, he set the internal controls over the accounting and financial management of the company. Shane Harwell was the member/manager of Harcom LLC with 50% ownership of the units since February 1999. When the conversion to a C corporation occurred in October 2006, Mr. Harwell was President and Secretary and appointed to the Board of Directors in the Articles. Mr. Harwell has been involved in the production and distribution of audio and visual tools to businesses since 1988. In 1987 Mr. Harwell graduated Summa Cum Laude from Oral Roberts University in 3.5 years with a 3.9 GPA and a Bachelor of Science degree in Accounting. Immediately following graduation, for four years, he served as General Manager of Training Systems Inc., the largest producer and distributor of radio jingles in the nation at that time. Training Systems Inc. was owned by Mr. Harwell’s father in law, Robert A Tolomeo, who mentored Mr. Harwell during that time passing on twenty years of experience in the industry. During that mentorship Mr. Harwell learned all aspects of the business and made improvements and management changes where needed. This included the accounting and administration area, order processing, production, sales, and playback.
10
From 1992 to 2000 Mr. Harwell transferred his skills from the business sector to the non- profit sector. Serving as Vice President of Sales and Marketing for Impact Productions in Tulsa, Oklahoma he began his sales force with one part time staff member and built it into a full time staff of 60 people as they became the largest producers and distributors of outreach television commercials for churches in the nation. In 2001 his marketing team was purchased in an acquisition by Faith Highway, a Delaware Corporation based in Austin, Texas. Faith Highway purchased the group under the stipulation that Mr. Harwell remain in charge of the large marketing force. In 2002, Mr. Harwell was promoted to President of Faith Highway. During his tenure there Faith Highway became the largest producer and syndicator of websites for churches, while remaining the top production company for outreach television commercials. During his last six months of employ with Impact Productions, Mr. Harwell spent thirty hours a week for six months on site at Harcom Productions, as his father, Charles Harwell took the reins.
- Susan Harwell has served as our Treasurer and as a Director since October 2006. From February 1999 to present, Ms. Harwell helped shape the process in the playback department, production department and the billing and administrative areas. She has been involved in the music/message on hold industry for over twenty years. Her expertise is in the areas of office administration and production of the audio products themselves.
- Charles Harwell has served as a Director since February 2000. He has been the General Manager of all daily activities of Harcom Productions since January of 2001. Mr. Harwell attended Samford University in Birmingham, Alabama, and in 1962 received his Bachelor of Science Degree in Accounting. In 1972 Mr. Harwell earned a Master’s of Science Degree in Management from Rollins College in Winter Park, Florida. Mr. Harwell also served in the United States Air Force from the years 1962-1965, where he received an honorable discharge with the rank of 1 st Lieutenant.
As he entered civilian life, he accepted a position with the Florida Gas Company in Winter Park, Florida as the Plant Accountant. He then decided to move on to the American Fire and Casualty Insurance Company in Orlando, Florida where he became their Chief Accountant from 1967-1970.
Then from 1970-1982 Charles worked for the Walt Disney World Company in Lake Buena Vista, Florida. As the Manager of General Accounting he coordinated all areas of general accounting which included general ledger, cost accounting, inventory control, and the fixed assets departments. He produced the financial statements for the Walt Disney World Company and fourteen other related companies. Then, as the Manager of Resort Finance, Mr. Harwell was responsible for the financial decisions pertaining to Walt Disney World hotels, campgrounds, and golf courses. He managed all hotel night audits and convention accounting. As the Manager of Golf Operations, he managed three golf courses and established operating procedures for merchandising, operations and maintenance. Charles was also the Co-Chairman of the Walt Disney World Golf Classic.
From 1982-1986, Mr. Harwell served as Executive Vice President of Management Per Se in Orlando, Florida. He supervised all facets of land development to include locating desirable property, arranging financing, designing plans for development, obtaining government approvals, preparing financial plans, and overseeing the construction of the projects.
From 1986-1995, Mr. Harwell served as the Vice President of Finance and Administration for Palm Beach Atlantic College in West Palm Beach, Florida. In this position, he managed all business and support services functions including Accounting and Finance, Personnel Security, Financial Aid, Food Service, and Campus Mail. He assured quality management of the Campus Bookstore, Building and Grounds Maintenance. Mr. Harwell spearheaded the planning and construction of all new facilities. His responsibilities also included the purchasing of all items required to facilitate a four-year educational institution. At this time he was also the Assistant Professor in the School of Business where he taught courses in Finance, Accounting, Marketing, and Forecasting.
From 1995-2000, Mr. Harwell served as the Director of Operations for Team Classic Golf Services, Inc. in Orlando, Florida. He assisted in procurement of a $51,500,000 bond issue for the financing of a multi-faceted golf complex. He was responsible for all golf operations including the merchandising, the pro shop, golf course maintenance, custodial, and security. Mr. Harwell also served as the owner’s representative for the construction of the golf complex.
In 2000, Mr. Harwell, began working for Harcom Productions as the General Manager. He spent several months working alongside of Susan Harwell, (his daughter in law), who has been working in and around this specific industry for twenty years. Mr. Harwell quickly mastered the nuances of the office administration system as well as the production and delivery systems of the audio products themselves. In early 2001, our President Shane Harwell worked alongside of Mr. Charles Harwell sharing his expertise in recruiting and sales training. Charles Harwell has kept the company on a steady course while managing all day to day activities of the company for the past six years. Our revenues have remained stable with slight growth over that
11
time, despite a significant national economic downturn in 2001 and early 2002. Mr. Charles Harwell is the father of our President Mr. Shane Harwell.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial ownership of shares of our common stock with respect to stockholders who were known by us to be beneficial owners of more than 5% of our common stock as of December 15, 2006, and our officers and directors, individually and as a group. Unless otherwise indicated, the beneficial owner has sole voting and investment power with respect to such shares of common stock.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission ("SEC") and generally includes voting or investment power with respect to securities. In accordance with the SEC rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the table are deemed beneficially owned by the optionees, if applicable. Subject to community property laws, where applicable, the persons or entities named in Table 1.0 (See "Selling Security Holders") have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by them.
Table 3.0 Beneficial Ownership
DESCRIPTION OF SECURITIES
General
We are authorized to issue up to 100,000,000 shares of common stock, $0.01 par value per share, of which 1,487,500 shares are issued and outstanding.
Common Stock
Subject to the rights of holders of preferred stock, if any, holders of shares of our common stock are entitled to share equally on a per share basis in such dividends as may be declared by our Board of Directors out of funds legally available therefore. There are presently no plans to pay dividends with respect to the shares of our common stock. Upon our liquidation, dissolution or winding up, after payment of creditors and the holders of any of our senior securities, including preferred stock, if any, our assets will be divided pro rata on a per share basis among the holders of the shares of our common stock. The common stock is not subject to any liability for further assessments. There are no conversion or redemption privileges or any sinking fund provisions with respect to the common stock and the common stock is not subject to call. The holders of common stock do not have any pre-emptive or other subscription rights.
12
Holders of shares of common stock are entitled to cast one vote for each share held at all stockholders' meetings for all purposes, including the election of directors. The common stock does not have cumulative voting rights.
All of the issued and outstanding shares of common stock are fully paid, validly issued and non-assessable as determined by our legal counsel, Diane J. Harrison, Esq. whose opinion appears elsewhere as an exhibit to this prospectus.
Preferred Stock
We currently have no provisions to issue preferred stock.
Debt Securities
We currently have no provisions to issue debt securities.
Warrants
We currently have no provisions to issue warrants.
Dividend
We have paid no cash dividends on our common stock in the years 2003, 2004, and 2005 respectively. We anticipate that any earnings, in the foreseeable future, will be retained for development and expansion of our business and we do not anticipate paying any further cash dividends in the near future. Our Board of Directors has sole discretion to pay cash dividends with respect to our common stock based on our financial condition, results of operations, capital requirements, contractual obligations, and other relevant factors.
Shares Eligible for Future Resale
Upon the effectiveness of the registration statement, of which this prospectus forms a part, we will have 1,487,500 outstanding common shares registered for resale by the selling shareholders in accordance with the Securities Act of 1933 and there will be 1,000,000 outstanding shares registered for sale by us in accordance with the Securities Act of 1933.
Prior to this registration, no public trading market has existed for shares of our common stock. The sale, or availability for sale, of substantial amounts of common stock in the public trading market could adversely affect the market prices for our common stock.
T ransfer Agent and Registrar
The transfer agent and registrar for our common stock is Island Stock Transfer, Inc., 200 2 nd Avenue South., Suite 300N, St. Petersburg, Florida 33701.
INTEREST OF NAMED EXPERTS AND COUNSEL
Killman, Murrell, & Co. P.C, Certified Public Accountants, independent certified public accountants, whose reports appear elsewhere in this registration statement, was paid in cash for services rendered. Therefore, they have no direct or indirect interest in us. Killman's reports are given based on their authority as an expert in accounting and auditing. Killman, Murrell, & Co. P.C. has provided audited financials for Harcom Productions, Inc. for December 31, 2004 and December 31, 2005. The date of the reports for these audited financials is December 17, 2006.
Harrison Law, P.A. is the counsel who has given an opinion on the validity of the securities being registered which appears elsewhere in this registration statement has no direct or indirect interest in us.
13
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Articles of Incorporation do include a provision under Section 1031(G) of the Oklahoma General Corporation Act, to permit us to indemnify any Director, Officer, agent or employee as to those liabilities and on those terms and conditions as appropriate and to purchase and maintain insurance on behalf of any such persons whether or not the corporation would have the power to indemnify such person against the liability insured against.
Our By-Laws, Article X, Section 3, do permit us to indemnify any Director, Officer, agent or employee as to those liabilities and on those terms and conditions as appropriate and to purchase and maintain insurance on behalf of any such persons whether or not the corporation would have the power to indemnify such person against the liability insured against.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of Harcom Productions, Inc. pursuant to the foregoing provisions, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is unenforceable.
ORGANIZATION WITHIN LAST FIVE YEARS
We were formed in Oklahoma on February 5, 1999, as The Powerhouse, L.L.C. Our name was changed to Harcom Productions, LLC., on June 28, 1999 due to a conflict with a company with a similar name. We began the process of changing from a limited liability company to a “C” corporation in October of 2006. We received our approval for conversion from a limited liability company to corporation status on November 9, 2006.
We have not been involved in any bankruptcy, receivership or similar proceedings since inception nor have we been party to a reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business. We do not foresee any circumstances that would cause us to alter our current business plan within the next twelve months. In the event we do not raise additional capital through the primary offering we will seek funds from private sources.
The Company has had no related transactions with any related persons, promoters or control persons that have had an interest in our business.
DESCRIPTION OF BUSINESS
Business Development
We were originally formed as a Limited Liability Company on February 5, 1999 under the name The Powerhouse, L.L.C. under the laws of the State of Oklahoma. On February 26, 1999 our name was changed to Powerhouse Productions, L.L.C. Later, on June 28, 1999 our name was amended to Harcom Productions, L.L.C. when it was discovered that there was a company with a name similar to the one we were using. We filed Articles of Conversion on October 2, 2006 changing the company from a Limited Liability Company to a “C” corporation with 1,000,000 shares of common stock authorized at a par value of $0.001 per share. On October 5, 2006, we filed articles of amendment to the certificate of incorporation changing the shares of stock authorized to 100,000,000 with a new par value of $0.01 per share.
Prior to February 1999 the company operated under the name Training Systems Inc. since 1970. Training Systems Inc. was founded in 1970 by Robert Tolomeo Sr., Susan Harwell’s father. Mr. Tolomeo, Sr. built the company into the largest radio jingle syndication and on-hold messaging company in the nation up until the mid 1980’s. In 1999 when Mr. Tolomeo, Sr. sold the company to Shane and Susan Harwell, it had retained its solid reputation and good name in the industry. Mr. Tolomeo, Sr. requested that Shane and Susan Harwell change the name of the company, but the transaction permitted them to retain the experienced staff, and the non-cash assets of the company including the intellectual property of the music beds and jingles. Since 1999, the company has maintained a solid reputation with significant clientele and provides a complete suite of turn-key services that offers customers the convenience and cost-efficiency of one-stop sourcing for all of their on hold messaging and radio advertising needs. Since inception, we have engaged in providing Music-on-Hold and messaging for businesses. We are a brick and mortar company that has a full service recording production studio located in 4,000 square feet of office and studio space. Our rent on this space is month to month at $1,750 per month. The appeal of the interior and exterior is quite low. At a price of less than $4 per square foot, it is equivalent to warehouse space prices in Tulsa. One third of the space has very poor heating. We do not own the property. Harcom currently only requires about 3,500 square feet of the space. The appearance
14
of our physical space is perhaps the greatest drain on our ability to attract the type of quality leadership and employees in general that we require to execute our desired expansion.
Our Plan of Operation provides for the leasing of 5,500 square feet of space on a one year lease in a more appealing space in a more appealing part of Tulsa. Management feels this is vital to attracting the type of marketing director, and local clientele we need to attract. We can relocate to a more attractive location (inside and out) for the lease amount of $12 per square foot. Our Plan provides for this $3,750 per month increase in rent, plus an allowance for $15,000 in lost revenues and phone system and computer system relocation expenses associated with such a move.
Currently, we offer professional consulting in Music-on-Hold and messaging services as well some equipment sales and consultation services for commercial clients. All of the work we presently provide that requires actual production of messages we do on site. We do not use anyone on a subcontracted basis. Our objective is to concentrate our efforts on targeting the same market that we have for seven years to maximize our market penetration.
Our Business
(1) Principal Products or Services and Their Markets
We provide commercial clients with professional Music-on-Hold messaging systems and message content. We sell our products to business of every kind, including, insurance agencies, funeral homes, mobile home dealers, automobile dealerships, and collision repair shops across the country. If they have a telephone system with Music-on-Hold capability, they are a potential customer.
Harcom’s facility is designed to optimize efficiency in both sales and production of the product. The Company's team of experienced, qualified employees is able to present the product to the end business user directly over the telephone, play a sample for them, and have the purchasing decision made within minutes. Information is then taken from the customer over the telephone and entered on to a fact sheet. The fact sheet is passed to the scriptwriter who merges the custom information on the fact sheet with the generic version of the messages that are most appropriate to that industry to produce “scripts” from which the in house announcer can read. Our in-house announcer then reads the custom scripts and blends their voice with the music beds that Harcom owns. The production process takes about three weeks on average, and needs to be improved. Next, the client is contacted by the sales manager who originally oversaw the initial point of sale and is given the opportunity to hear the finished production over the telephone in order to make any final changes. Once perfected, the product is then stored in a digital player and shipped to the client and the invoice is generated. Customers are billed monthly until the invoice is paid in full. Because of our streamlined sales and delivery system, we offer our products at prices that are 10%-50% less than our competitors in the industry. For those clients who require a module in order to achieve Music-on-Hold capability on their phone system, they purchase a module from us before we begin production. This is due to our cost of the modules and businesses needing modules represents approximately 45% of our customer base. Currently Harcom’s clients are comprised of about 25% independent insurance agents, 20% mobile home dealers, 15% funeral homes, and the remaining 40% are miscellaneous business entities including real estate agents, hardware stores, glass companies, auto body companies, automobile dealerships, and mailing and shipping stores.
Our principal products and services are as follows:
(a)
on hold messages as a stand alone product;
(b)
on hold converters; and
(c)
on hold players.
In addition there are a myriad of other businesses that can utilize our products. Any business that has more than a single phone line that possesses Music-on-Hold capability is a potential customer. In our experience, this includes about 88% of the businesses that can be contacted by telephone across the nation. The range of our customers includes businesses that generate between $70,000 in annual sales to those that generate $15 million in annual sales. If our potential customer has a marketing budget of at least $5,000 per year, our products fit nicely into the overall marketing scheme.
Many businesses find that although they may not have initially included Music-on-Hold products into their budget it makes little sense for them to invest heavily in other forms of advertising in an effort to create in-bound telephone calls only to lose a significant opportunity while those callers are placed on hold. On hold messaging provides the opportunity for the business to encourage the caller to be patient and remain on hold until someone can assist them. Studies have shown that callers will
15
remain on the line an average of sixty seconds longer when the business has messages playing versus no message or music playing while the caller is placed on hold. In today’s business environment the potential customers who are retained during that 60 seconds of wait time can contribute to a material portion of the sales for that business.
In addition, custom-crafted messages by Harcom Productions Inc. provide the business with the opportunity to up-sell the caller or cross sell the caller as the messages educate the caller on the variety of products or services that the business offers, some of which the caller was initially not aware. Finally, our on hold messages are an important tool for the small business because all of the music is created in our studios at Harcom Productions. Since we hold the rights to the music beds, the business owner is never in danger of offending the American Society of Composers, Authors, and Publishers (ASCAP). ASCAP is the artists’ union that routinely files suit against those who use music written and performed by one of their artists to promote a product or service. Utilizing the local radio station or a CD produced by an artist or label of any kind as on hold music for inbound callers is a violation of copyright law and puts the user at risk of being the subject of a law suit brought by ASCAP. So theoretically every business playing Music-on-Hold must utilize a service such as Harcom Productions in order to be in compliance with ASCAP copyright law. In addition, the business which chooses to use the local radio station as their on hold music runs the risk of playing a commercial for their competitor that is being broadcast over that station while the caller on hold is waiting to receive assistance.
(2) Distribution Methods of the Services
The primary delivery of products and services is through land based delivery and/or mail from our home office location in Tulsa, Oklahoma. With the implementation of our expansion we will hire five (5) sales representatives to cover a specific industry(s). We have targeted June 2007 to hire sales representatives (reps) for our expansion.
Our sales reps will be responsible for business development in their specific industry(ies). They will target the specific commercial segment(s) as well as development of business in other industries. We will supply the reps with laptop computers and the appropriate software to down/upload data and information throughout the business day. Orders will come in to the central office and will be sent to production for completion. The completed work product will be drop-shipped direct to the customer using land-based services.
We anticipate that we will not provide services to out-of-country clients until, and unless, we have completed our website to obtain international business.
(3) Status of Any Publicly Announced New Product or Service.
We have not developed any new or unique products or services that would make us stand above our competition. While the Internet will provide a new tool for advertising and customer interface, there has been no significant change in the services we provide. We will be utilizing the Internet as a mainstay of our future advertising and support for our sales representatives. Additionally our research will be focused on how our competitors are utilizing the internet to provide services to their clients. We will also be researching how to make our expanded sales force available to other companies who require skilled telesales people to offer their products or services. Our customers will not bear the cost of the week or two of market research to be conducted by our new Director of Marketing
(4) Our Competition
In order to compete effectively in the music/message on-hold business, a company must provide a wide range of quality services and products at a reasonable cost. This business market as a whole is characterized by intense competition with a large number of companies offering or seeking to develop services and products that will compete with those that we offer. It is our belief, based upon our experience that the failure rate of small businesses indicates that far too many begin operations prior to having the skills and knowledge necessary for the day-to-day business operations as well as the necessary capital. As a result, we developed our individualized approach to offering music/message on hold services.
Our ability to provide personalized service through our representatives as well through ordering via the Internet takes our services one step beyond typical localized music/message on hold and their offerings. The small, localized providers primarily operate within their own geographic confines and will not directly compete with us in all the geographic areas within which we will operate. We believe we compete favorably with the firms that provide products and services similar to ours because those firms still focus on providing products and services through a brick and mortar facility only. While each localized provider could conceivably be considered a competitor, realistically they compete more on a local geographic basis. The typical
16
provider locates in an area that has the demographics to support the business. As a result of our twenty plus years of operations we have a strong, loyal customer base. Due to the strong loyalty demonstrated previously by clients to our Company we do not feel there is a threat from local providers “stealing” our customers.
Many of our competitors have greater financial resources than we have, enabling them to finance acquisition and development opportunities or develop and support their own operations. In addition, many of these companies can offer bundled, value-added, or additional services not provided by us. Many may also have greater name recognition. Our competitors may have the luxury of sacrificing profitability in order to capture a greater portion of the market. They may also be in a position to pay higher prices than we would for the same expansion and development opportunities. Consequently, we may encounter significant competition in our efforts to achieve our internal and external growth objectives.
Our competitors may have methods of operation that have been proven over time to be successful. Our methods of operation for our expansion of operations have not been proven to be successful.
Our last search on the internet found over 350 companies that produce and/or sell on hold messaging services. However, Harcom possesses a solid position in the industry due to our experienced sales force and quality products which are competitively priced. We are able to present the product to the end business user directly over the telephone, play a sample for them, and have the purchasing decision made within minutes.
The three main competitors that we encounter on a regular basis as we approach potential customers are Impressions on Hold, Muzac, and Applied Media Technologies. These are top tier companies who are much larger than Harcom, and have a more sophisticated system of producing the product and making eventual changes to the product on behalf of the client. This is part of the reason for the advanced web site development in our business plan. Impressions on Hold and Muzac distribute their product through a franchise model. They have local sales agents in 75 and 200 cities respectively, whereas we conduct business strictly over the telephone. We were able to compete with them in 2000 and 2001 because our pricing structure was about half of our competitors. At that time, an Impressions on Hold customer paid around $1200 annually to have their needs met. Impressions on Hold would persuade the customer to change the content of their messages every month and their need for what was then advanced digital technology.
Based on feedback from potential customers who had purchased on hold products in the past, management of Harcom believed that monthly updates were rarely used by customers and that changing messages every month was not necessary. Most customers are happy with a change to their content one to three times annually. Impressions on Hold is still priced approximately $355 higher than our products ($1,045 for module and messages vs. $690 for module and messages with Harcom). They do provide a face to face sales rep, and installation, for which they charge $250. Our technical department will often instruct the customer on how to install the digital player directly over the telephone. This provides the customer with further savings. Muzac sells their Music-on-Hold messaging for $100 per month. Again, our price point helps us earn business there. Applied Technologies is the most competitive of the three as they provide a one minute version vs. Harcom’s six minute version for the same price as Harcom. Most potential customers don’t know why the extra five minutes of variety is important. Applied Media Technologies and Impressions on hold were both founded in 1991 and boast revenues of Three Million Dollars annually each. Muzac was formed in 1947 and generates over One Million per year in sales. It is safe to assume these three companies will be around for many years to come. All three companies not only have a strong internet presence, but provide back-end web technology for the customer to make changes and to communicate with their customer service staff. We do not have a web site at present, and that is one reason why we include the development of the site and back-end customer service technology in our use of proceeds when we have funding.
Management believes that the key to remaining competitive is to keep our price structure where it is today while moving to more of a web based model on service and support. Our company struggles to make it on the approved vendors list for some of the major insurance companies and Real Estate companies because we do not have a web presence or the ability for their agents to interface with us via the internet in order to make changes to their content. This is another reason why our plan of operations includes this technology upgrade.
Finally, our production and delivery time has grown worse over the past three years. It now takes an average of 2-4 weeks for a customer to hear and approve their final product. This is not competitive as most competitors are providing a 3-6 day turnaround. We address this issue with the addition of another scriptwriter and announcer.
(5) Sources and Availability of Raw Materials
17
In today’s market, compact discs (CDs) and CD players are readily available at almost any discount office supply or wholesale store, so those “raw materials” are never out of stock in Tulsa. We currently only ship an average of four CD players per month to our customer base, so most of our materials are the digital recorders and modules. There are a multitude of blank CD manufacturers, CD player manufacturers, and stereo wire manufacturers, from which we prepare our “pigtail” adaptors. Consequently, if by some occurrence our current supplier ceased to manufacture these staple items, we could locate another supplier within minutes.
The other key aspect of our business requires people who can communicate over the telephone. This will never be a challenge for us as long as we can pay a competitive wage. Most job applicants are from the Midwest, providing for a “dialect” that is easy for our clients nationwide to understand. Also, voice talent for the productions themselves is abundant, especially in the Tulsa area. The University of Tulsa, Oral Roberts University, Tulsa Broadcasting College, Tulsa Community College, and Oklahoma State University-Tulsa campus all offer undergraduate degrees with a major in Telecommunications and Broadcasting. These universities along with several local talent agencies insure an abundant supply of “voice talent” from which to choose. We only need one solid female voice talent who can remain a full time employee, and one male talent to whom we can outsource.
The same would hold true of writers who are needed to blend the templates of each message with the unique information for each client. Though our computer program can merge the two, and, at our current size, we only need one full time script writer; an effective command of grammar and syntax is required. With the universities in our area and the desire on the part of many writers to maintain steady employment, the resource of writing skill is in abundant supply.
Finally, sales managers are an important part of our business. We have been able to retain the two managers we currently have for over seven years. However, we always have representatives who become strong in our selling system who occasionally offer to take on a leadership role if one should arise. Our experience tells us that being able to interact with prospective customers and the ability to close the sale is one of the most important tasks of a team leader. When a team leader is able to assist the representative in capitalizing on the closing opportunities that the representative creates, there is a synergy that is created between the representative and their team leader. This helps keep management/employee conflict to a minimum, so the role of the manager is made easier.
At this time we do not see a critical dependence on any supplier(s) that could adversely effect our operations.
(6) Dependence on Limited Customers
We do not rely on any one or a limited number of customers for our business. We expect to further increase our client base once we obtain additional funding and ramp up expanded operations. While our target markets are unlimited, we may have to rely on several major industries while we develop other markets.
(7) Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts
Since we hold the rights to the music beds, we must maintain these rights so we are not in violation of copyright law. ASCAP is the artists’ union that routinely files suit against those who use music written and performed by one of their artists to promote a product or service. Utilizing the local radio station or a CD produced by an artist or label of any kind as on hold music for inbound callers is a violation of copyright law and runs the risk of being enforced by ASCAP. So every business playing Music-on-Hold must utilize a service such as Harcom Productions in order to be in compliance with copyright law.
At the present time we do not own or have any domain names, patents, trademarks, licenses (other than the usual business license), franchises, concessions, royalty agreements or labor contracts. However, in the future, our success may depend in part upon our ability to preserve our trade secrets, obtain and maintain patent protection for our technologies, products and processes, and operate without infringing upon the proprietary rights of other parties. However, we may rely on certain proprietary technologies, trade secrets, and know-how that are not patentable. Although we may take action to protect our unpatented trade secrets and our proprietary information, in part, by the use of confidentiality agreements with our employees, consultants and certain of our contractors, we cannot guarantee that:
(a)
these agreements will not be breached;
(b)
we would have adequate remedies for any breach; or
(c)
our proprietary trade secrets and know-how will not otherwise become known or be independently developed or discovered by competitors.
18
We cannot guarantee that our actions will be sufficient to prevent imitation or duplication of either our products and services by others or prevent others from claiming violations of their trade secrets and proprietary rights.
(8) Need for Government Approval of Principal Products or Services
None of the services we offer require specific government approval. We do have to maintain our corporate status as well as any necessary sales tax and business licenses.
(9) Government Regulation
As a music/message on hold provider, we are subject to a limited variety of local, state, and federal regulations. While we believe that our operations are in compliance with all applicable regulations, there can be no assurances that from time to time unintentional violations of such regulations will not occur. We are subject to federal, state and local laws and regulations applied to businesses, such as payroll taxes on the state and federal levels. In general, our printing activities are subject to local business licensing requirements. Our current business requires that we comply with state corporate filings, city or county business license and the necessary business liability insurance. The requirements of these regulations are minimal and do not cause any undue burden.
Internet access and online services are not subject to direct regulation in the United States. Changes in the laws and regulations relating to the telecommunications and media industry, however, could impact our business. For example, the Federal Communications Commission could begin to regulate the Internet and online services industry, which could result in increased costs for us. The laws and regulations applicable to the Internet and to our services are evolving and unclear and could damage our business. There are currently few laws or regulations directly applicable to access to, or commerce on, the Internet. Due to the increasing popularity and use of the Internet, it is possible that laws and regulations may be adopted, covering issues such as user privacy, defamation, pricing, taxation, content regulation, quality of products and services, and intellectual property ownership and infringement. Such legislation could expose us to substantial liability as well as dampen the growth in use of the Internet, decrease the acceptance of the Internet as a communications and commercial medium, or require us to incur significant expenses in complying with any new regulations.
(10) Research and Development During Last Two Fiscal Years
During the last two fiscal years no money was spent on research and development. We have, however, spent minimal monies on Internet research and development.
(11) Cost and Effects of Compliance with Environmental Laws
We are not subject to any federal, state or local environmental laws. Our products and services do not contain any materials that have any environmental elements that require special handling or disposal methods.
(12) Our Employees
As of December 26, 2006 there are 14 full-time employees at Harcom Productions. Our two sales managers have been with our company for ten years and seven years respectively. Another five members of our staff have more than five years of tenure with the company.
In addition to our General Manager, Charles Harwell, and the two sales managers we have one employee who serves as both custom script writer and IT coordinator that has been a part of our success. He has been with Harcom for seven years. Mr. Harwell currently provides the strategic direction and the necessary internal accounting controls for the company.
Reports to Security Holders
We will file reports and other information with the U.S. Securities and Exchange Commission (“SEC”). You may read and copy any document that we file at the SEC's public reference facilities at 100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information about its public reference facilities. Our SEC filings will be available to you free of charge at the SEC's web site at <www.sec.gov>.
19
We are not required by the Oklahoma General Corporation Act to provide annual reports. At the request of a shareholder, we will send a copy of an annual report to include audited financial statements. In the event we become a reporting company with the SEC, we will file all necessary quarterly and annual reports.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following management's discussion, analysis of financial condition, and results of operations should be read in conjunction with our financial statements and notes thereto contained elsewhere in this prospectus.
Our Business
Harcom Productions Inc. specializes in Music-on-Hold messaging systems and messaging content for businesses across the nation. We have been doing business under the name “Harcom Productions” since 1999.
We intend to establish a larger sales force by June 2007. We then plan to maximize our services in the third quarter of 2007. We believe it is critical to have a larger presence in the national market so that we can work effectively with local clients as well as the commercial market segment nationally. Using the market penetration of our company as the model, we extrapolated what we believe are realistic goals for sales and revenue to determine the number of sales persons to add to our staff.
We anticipate that the funds from a private offering, assuming that we sell all the offered shares, will provide us sufficient capital for the upgrade to our productions systems as well as the addition of our sales staff and relocation to a more appropriate facility. We may raise additional funds either through subsequent offerings of our shares or through other financing arrangements, such as borrowings. There is no guarantee that we will be able to raise funds in addition to the funds we raise in a private offering, if any. If we are not able to raise additional funds, we will likely not be able to expand our operations.
We will compete with traditional "brick and mortar" providers of music/message on hold services. Once our website is operational, however, we will also compete with other Internet-based companies and businesses that have developed or are in the process of developing competing websites. Our website will be developed by a local web design firm and designed to target our current market segments as well as other business markets. We intend to have a user-friendly website which provides prospective clients with a complete listing of our available services. We plan to design our website to allow current and potential clients to ask our “sales reps” introductory questions via e-mail. We believe that interchange will allow us to tailor our services to each particular client. The increase in business commerce utilizing the Internet has increased dramatically over the last three years. For our industry the Internet has brought potential customers from countries worldwide to doing business with a local business. Capitalizing on this presence requires a website that is not only professional but is functional as well. We have located a local company to assist us in both the design and hosting of our site. For a flat fee they will maintain our site and make any changes necessary when needed. We have allocated $7,000 towards our Internet needs in the event we raise $250,000 through a private offering or debt financing. Should we raise closer to $1,000,000, through a private offering or debt financing, we would allocate $50,000 towards our Internet presence. This would allow us to place our company towards the top of search engine results. The major search engines charge a fee for each hit from an individual/business searching under the terms we will list under. The earlier a company desires to have their web page shown in the results determines the amount paid by the company for each search hit. This cost per hit can range from under $1.00 to as much as $7.00 per search hit. To generate more possible business we will select as many "key" words that a potential customer would use to search by. While we do not have a specific list developed as of December 26, 2006, we have a pending list that includes over twenty (20) search terms.
In addition to the specific cost of search hits, we will seek to do "banner" advertising. Banner advertising is a method whereby a banner will appear on a different website advertising the services of our company. An individual/business would be able to click on the banner and be directed to our website. The cost of banner advertising is dependent on the size of the banner, the site it is located on and the placement on the page. We have allotted the cost of our website advertising and registry under "Working Capital" Marketing Expenses. Due to the variable nature of these costs, management believes it needs the flexibility to allocate funds for our Internet presence based on the circumstances at the time we begin funding and expanding.
We do not expect to have this website operational until we secure additional capital. We anticipate that we will use a portion of the proceeds from our private offering to develop our website. However, as of the date of this prospectus, our website has not moved beyond the mere discussion phase as we currently lack the necessary funds to begin development of our website. We do believe that it can be fully operational within thirty days after securing funds. We will hire an employee who will coordinate the design and maintenance of our website and provide continual updates to our contracted company with the most current information for our potential clients.
20
We anticipate that we will use the funds raised in a private offering and revenues generated to hire a marketing director, fund the launching of a sophisticated web site, increase our database accessibility by our sales force, replace our antiquated computers, reduce production time from 3.5 weeks to 2 days, and expand into additional markets. Although the quality of the messages is not a current concern to our clients, with a significant investment in studio upgrades we could cut our production and playback turnaround time by 25%. We would also have the ability to email audio files to about 20% of our current clientele who already have digital on hold modules as part of their phone system. This would cut our shipping costs by about $4,000 per year. However, our shipping costs are passed on to the client at present so that technology would be a convenience factor for our clients more than a significant cost savings to Harcom.
We will need to equip our sales and marketing reps with telephones, laptop computers, software designed for quoting jobs and personal communication devices. The necessity of close contact with each rep is a must. Orders must be uploaded to our headquarters when received so they can be processed expeditiously for customer satisfaction. While the cost of computer equipment has decreased for basic equipment, the needs of our reps will exceed this basic need. They will require peripheral devices and software that will make each setup complete. We have allocated $30,000 towards these purchases in the event we raise $500,000 from a private offering. In the event we raise closer to $1,000,000 through a private offering, we have allotted $275,800.00 towards equipment purchases. This will include not only equipment for each rep but also equipment for our headquarters. We will purchase the following equipment to enhance and upgrade our facilities and equipment:
·
Upgraded phone system and T-1 lines
·
Three (3) admin computers with new software
·
Pro Tools M- Powered Pack including Apple I- Book G4 laptop
·
Stand alone CD/ DVD duplicator–Kangaroo solutions 1 to 16 ratio
·
Upgrade receiver/amp, cassette system and CD player
·
Microphone- Shure KSM44
·
A pair of self powered M-Audio BX8a 130 W Monitors
·
Software upgrades
·
Mackie Micro Series Mixer model: 1402-VLZ this is a 14 channel mic/line mix
·
Epiq CPU model: BPS (Business Performance Series)
(i) How long can we satisfy our cash requirements and will we need to raise additional funds in the next 12 months?
Our Plan of Operation for the next twelve months is to raise capital to continue to upgrade our equipment and expand our sales staff. While we have the necessary cash and revenue to satisfy our cash requirements for the next twelve months, this would not include any of our plans for expansion. In the event we sell shares in our private placement representing between 25%-75% of our intended goal, we will be able to implement our expansion in accordance with those same percentages. We anticipate that we will use the funds raised in the private offering and revenues generated to fund equipment purchases and office improvement and for marketing activities and working capital. Our failure to market and promote our services will harm our business and future financial performance. If we are unable to expand our operations within the next twelve months, we will likely fail to increase our revenues. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then we may not be able to expand our operations. If adequate funds are not available, we believe that our officers and directors will contribute funds to pay for some of our expenses. However, we have not made any arrangements or agreements with our officers and directors regarding such advancement of funds. We do not know whether we will issue stock for the loans or whether we will merely prepare and sign promissory notes. If we are forced to seek funds from our officers or directors, we will negotiate the specific terms and conditions of such loans when made, if ever. None of our officers or directors are obligated to pay for our expenses. Moreover, none of our officers or directors has specifically agreed to pay our expenses should we need such assistance.
During the last twelve months we have increased our revenue by approximately $34,000 or 7% for the period ending September 30, 2006 as compared to the same period in 2005. Our cash available at the end of the year December 31, 2005 increased from December 31, 2004 by $8,748. Our percentage of expenses to revenue ratio for the period ending September 30, 2006 was approximately ninety-seven percent (97%). In the year 2005 this ratio was approximately ninety-eight percent (98%). The implementation of our business strategy is estimated to take approximately 12-18 months. Once we are able to secure funding, implementation will begin immediately. We anticipate 60 days to be in a stage of full operational activity to gain additional clients. The major parts of the strategy to be immediately implemented will be the sales and marketing and office equipment and human resource procurement.
21
Our cash flows, revenue and profits are sufficient to sustain our current operations. The goal of a future private offering is to raise capital to allow for expansion. This expansion will require additional capital and it is our intention to dedicate the funds raised to the execution of the planned expansion.
(ii) Summary of product research and development
We are not currently conducting nor do we anticipate conducting any research and development activities, other than the development of our proposed website and looking into a possible new industry to target for offering our services. However, we do plan to market ourselves aggressively.
(a) Marketing Plan
The first phase is to take Harcom from a telephone sales approach only, to a telephone and web based Music-on-Hold provider for businesses around the nation. We will first post a job description for our Director of Marketing position with Monster.com in an effort to screen applicants and conduct interviews with qualified candidates. They must possess strong verbal and written communication skills, solid web instincts as it pertains to design and functionality, and a basic knowledge of how search engine listings are positioned. They must also possess dynamic leadership skill and the ability to recruit and train new sales representatives and prepare proposals for future business clients who may be open to outsourcing their telesales, appointment setting or follow up needs. If for some reason, we cannot locate a viable candidate through Monster.com, we will empower an executive recruitment firm to locate qualified candidates for this position. This person will work to move Harcom to a company with a strong web presence with a vision toward offering our telesales services to other companies, first locally and then regionally and nationally.
With the help of our current IT person, our Marketing Director will work through a local vendor to launch a website that will enable customers to hear samples of our product and to contact us. Since we currently lack any type of website, just the fact that we have a site that is functional will increase our sales by 15% because of the credibility factor. We believe that we are consistently losing sales to competitors because we lack the credibility of firms who actually have a web site on the internet.
The next step will be to add the capability of the site to store each customer’s finished on hold messages so that they can download them at any time to the digital device that we already ship to them. It is estimated by our sales managers that this capability will allow us to qualify as an “approved vendor” for Allstate Insurance, Century 21 Realtors, and Clayton Mobile Homes. The independent agents for these companies often still do business with us but we lose 10% of our interested prospects who are agents for these three companies when they discover we are not on the official vendor’s list for these companies. Some agents care a lot about that approved vendor list while others have no regard for it at all. In our discussions with the national headquarters for these three companies, as well as the headquarters for other companies they all want our company to provide downloadable audio files from a central web site in order to gain this approval as one of a handful of vendors on their approved list.
We will utilize a direct marketing person to contact companies to solicit business.
Our target markets and marketing strategy will be fully developed. Our marketing initiatives will include:
(a)
utilizing direct response print advertisements placed primarily in small business, entrepreneurial, and special interest magazines;
(b)
links to industry focused websites;
(c)
affiliated marketing and direct mail
(d)
presence at industry trade shows; and
(e)
promoting our services and attracting businesses through our proposed website.
We believe that our experience from operating a brick and mortar facility for seven years will serve us well with our marketing initiative. As a company we have learned the value of a good presence at trade shows and conventions for our industry. We have allotted between $1,000-$14,700 of our working capital should we raise between $250,000 to $1,000,000 in our private offering. The amounts vary greatly depending on how many reps we can send to trade shows and conventions. By having more of our reps at trade shows we can build relationships quicker and gain market share at the same time. While there are two major shows, there are many regional events for reps to attend to solicit clients.
22
We will develop a high quality brochure to send when we utilize a direct market campaign. We have tentatively set the third quarter of 2007 as a target date for a direct mail campaign. By waiting until the third quarter, our sales reps will have sufficient time to develop their skills.
(b) Sales Strategies
- Power Point Presentation . We plan to create a flexible Power Point presentation that our marketing department will use to deliver a professional sales presentation specifically tailored to the needs of our target markets. The presentation will have a core section that is generic to all customer segments as well as specific customer segment modules allowing modification of the presentation for the appropriate audience. Additionally, this Power Point presentation will be the basis for brochures and print advertising layout to ensure we have a consistent look through out all our marketing communications.
- Capability Brochures . We expect to create a capability brochure featuring our family of services and products. This will be a high quality brochure with extensive detail.
- Public Relations and Advertising . We plan to implement a campaign to obtain media coverage by publishing persuasive news articles and feature stories that increase the awareness of the business services and further the acceptance of our products, services and technologies as the solution to targeted customer segments.
(c) Other Markets
During our seven years of operations we have developed our target market. Our reputation for high quality and dependability have led to our continued existence. These two factors contributed to our success both in terms of longevity and profitability. Our new sales representatives will be responsible for more fully developing their geographic markets as well as any potentially new markets.
(iii) Any expected purchase or sale of plant and significant equipment?
While we do not plan on purchasing any plant or single major piece of equipment, we do plan on leasing a newer, more attractive office as a part of our plan, as is the purchase of updated computers, and a combination copier/printer. If, however, we are able to raise over $500,000 in capital through a private offering, we would begin to invest a minimum of $57,000 to upgrade our audio studio to position our company for the future and reduce our production time and shipping costs. Our current audio suite is outdated, and employs fully depreciated equipment to produce our on hold messages.
(iv) Employees
Currently, there are 14 full-time employees at Harcom Productions. Our two sales managers have been with our company for ten years and seven years respectively. Another five members of our staff have more than five years of tenure with the organization.
In addition to our General Manager and our two sales managers, one individual serves as both custom script writer and IT coordinator.
We anticipate achieving growth by hiring additional staff, installing computers, and launching a professionally designed website to attract new clients. We plan to hire individuals with the following strengths:
- Sales Representatives : This position requires an individual experienced in marketing to small businesses and developing and implementing ongoing marketing strategies. This position will be a liaison between us and those institutions that traditionally utilize music/message on hold services.
- Clerical Assistant : This individual will perform all daily office tasks including, but not limited to, computer input and bookkeeping.
- Computer Assistant : This individual will have web design experience, a working knowledge of computer networks, as well as work with an outside web design firm to establish our proposed website. We believe that our proposed website will be an important tool to expand our area of operations and client base.
23
Results of Operations
General
During the year ended December 31, 2005, our assets consisted of our cash, accounts receivable, the intangible asset of the library of radio jingles and music beds we possess, and our revenues were generated from services sold to businesses at large. The following table shows our revenues, expenditures and net income for the years from 2004-2005 and for the period ending September 30, 2006.
Table 4.0 Revenues, Expenditures and Net Income
|
YEAR |
REVENUE |
EXPENSES |
NET INCOME |
|
Septempber 30, 2006 |
$535,264 |
$521,230 |
$14,034 |
|
2005 |
$651,978 |
$633,656 |
$18,322 |
|
2004 |
$612,934 |
$624,159 |
($11,225) |
Although we are seeking to expand our services, the uncertain economy could have a material adverse effect on such plans. While we have seen improvement in the business economy, we cannot be assured that continued recovery will occur.
Results of Operations For the Period Ended September 30, 2006
For the period ended September 30, 2006 our revenues of $535,264 were an increase of approximately $33,800 from the same period in 2005. We attribute this increase to a more experienced sales staff in 2006 versus 2005, as all other variables remained fairly constant. Expenses during the period ended September 30, 2006 compared to September 30, 2005 reflect a decrease of approximately $32,000. This change can be directly related to a reduction in salaries and our general and administrative costs. Since we have paid the costs of this registration statement as they came due, our expenses should stabilize and we believe they will track closely with our expenses from the fiscal year ended December 31, 2005. Our cash flow showed a decrease in cash of approximately $8,000 however we had in increase in out total assets of over $36,000 directly attributable to an increase in our accounts receivable. The Company believes that our cash and cash equivalents will remain stable and we will increase our cash and cash equivalents as we raise funds from the private offering and we begin to develop more business.
Results of Operations For the Year Ended December 31, 2005
During the year ended December 31, 2005, we had revenues of approximately $651,978. We used $47,480 of cash flow from our operating activities. We had $18,322 of net income. We also had $18,129 of noncash depreciation and amortization expenses. When the noncash depreciation and amortization expenses of $18,129 is added to the net income of $18,322, along with the increase in accounts receivable and decrease in payables of $3,400, the result is the $43,389 total cash flows generated from operating activities.
We did not have any cash flows from investing activities for the year ended December 31, 2005, but we did have our financing activities utilize $34,641 of cash flows. These resources were utilized to pay down part of our long-term debt.
The result of the above activities was a total increase in cash of $8,748 for the year ended December 31, 2005. When this increase was added to the company’s cash at the beginning of the year, the result was a total of $8,748 of cash as of the company’s December 31, 2005 year-end. We do not foresee any circumstances or events that will have an adverse impact on our operations. We do anticipate an increase in our business based on our current method of operation and the activities of our officers and directors. We saw an increase of almost $39,000 or 9% in revenues from the fiscal year 2004 due to our operations. While we believe we can sustain such growth and that it is a good indicator that the experience of management and our method of operations indicates that our adjustments have been made according to sound business principles and with strong financial controls. Thus, we expect to satisfy our current cash requirements indefinitely. However, we will need additional cash to expand our operations.
Management believes that its success in gaining market share will depend greatly on our ability to get quality employees that can be trained to learn how to sell music/message on hold correctly. When a job is quoted incorrectly, especially to low, it cost the company revenue and profits.
24
We believe the Company must insure the retention of new customers. It is our belief that by setting sales benchmarks for each sales representative, gross sales, to be reviewed by the Board of Directors quarterly for corrective action we can track not only our advertising dollars but our customer retention factor. Each sales representative will be responsible for producing 25% of the gross sales target set for his/her specific market. Our financial stability will allow us to maintain a good marketing program to penetrate further into our target market as well as potential new markets that utilize music/message on hold.
When compared to the year 2004, our expenses decreased approximately $16,000 while revenues increased almost $39,000. We attribute this disproportionate ratio of expenses to revenue to the fact that management was able to increase revenues while generating fewer expenses.
Table 5.0 Cash Flow Worksheet December 31, 2005
|
|
Balance |
|
|
|
|
Financing |
|
|
||
|
|
December 31, 2004 |
December 31, 2005 |
Difference |
Noncash-Oper. |
Operating |
Investing |
Cash In |
Cash Out |
Noncash-Finan. |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
- |
8,748 |
8,748 |
|
|
|
|
|
|
8,748 |
|
Accounts Receivable |
116,864 |
110,448 |
(6,416) |
|
6,416 |
|
|
|
|
- |
|
PP&E |
11,062 |
11,062 |
- |
|
|
- |
|
|
|
- |
|
Accumulated Depreciation |
(9,482) |
(11,062) |
(1,580) |
1,580 |
|
|
|
|
|
- |
|
Deposits |
1,650 |
1,650 |
- |
|
|
|
|
|
|
- |
|
Intangible Assets |
248,247 |
248,247 |
- |
|
|
|
|
|
|
- |
|
Accumulated Amortization |
(93,270) |
(109,819) |
(16,549) |
16,549 |
|
|
|
|
|
- |
|
Accounts Payable |
(17,701) |
(17,310) |
391 |
|
(391) |
|
|
|
|
- |
|
Current portion of Long-term debt |
(22,956) |
(24,587) |
(1,631) |
|
|
|
|
1,631 |
|
- |
|
Due to Charles Harwell |
(76,588) |
(37,936) |
38,652 |
|
|
|
(38,652) |
|
|
- |
|
Long-term Debt |
(248,174) |
(250,554) |
(2,380) |
|
|
|
|
2,380 |
|
- |
|
Accrued Interest Payable |
(11,909) |
(12,822) |
(913) |
|
913 |
|
|
|
|
- |
|
Membership Capital |
(40,000) |
(40,000) |
- |
|
|
|
|
|
|
- |
|
Retained Earnings |
142,257 |
123,935 |
(18,322) |
|
18,322 |
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
- |
- |
18,129 |
25,260 |
- |
(38,652) |
4,011 |
- |
8,748 |
|
|
|
|
|
|
43,389 |
|
|
(34,641) |
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
18,322 |
|
|
|
|
|
|
|
|
|
|
Non-Cash Transactions |
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
1,580 |
|
|
|
|
|
|
|
|
|
|
Amortization |
16,549 |
|
|
|
|
|
|
|
|
|
|
Decrease (Increase) in Accounts Receivable |
6,416 |
|
|
|
|
|
|
|
|
|
|
(Decrease) Increase in Accrued Interest Payable |
913 |
|
|
|
|
|
|
|
|
|
|
(Decrease) Increase in Accounts Payable |
(391) |
|
|
|
|
|
|
|
|
|
|
Total Operating Activities |
43,389 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
Purchase of Equipment |
- |
|
|
|
|
|
|
|
|
|
|
Sale of Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
Loans from related parties |
(38,652) |
|
|
|
|
|
|
|
|
|
|
Repayment of loans from related parties |
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
|
|
|
|
|
|
|
|
|
|
Repayment of long-term debt |
4,011 |
|
|
|
|
|
|
|
|
|
|
Total Financing Activities |
(34,641) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash |
8,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period |
8,748 |
|
|
|
|
|
|
|
|
|
25
Results of Operations Ended December 31, 2004
During the year ending December 31, 2004, we had revenues of approximately $612,934, and our costs associated with generating revenues were approximately $624,159, resulting in net loss of $11,225. Furthermore, during the year ended December 31, 2004, we expended $9,388 of cash flow from operating activities. We had a $11,225 net loss including the recognition of noncash depreciation expense. Our financing activities consisted of increased funding of $14,200 from shareholders and $6,058 used to repay long term debt. The net result was a net increase of $8,142 in cash due to financing activities.
The result of the above operating and investing activities was net cash flow of ($1,246) for the year ended December 31, 2004, which when added to $1,246 of cash and cash equivalents at the beginning of the year, resulted in $-0- of cash at the end of the year.
The low revenue base in 2004 management attributes to Mr. Harwell spending more of his time developing a plan for expansion of business than actual time spent on current sales. We believe this was a necessary element for us as a company. Without his efforts in laying the groundwork for the expansion plans, we would have had to potentially utilize the services of an outside consulting company to assist us. Management believed that Mr. Harwell could do a better job as well as save the company money while preparing the new operational plan.
Liquidity & Capital Resources
The music/message on hold market trend has shown a steady increase in both the number of companies utilizing our products and the rate at which small providers are appearing. Management believes it can capitalize on both these trends by utilizing a controlled growth and sound financial plan to locate and keep clients. As we begin acquisition of clients our liquidity increases in two ways. We will begin a revenue stream from orders as well as from our offering of ancillary devices. Our ancillary products are lines of music/message on hold modules. In the event a downturn in the market occurs, the company plans to tighten its plan on the acquisition of new clients to avoid overextending the internal resources of the company as well as straining the external resources through our banking contacts.
Our internal liquidity is provided by our operations. In the event the company needs additional funds prior to our raising capital through a private placement or debt financing, our President Shane Harwell will provide any necessary capital. In the event a building is located and can be leased at a price under market value and the building can be remodeled to accommodate the company, the company will consider leasing prior to obtaining funds through our private placement or debt financing.
While the capital resources of the company are limited from a cash perspective, the credit of the officers and directors for guaranteeing any loan necessary is extremely strong. The company has not established any lines of credit with any banks. In the event a supplier or lender requires additional credit to obtain equipment or other business supplies, our officers and directors are willing to extend their credit to accomplish the purchase.
During the third quarter of 2005, our officers and directors decided to implement actions previously discussed in order to further facilitate the Company’s growth and expansion. Pursuant to the Company’s Board of Directors’ authorization of the sale of shares of the Company’s stock at $1.00 per share to a maximum of sixty (60) family and close friends of the Company’s officers and directors in order to gain additional funding and involvement for the Company’s expansion, the Company continued to seek to bring in friends and family as additional shareholders/investors in the Company in order to assist in funding the Company’s endeavors. As of November 30, 2006, the Company had sold additional shares of its common stock pursuant to this authorization. On December 2, 2006 the Company completed a forward stock split of 25:1 for all shareholders of record as of November 30, 2006. During the third quarter of 2005, the Company’s management and Board discussed and decided that, while the expansion of its business provides the benefits of diversification and support along with additional revenue streams, it was still not providing sufficient cash flows to facilitate the Company’s principal objective of expanding. Accordingly, the Company’s Board and management decided to undertake the filing of an SB-2 Registration Statement with the Securities and Exchange Commission to register the current issued and outstanding shares. The Board and management additionally decided to target a private placement offering of $1,000,000 to provide sufficient cash resources for the acquisition of office space, employees and equipment necessary to expand operations and provide sufficient working capital to fund operations and marketing. Prior to offering any shares in a private placement the company will file a Form D with the Securities and exchange Commission as well as register its offering in those states where shares will be sold and that require such state registration.
26
In summary, the Board and management believe the Company’s expansion in its shareholder base and its growth into related supporting additional services and revenue streams (ancillary music/message on hold products) have strengthened and diversified the Company. Management and the Board also believe the decision to file an SB-2 Registration Statement with SEC will provide the Company the opportunity to provide liquidity for purchasers of shares that may be offered in a private placement. The Company believes it has methodically built a unique, well-rounded supporting infrastructure (i.e., providing the additional ancillary supporting products) that, once adequately capitalized, will become a competitive and unique force in the existing and growing music/message on hold market. It is our belief that our cash flow is sufficient to sustain our current level of operations. While operations could be sustained for a long time (over twelve months), there would be minimal to be distributed for the efforts of the officers and directors. To begin expansion, funds will need to be brought into the company to permit us to move forward with our expansion. Without these funds, management believes it cannot sustain expanding operations.
Although no assurances can be made, we believe that our expenses will increase proportionately to revenues during the fiscal year ending December 31, 2007.
Plan of Operation
Since we are not offering shares for sale in a primary offering, it is our intention to raise additional capital through private sources or debt financing. In the event we do a private placement of our shares, we will file a Form D with the Commission as well as register our offering in those states that require such registration. Table 6.0 provides a breakdown of how we intend to use any proceeds raised through a private placement or debt financing.
In the event we raise only a nominal amount from the sale of our securities in a private placement or debt financing, $250,000 or less, we will use the proceeds to pay for printing, for any legal and accounting costs that may exist, and to pay secured creditors if any there may be. Any remaining funds will be used towards implementation of our expansion of operations.
We expect to use all of the net proceeds for general corporate purposes, including the costs of this registration, electronic equipment purchases, personnel wages, and working capital. The amounts we actually expend for working capital and other purposes may vary and will depend on a number of factors including, but not limited to, the actual net proceeds received, the amount of our future revenues and other factors described under "Risk Factors." Accordingly, our management will retain broad discretion in the allocation of the net proceeds. A portion of the net proceeds may also be used to purchase complimentary businesses assets or technologies. We have no current plans or agreements or commitments with respect to any of these transactions and we are not currently engaged in any negotiations with respect to any of these transactions. Management’s allocation of proceeds may change in the event competing message production firms realize that we are expanding our operations and they may try to prevent us from trying to gain additional customers by converting their customers to customers of Harcom. This would necessitate management allocating funds for additional sales and advertising creating a more long term approach. Quick expansion requires additional personnel, insurance, payroll taxes, and normal operating expenses that must be increased. In this scenario, less money would be spent on marketing. Conversely, if it takes more time than anticipated to gain additional customers, more money would be spent on marketing and advertising and less on additional personnel. Expansion of sales and marketing activities, strategic alliances or joint ventures, and corporate partnering arrangements will be considered as alternatives for management’s discretion. Potential strategic alliances and joint ventures have been determined to be those in the message production services industry. Presently management is anticipating funds being used for the lease of larger space, equipment purchases and employee wages. Table 6.0 shows anticipated use based on raising varying amounts of capital with Table 7.0 providing a further breakdown of the Working Capital expenditures.
Table 6.0 Capital Allocation
|
Amount of Capital Raised |
Offering Expenses (1) |
Equipment Purchases |
New Office Space |
Employee Wages (2) |
Debt Repayment |
Working Capital |
|
$250,000 |
$35,000 |
$13,000 |
$59,000 |
$95,000 |
$35,000 |
$13,000 |
|
$500,000 |
$35,000 |
$67,500 |
$59,000 |
$225,000 |
$60,000 |
$53,500 |
|
$750,000 |
$35,000 |
$183,500 |
$59,000 |
$345,000 |
$60,000 |
$67,500 |
|
$1,000,000 |
$35,000 |
$285,800 |
$59,000 |
$475,000 |
$60,000 |
$85,200 |
|
(1) Offering expenses include the following: Registration Fee, Federal taxes, state taxes and fees, Printing and Engraving Expenses, Accounting Fees and Expenses, Legal Fees and Expenses, and Transfer Agent's Fees and Expenses. |
||||||
|
(2) Employee wages constitute a combination of salary, draw and commissions to be paid for sales made by the employee. |
||||||
27
Table 7.0 Breakdown of Working Capital
|
Amount of Capital Raised |
Working Capital |
Allowance for Tax Deposits |
Workers Compensation Insurance |
Advertising and Marketing Expenses |
Travel and Presentation Expenses |
|
$250,000 |
$13,000 |
$4,000 |
$1,000 |
$7,000 |
$1,000 |
|
$500,000 |
$53,500 |
$18,000 |
$5,000 |
$25,500 |
$5,000 |
|
$750,000 |
$67,500 |
$18,000 |
$5,000 |
$35,000 |
$9,500 |
|
$1,000,000 |
$85,200 |
$18,000 |
$5,000 |
$47,500 |
$14,700 |
The above tables refer to the use of proceeds being used exclusively for our current operations in Oklahoma and does not include any facility expansion plans to other states.
Our use of proceeds varies dramatically due to several factors. At only $250,000 of capital raised, we will need minimal working capital. Deposits for employee wages, workers compensation insurance, advertising and marketing expenses as well as corporate travel for client presentations will be minimal. As we raise additional capital, expenditures in these categories expand. Specifically the cost of tax deposits for wages, workers compensation insurance and employee travel and presentation expenses rise for each additional employee we hire. We have specifically designated amounts to be used for employee wages, which can be a combination of a salary, draw or commissions versus sales. Due to the delay in the collection of receivables from customers we have allotted funds for employee wages to cover this shortage. Our expenses for advertising and marketing will rise as we begin to expand our client base. Management will make a determination of using an employee leasing company for any future employees that may be needed. Because we are targeting one specific area of business (Music-on-Hold messaging systems) we must have the ability to provide complete, professional presentations that will place us in competition with much larger firms that have the capital to make top-notch presentations. Management’s discretion will be further used when determining whether to automate or hire personnel. Many of our functions such as sales, bookkeeping, and customer-order coordination activities require personnel to perform the functions. Management has kept its decision making in the use of working capital broad so it may exercise good judgment in applying management principles to the use of funds. At such time when the company has generated a positive cash flow from our expanded operations the Board of Directors will determine what compensation will be awarded Mr. Harwell. Upon registration with the U.S. Securities Exchange Commission, 1,487,500 of our outstanding shares of common stock will be eligible for resale under the Securities Act. We will not realize any proceeds from any actual resale of the shares sold by the selling security holders.
Dilution
While there will be no dilution to existing shareholders from the resale offering, dilution may occur in the event we chose to raise capital through a private offering or debt financing.
The issuance of further shares and the eligibility of further issued shares for resale will dilute our common stock and may lower the price of our common stock. If you invest in our common stock, your interest will be diluted to the extent of the difference between the price per share you pay for the common stock and the pro forma as adjusted net tangible book value per share of our common stock at the time of sale. We calculate net tangible book value per share by calculating the total assets less intangible assets and total liabilities, and dividing it by the number of outstanding shares of common stock.
In the future, we may issue additional shares, options and warrants and we may grant stock options to our officers, employees, directors, and consultants under a stock option plan, all of which may further dilute our net tangible book value.
DESCRIPTION OF PROPERTY
We are a brick and mortar company that has a full service recording production studio located in 4,000 square feet of office and studio space. Our rent on this space is month to month and totals $1,750 per month. The appeal of the interior and exterior is quite low. At a price of less than $4 per square foot, it is equivalent to warehouse space prices in Tulsa. One third of the space has very poor heating. We do not own the property. Harcom currently only requires about 3,500 square feet of the space. The appearance of our physical space is perhaps the greatest drain on our ability to attract the type of quality leadership, and employees in general, that we require to execute our desired expansion.
28
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
To the best of our knowledge there are no transactions involving any director, executive officer, or any security holder who is a beneficial owner or any member of the immediate family of the officers and directors.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is not quoted or traded on any quotation medium at this time. We intend to apply to have our common stock included for quotation on the NASD OTC Bulletin Board. There can be no assurance that an active trading market for our stock will develop. If our stock is included for quotation on the NASD OTC Bulletin Board, price quotations will reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
Should a market develop for our shares, the trading price of the common stock is likely to be highly volatile and could be subject to wide fluctuations in response to factors such as actual or anticipated variations in quarterly operating results, announcements of technological innovations, new sales formats, or new services by us or our competitors, changes in financial estimates by securities analysts, conditions or trends in Internet or traditional retail markets, changes in the market valuations of other on-hold messaging companies, announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, capital commitments, additions or departures of key personnel, sales of common stock and other events or factors, many of which are beyond our control. In addition, the stock market in general, and the market for business services in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. These broad market and industry factors may materially adversely affect the market price of the common stock, regardless of our operating performance. Consequently, future announcements concerning us or our competitors, litigation, or public concerns as to the commercial value of one or more of our products or services may cause the market price of our common stock to fluctuate substantially for reasons which may be unrelated to operating results. These fluctuations, as well as general economic, political and market conditions, may have a material adverse effect on the market price of our common stock.
At the present time we have no outstanding options or warrants to purchase securities convertible into common stock.
There are 1,487,500 shares of common stock that could be sold by the selling shareholders according to Rule 144 that we have agreed to register. A brief description of Rule 144 follows:
The common stock sold in this offering will be freely transferable without restrictions or further registration under the Securities Act, except for any shares purchased by an “affiliate.” An “Affiliate” is a person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control of the issuer. The definition of an "Affiliate" is critical to the operation of Rule 144, promulgated under the Securities Act. Rule 144 provides for restrictions on the amount of securities that can be sold by an affiliate during a given period of time. In general, pursuant to Rule 144, a shareholder who has satisfied a one year holding period may, under certain circumstances, sell within any three month period a number of securities which does not exceed the great of 1% of the then outstanding shares of common stock or the average weekly trading volume of the class during the four calendar weeks prior to such sale. Further, Rule 144 permits, under certain circumstances, the sale of securities, without any quantity limitation, by our shareholders who are not affiliates and who have satisfied a two-year holding period.
Cash dividends have not been paid during the last three (3) years. In the near future, we intend to retain any earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. The declaration and payment of cash dividends by us are subject to the discretion of our board of directors. Any future determination to pay cash dividends will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant at the time by the board of directors. We are not currently subject to any contractual arrangements that restrict our ability to pay cash dividends.
We have forty-six (46) stockholders of record of our common stock as of December 26, 2006. The CUSIP number for our common stock is 411164R 10 6.
29
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long-term compensation of our Chief Executive Officer, and the most highly compensated employees and/or executive officers who served at the end of the fiscal years December 31, 2004 and 2005, and whose salary and bonus exceeded $100,000 for the fiscal years ended December 31, 2004 and 2005, for services rendered in all capacities to us. The listed individuals shall be hereinafter referred to as the "Named Executive Officers."
Table 9.0 Summary Compensation
Additional Compensation of Directors
All of our directors, except for Charles Harwell, are unpaid. Compensation for the future will be determined when and if additional funding is obtained.
Board of Directors and Committees
Currently, our Board of Directors consists of. Shane Harwell, Susan Harwell and Charles Harwell. We are not actively seeking additional board members. At present, the Board of Directors has not established any committees.
Employment Agreements
Currently, we have no employment agreements with any of our Directors or Officers.
AUDIT COMMITTEE
We do not have an audit committee that is comprised of any independent director. As a company with less than $1,000,000 in revenue we rely on our President Shane Harwell for our audit committee financial expert as defined in Item 401(e) of Regulation S-B promulgated under the Securities Act. Our Board of Directors acts as our audit committee. The Board has determined that the relationship of Mr. Harwell as both our company President and our audit committee financial expert is not
30
detrimental to the Company. Mr. Harwell has a complete understanding of GAAP and financial statements; the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves in a fair and impartial manner; has experience analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to or exceed the breadth and complexity of issues that can reasonably be expected to be raised by the small business issuer’s financial statements; an understanding of internal control over financial reporting; and an understanding of audit committee functions. Mr. Harwell has gained this expertise through his formal education and experience as our President for over the last seven years. He has specific experience coordinating the financials of the company with public accountants with respect to the preparation, auditing or evaluation of the company’s financial statements.
DISCLOSURE CONTROLS AND PROCEDURES
Our Board of Directors has determined that our Chairman/President, Shane Harwell has developed disclosure controls and procedures that the full Board of Directors believes are in keeping with the intent of the regulations. As our President for over seven (7) years coordinating our company’s audits and financial statements, Mr. Harwell and the full Board of Directors find the Company’s disclosure controls and procedures to meet or exceed those required.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Our Chairman/President, Shane Harwell will be providing a full financial reporting and accounting of the Company according to the Generally Accepted Accounting Principles and guidelines established by the American Institute of Certified Public Accountants. The Board of Directors has found no weakness in the controls that have been established and believes that the semi-annual monitoring by the full Board of Directors will keep those who invest in our Company fully informed of the true financial status of the Company at all times. Should there be a change in our internal control over financial reporting, this change or changes will be made available in our reports filed with the Securities and Exchange Commission.
CODE OF ETHICS
We have adopted a code of ethics as of November 11, 2006 that applies to our principal executive officer, principal financial officer and principal accounting officer as well as our employees. Our standards are in writing and will be posted on our website once our site is operational. Our complete Code of Ethics has been attached to this registration statement as an exhibit. Our annual report filed with the Securities Exchange Commission will set forth the manner in which a copy of our code may be requested at no charge. The following is a summation of the key points of the Code of Ethics we adopted:
·
Honest and ethical conduct, including ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
·
Full, fair, accurate, timely, and understandable disclosure reports and documents that a small business issuer files with, or submits to, the Commission and in other public communications made by our company;
·
Full compliance with applicable government laws, rules and regulations;
·
The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
·
Accountability for adherence to the code.
CORPORATE GOVERNANCE
As a small business issuer we are not listed on a national securities exchange or in an inter-dealer quotation system that has requirements that a majority of the board of directors be independent. We have not applied for a listing with a national exchange or in an inter-dealer quotation system which has requirements that a majority of the board of directors be independent. We are not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act respecting any director. We have conducted regular monthly Board of Director meetings on the last business Friday of each month for the last calendar year. Each of our directors has attended all meetings. We have no standing committees regarding compensation, audit or other nominating committees. At our annual shareholders meetings each shareholder is given specific information on how he/she can direct communications to the officers and directors of the corporation. All communications from shareholders are relayed to the members of the Board of Directors.
31
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for Harcom Productions, Inc. by Diane J. Harrison, Esq., 6860 Gulfport Blvd. South, PMB 162, South Pasadena, Florida 33707.
EXPERTS
Certain of the financial statements of Harcom Productions, Inc. included in this prospectus and elsewhere in the registration statement, to the extent and for the periods indicated in their reports, have been audited by Killman, Murrell, & Co. P.C, Certified Public Accountants , whose reports thereon appear elsewhere herein and in the registration statement.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On September 12, 2006, we engaged Killman, Murrell, & Co. P.C, Certified Public Accountants, ("Killman") as our independent auditor. They are our first auditor and we have had no disagreements with Killman on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, in connection with its reports.
WHERE YOU CAN FIND MORE INFORMATION
Harcom Productions, Inc. will be subject to the informational requirements of the Securities Exchange Act of 1934, and in accordance therewith files reports, or information statements and other information with the Securities and Exchange Commission. Such reports and other information can be inspected and copied at the public reference facilities maintained by the Commission at 100 F Street N. E., Washington, D.C. 20549, at prescribed rates. In addition, the Commission maintains a web site that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the Commission. The address of the Commission’s web site is http://www.sec.gov .
Harcom Productions, Inc has filed with the Commission a registration statement on Form SB-2 under the Securities Act of 1933 with respect to the common stock being offered hereby. As permitted by the rules and regulations of the Commission, this prospectus does not contain all the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to Harcom Productions, Inc and the common stock offered hereby, reference is made to the registration statement, and such exhibits and schedules. A copy of the registration statement, and the exhibits and schedules thereto, may be inspected without charge at the public reference facilities maintained by the Commission at the addresses set forth above, and copies of all or any part of the registration statement may be obtained from such offices upon payment of the fees prescribed by the Commission. In addition, the registration statement may be accessed at the Commission’s web site. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete and, in each instance, reference is made to the copy of such contract or document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference.
32
FINANCIAL STATEMENTS
Table of Contents
A
B
C
D
Harcom Productions, LLC
Notes to Financial Statements
For The Nine Months Ended September 30, 2006
Note 1 – Summary of Significant Accounting Policies
Organization and Nature of Operations
Harcom Productions, L.L.C. was incorporated in 1999 in the state of Oklahoma. The Company’s headquarters are located in Tulsa, Oklahoma. In early 1999, the Company executed a Purchase Agreement to acquire the operating and intangible assets of an existing production company from a related party. As such, the Company has since operated as a production company specializing in on hold messaging for all types of companies.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to form 10-Q and Article 10 Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal and recurring nature. These financial statements should be read in conjunction with the audited financial statements at December 31, 2005. Operating results for the nine months ended September 31, 2006 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2006.
Note 2 – Subsequent Events
On October 2, 2006, Harcom Productions, L.L.C. began the process of changing its classification from that of a limited liability company to that of a corporation under the laws of the state of Oklahoma. Immediately following this conversion, there were 100,000 shares outstanding. These shares were held in equal parts by the two previous members of the Company and had a par value of $0.01 per share.
On October 5, 2006, the Board of Directors of Harcom Productions, Inc. authorized a 1 for 2.6666667 reverse stock split with an effective date of October 15, 2006. This split reduced the number of outstanding shares to 37,500. On the same day, the Board of Directors also approved an increase in the Company’s authorized shares to 100,000,000.
On October 22, 2006, the Company issued 21,000 shares of its common stock to 43 investors. These shares were valued at $0.01 per share which is the price the Board of Directors determined to be the fair market value of the shares on the date of sale. As a result of this transaction, the company received $210.
On October 22, 2006, the Company issued 500 shares of its common stock to Charlie Harwell in exchange for services. These shares were valued at $0.01 per share which is the price the Board of Directors determined to be the fair market value of the shares on the date of the transaction. The Company recorded $5 in salaries related to this transaction.
On November 22, 2006, the Board of Directors of Harcom Productions, Inc. authorized a 25 for 1 forward stock split with an effective date of December 2, 2006. This split increased the number of outstanding shares to 1,475,000.
E
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Harcom Productions, L.L.C.
Tulsa, Okalahoma
We have audited the accompanying balance sheets of Harcom Productions, L.L.C. (the “Company”) as of December 31, 2004 and 2005 and the related statements of operations, members’ deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Harcom Productions, L.L.C. 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.
/s/Killman, Murrell & Company, P.C.
Killman, Murrell & Company, P.C.
Odessa, Texas
December 17, 2006
F
G
H
I
J
Harcom Productions, L.L.C.
Notes to Financial Statements
December 31, 2005 and 2004
Note 1 – Summary of Significant Accounting Policies
Organization and Nature of Operations
Harcom Productions, L.L.C. was incorporated in 1999 in the state of Oklahoma. The Company’s headquarters are located in Tulsa, Oklahoma. In early 1999, the Company executed a Purchase Agreement to acquire the operating and intangible assets of an existing production company from a related party. As such, the Company has since operated as a production company specializing in on hold messaging for all types of companies.
Cash and Cash Equivalents
The Company considers highly liquid investments (those readily convertible to cash) purchased with original maturity dates of three months or less to be cash equivalents.
Income Taxes
The Company is treated as a partnership for federal income tax purposes. Consequently, federal income taxes are not payable by the Company. Members are taxed individually on their shares of the Company’s earnings. The Company’s net income or loss is allocated among the members in accordance with the regulations of the Company.
Allowance for Doubtful Accounts
It is the Company's policy to provide an allowance for doubtful accounts when it believes there is a potential for non-collectibility. For the year ended December 31, 2005, the Company’s allowance for doubtful accounts totaled $13,000, based upon management’s analysis of possible bad debts.
Revenue Recognition
Costs of Goods Sold costs include all direct equipment, material, shipping costs and those indirect costs related to contract performance, such as indirect labor. Selling, general and administrative costs are charged to expense as incurred. Changes in contract performance, contract conditions, and estimated profitability that may result in revisions to costs and income are recognized in the period in which the revisions are determined.
For revenue from product sales, the Company recognizes revenue in accordance with Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition," which superseded SAB No. 101, "Revenue Recognition in Financial Statements." SAB No. 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectibility of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. SAB No. 104 incorporates Emerging Issues Task Force ("EITF") No. 00-21, "Multiple-Deliverable Revenue Arrangements." EITF No. 00-21 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing EITF No. 00-21 on the Company's financial position and results of operations was not significant. This issue addresses determination of whether an arrangement involving more than one deliverable contains more than one unit of accounting and how the arrangement consideration should be measured and allocated to the separate units of accounting. EITF No. 00-21 became effective for revenue arrangements entered into in periods beginning after June 15, 2003.
For those contracts which contain multiple deliverables, management must first determine whether each service, or deliverable, meets the separation criteria of EITF No. 00-21. In general, a deliverable (or a group of deliverables) meets the separation criteria if the deliverable has standalone value to the customer and if there is objective and reliable evidence of the fair value of the remaining deliverables in the arrangement. Each deliverable that meets the separation criteria is considered a "separate unit of accounting." Management allocates the total arrangement consideration to each separate unit of accounting
(continued)
K
Note 1 – Summary of Significant Accounting Policies (continued)
Revenue Recognition (continued)
based on the relative fair value of each separate unit of accounting. The amount of arrangement consideration that is allocated to a unit of accounting that has already been delivered is limited to the amount that is not contingent upon the delivery of another separate unit of accounting. After the arrangement consideration has been allocated to each separate unit of accounting, management applies the appropriate revenue recognition method for each separate unit of accounting as described previously based on the nature of the arrangement. All deliverables that do not meet the separation criteria of EITF No. 00-21 are combined into one unit of accounting, and the appropriate revenue recognition method is applied.
Use of Estimates
The preparation of financial statements in conformity with generally accepted principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.
Long-Lived Assets
Equipment is stated at cost and depreciated over a useful life of 7 years. Expenditures for maintenance and repairs are charged to operating expenses as incurred. When equipment is retired or otherwise disposed of, the cost of the asset and the related accumulated depreciation are removed from the accounts with the resulting gain or loss being reflected in results of operations.
Intangible assets include intellectual property rights which were valued at the date of acquisition by management and amortized over 15 years.
Management assesses the recoverability of equipment and intangible assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from its future undiscounted cash flows. If it is determined that an impairment has occurred, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its estimated fair value.
New Accounting Standards
In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 clarifies that abnormal amounts of idle facility expense, freight handling costs and wasted materials (spoilage) should be recognized as current-period charges and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. We adopted SFAS No. 151 on January 1, 2006. There was no material impact on our accounting for inventory costs.
In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment”. This statement replaces SFAS No. 123, “Accounting for Stock Based Compensation” and supersedes ABP Opinion No. 25, “Accounting for Stock Issued to Employees”. It establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services. The statement requires companies to expense the fair value of employee stock options and other equity-based compensation, eliminating the alternative to use APB No. 25’s intrinsic value method. The statement became effective for the Company on January 1, 2006. In March 2005, the SEC released Staff Accounting Bulletin No. 107 “Share-Based Payment”, which provides interpretive guidance related to the interaction between SFAS 123 (R) and certain SEC rules and regulations. It also provides the SEC staff’s views regarding valuation of share-based payment arrangements. Management believes that SFAS No. 123 (R) and SAB No. 107 will have an impact on future share-based transactions of the Company but cannot determine the impact at this time.
In November 2005, the FASB issued FSP Nos. FAS 115-1 and 124-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments". This FSP addresses the determination as to when an investment is considered impaired, whether the impairment is 'other-than-temporary', and the measurement of an impairment loss. The investment is impaired if the fair value is less than cost. The impairment is 'other-than-temporary' for equity securities and debt securities that can contractually be prepaid or otherwise settled in such a way that the investor would not recover substantially all of its cost. If 'other-than-temporary', an impairment loss shall be recognized in earnings equal to the difference between the investment's cost and its fair value. The guidance in this FSP is effective in reporting years beginning after December 15, 2005.
(continued)
L
Note 1 – Summary of Significant Accounting Policies (continued)
New Accounting Standards(continued)
The Company is reviewing FSP Nos. FAS 115-1 and 124-1, but does not expect that the adoption of this FSP will have a material effect on its financial statements. In May 2005, the FASB issued SFAS no. 154, "Accounting Changes and Error
Corrections ("SFAS No. 154") which replaces APB Opinion No. 20, "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements-An Amendment of ABP Opinion No. 28. SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. Specifically, this statement requires "retrospective application" of the direct effect for a voluntary change in accounting principle to prior periods' financial statements, if it is practical to do so. SFAS No. 154 also strictly defines the term "restatement" to mean the correction of an error revising previously issued financial statements. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and are required to be adopted by the Company in the first quarter of fiscal year 2006. Although we will continue to evaluate the application of SFAS No. 154, management does not anticipate that adoption will have a material impact on our results of operations, financial position or cash flows.
Reclassification
Certain reclassifications may have been made in prior years' financial statements to conform to classifications used in the current year.
Note 2 – Equipment
A summary of equipment at December 31, 2005 and 2004 is as follows:
|
|
2005 |
|
2004 |
|
Equipment |
$ 11,062 |
|
$ 11,062 |
|
Less: Accumulated Depreciation |
(11,062) |
|
(9,482) |
|
Net Equipment |
$ - |
|
$ 1,580 |
Depreciation expense for equipment amounted to $1,580 and $1,580 respectively, for the years ended December 31, 2005 and 2004.
Note 3 – Intangible Assets
The cost to acquire intangible assets in 1999 has been allocated to the assets acquired according to the estimated fair values and amortized over a 15 year life using the straight line method. The Company has adopted SFAS No. 142, Goodwill and Other Intangible Assets, whereby the Company periodically tests its intangible assets for impairment. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets are tested for impairment, and write-downs will be included in results from operations. No impairment was identified for the years ended December 31, 2005 and 2004.
The identifiable intangible assets acquired and their carrying values at December 31, 2005 and 2004 are:
|
|
2005 |
|
2004 |
|
Jingles used in on hold messaging |
$ 248,247 |
|
$ 248,247 |
|
Less: Accumulated Amortization |
(109,820) |
|
(93,270) |
|
Net Intangible Asset |
$ 138,427 |
|
$ 154,977 |
Total amortization expense charged to operations for the year ended December 31, 2005 and 2004 was $16,549 and $16,550, respectively.
M
Note 4 – Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities at December 31, 2005 and 2004 are as follows:
|
|
2005 |
|
2004 |
|
Accounts payable |
$ 265 |
|
$ 1,192 |
|
Accrued rent |
6,567 |
|
3,533 |
|
Accrued state unemployment tax |
510 |
|
473 |
|
Accrued salaries |
2,324 |
|
2,734 |
|
Accrued interest |
5,040 |
|
3,969 |
|
Accrued Commissions |
15,425 |
|
17,104 |
|
Total accounts payable and accrued liabilities |
$ 30,131 |
|
$ 29,005 |
Note 5 – Acquisition
In 1999, the Company purchased all of the assets, including equipment, fixtures and furnishings from TSI, Inc. Pursuant to the purchase agreement, the purchase price and asset allocations were as follows:
Purchase Price
Note Payable
$ 207,000
Estimated Liability for future
health and automobile costs
52,309
Total Purchase Price
$ 259,309
Allocation
Equipment
$ 11,062
Jingles Purchased
248,247
Total Allocation
$ 259,309
Note 6 – Notes Payable and Long-term Debt
During the years ended 2000 and 2001, advances were made to the Company from one of its members and its General Manager totaling $16,000. This note payable is unsecured, due on demand and has an interest rate of 6.5% per annum. As of December 31, 2005 and 2004, the outstanding balance was $16,000. The interest expense related to this note payable was $1,072 and $1,072 for the years ended December 31, 2005 and 2004, respectively.
The long-term debt at December 31, 2005 and 2004 consisted of the following:
|
|
|
2005 |
|
2004 |
|
Note payable to former owners, dated July 1, 1999, bearing interest at 6.5% per annum, payable on March 1, 2019 |
|
|
|
$ 180,285 |
|
Less: current installments |
|
|
|
(8,021) |
|
|
|
|
|
|
|
Total amount of long-term debt |
|
|
|
$ 172,264 |
(continued)
N
Note 6 – Notes Payable and Long-term Debt (continued)
Aggregate maturities of long term debt, as of December 31, 2005, are as follows:
|
2006 |
|
$ 7,545 |
|
2007 |
|
8,050 |
|
2008 |
|
8,589 |
|
2009 |
|
9,165 |
|
2010 |
|
9,779 |
|
Thereafter |
|
129,136 |
|
|
|
|
|
|
|
$ 172,264 |
Note 7 – Due to Officer
Throughout the years ended December 31, 2005 and 2004, the Company’s General Manager Charles Harwell advanced funds to the Company to purchase materials expensed as costs of goods sold. These loans were made through the use of Mr. Harwell’s personal credit cards. As such, the amount of interest accrued is dictated by the interest rate agreed to through Mr. Harwell’s credit agreement. For the years ended December 31, 2005 and 2004, the amount due related to these cost of goods sold purchases totaled $30,154 and $68,647. Additionally, the total amount of accrued interest related to the outstanding balances totaled $7,782 and $7,941, respectively.
Advancement activity for 2005 and 2004 was as follows:
|
|
2005 |
|
2004 |
|
|
|
|
|
|
Beginning Balance |
$ 76,588 |
|
$ 72,754 |
|
Advancements |
83,195 |
|
56,393 |
|
Repayments |
(129,629) |
|
(60,500) |
|
Interest Accrued |
7,782 |
|
7,941 |
|
Ending Balance |
$ 37,936 |
|
$ 76,588 |
Note 8 – Accrued Purchase Obligation
The following reflect changes in the estimated accrued purchase obligation liability for future health and automobile costs due to a related party:
|
|
2005 |
|
2004 |
|
|
|
|
|
|
|
|
Beginning Balance |
$ 74,845 |
|
$ 64,479 |
|
|
Accretion of liability |
12,032 |
|
10,366 |
|
|
Repayments |
- |
|
- |
|
|
Ending Balance |
$ 86,877 |
|
$ 74,845 |
|
As of December 31, 2005 and 2004, the Company had not made any of the required payments since June 2002; therefore the Company is in default on the liabilities and as such the amounts have been reflected as current liabilities.
Note 9 – Other Commitments and Contingencies
Lease Agreement
On December 19, 2002, the Company executed a lease agreement. This lease agreement covers the office space for the Company’s headquarters in Tulsa, Oklahoma includes 4,000 square feet of finished retail space leased for one year beginning on January 1, 2003 and included a deposit of $1,650. The lease renews annually and the related rental expense for 2005 and 2004 was $23,333 and $23,333, respectively.
O
Note 10 – Subsequent Events
On October 2, 2006, Harcom Productions, LLC began the process of changing its classification from that of a limited liability company to that of a corporation under the laws of the state of Oklahoma. Immediately following this conversion, there were 100,000 shares outstanding. These shares were held in equal parts by the two previous members of the Company and had a par value of $0.01 per share.
On October 5, 2006, the Board of Directors of Harcom Productions, Inc. authorized a 1 for 2.6666667 reverse stock split with an effective date of October 15, 2006. This split reduced the number of outstanding shares to 37,500. On the same day, the Board of Directors also approved an increase in the Company’s authorized shares to 100,000,000.
On October 22, 2006, the Company issued 21,000 shares of its common stock to 43 investors. These shares were valued at $0.01 per share which is the price the Board of Directors determined to be the fair market value of the shares on the date of sale. As a result of this transaction, the company received $210.
On October 22, 2006, the Company issued 500 shares of its common stock to Charlie Harwell in exchange for services. These shares were valued at $0.01 per share which is the price the Board of Directors determined to be the fair market value of the shares on the date of the transaction. The Company recorded $5 in salaries related to this transaction.
On November 22, 2006, the Board of Directors of Harcom Productions, Inc. authorized a 25 for 1 forward stock split with an effective date of December 2, 2006. This split increased the number of outstanding shares to 1,475,000.
P
(Outside Back Cover Page Prospectus)
Until __________, 2007 (120 days after the date of this prospectus), all dealers that buy, sell or trade these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
TABLE OF CONTENTS
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Indemnification of Directors and Officers
Section 1031(G) of the Oklahoma Corporation Act permits corporations to indemnify a director, officer or control person of the corporation for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expense. Our Articles of Incorporation do include such a provision automatically indemnifying a director, officer or control person of the corporation or its stockholders for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such.
In addition, our By-Laws, Article X, Section 3, do permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether or not Oklahoma law would permit indemnification. We have not obtained any such insurance at this time.
We have been advised that it is the position of the Securities and Exchange Commission that insofar as the foregoing provisions may be invoked to disclaim liability for damages arising under the Securities Act of 1933, as amended, that such provisions are against public policy as expressed in the Securities Act and are therefore unenforceable.
Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by Harcom Productions, Inc. in connection with the sale of the securities being registered. All amounts are estimates except the Securities and Exchange Commission registration fee and the Accounting Fees and Expenses:
We will bear all the costs and expenses associated with the preparation and filing of this registration statement including the registration fees of the selling security holders.
Recent Sales of Unregistered Securities
Set forth below is information regarding the issuance and sales of Harcom Productions, Inc.'s common stock without registration during the last three years. No sales involved the use of an underwriter and no commissions were paid in connection with the sale of any securities. The following securities of Harcom Productions, Inc. were issued by Harcom within the past three (3) years and were not registered under the Securities Act of 1933:
(a)
On September 30, 2005 the Board of Directors authorized the sale of up to fifty thousand (50,000) additional shares of stock. The company sold twenty-one thousand (21,000) of the authorized fifty thousand (50,000) shares and then closed the sale of additional shares. The sale of stock to the following individuals was issued shares from the authorized capital stock for additional paid-in-capital. These shares were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 as the shares were not a part of a public offering. There was no distribution of a prospectus, private placement memorandum, or business plan to the public. There was no information transmitted by electronic means or by use of the Internet. Shares were sold to friends, family and personal business acquaintances of the President, Shane Harwell. Each individual had specific knowledge of the Company’s operation that was given to them personally by the President, Shane Harwell. Each individual is considered educated and informed concerning
33
small investments, such as the $5.00 investment in our company. The sale of the shares occurred between October 11, 2006 and November 2, 2006 to the following individuals. Upon receipt of the executed subscription agreements, the sale of any additional shares was closed by the Board of Directors. The following table gives effect to the forward stock split of 25:1 that occurred on December 2, 2006.
34
Index of Exhibits
The following Exhibits are filed as part of this Registration Statement, pursuant to Item 601 of Regulation S-B. All Exhibits are attached hereto unless otherwise noted.
Undertakings
(1) The undersigned Registrant hereby undertakes to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933.
(b) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a twenty percent change in the maximum aggregate offering price set forth in the "calculation of registration fee" table in the effective registration statement.
(c) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) The undersigned Registrant hereby undertakes that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the undersigned Registrant according the foregoing provisions, or otherwise, the undersigned Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
35
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, in the City of Tulsa, State of Oklahoma, on December 26, 2006.
|
(Registrant) HARCOM PRODUCTIONS, INC. |
|
By: /s/ Shane Harwell |
|
Shane Harwell |
|
President |
In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated.
|
Name |
Title |
Date |
|
/s/Shane Harwell Shane Harwell |
Principal Executive Officer, Principal Accounting Officer, Chief Financial Officer, Secretary, Chairman of the Board of Directors |
December 26, 2006 |
|
/s/ Susan Harwell Susan Harwell |
Treasurer/Director |
December 26, 2006 |
|
/s/Charles Harwell Charles Harwell |
Director |
December 26, 2006 |
36
CERTIFICATE OF INCORPORATION
OF
HARCOM PRODUCTIONS, INC.
ARTICLE I. CORPORATE NAME
The name of this corporation is HARCOM PRODUCTIONS, INC., and has its principal place of business at 7401 East 46th Place, Tulsa, Oklahoma 74145.
ARTICLE II. NATURE OF BUSINESS AND POWERS
The general nature of the business to be transacted by this Corporation is to engage in any and all business permitted under the laws of the State of Oklahoma and this Corporation shall have all of the corporate powers enumerated in the Oklahoma General Corporation Act.
ARTICLE III. CAPITAL STOCK
The maximum number of shares of stock that this Corporation is authorized to issue and have outstanding at anyone time is 1,000,000 shares of common stock having a par value of $0.001 per share.
ARTICLE IV. TERM OF EXISTENCE
This Corporation shall have perpetual existence commencing upon the filing of this Certificate.
ARTICLE V. REGISTERED AGENT AND INITIAL REGISTERED OFFICE
The Registered Agent and the street address of the initial Registered Office of this Corporation in the State of Oklahoma shall be:
CHARLES HARWELL
7401 East 46th Place
Tulsa, Oklahoma 74145
The Board of Directors from time to time may move the· Registered Office to any other address in the State of Oklahoma.
ARTICLE VI. PREEMPTIVE RIGHTS
Each Shareholder of the Corporation shall have the right to purchase, subscribe for, or receive a right or rights to purchase or subscribe for, a the price for which it is offered to others, that Shareholders pro rata portion of the following:
A.
Any stock of any class that the Corporation may issue or sell, whether or not exchangeable for any stock of the Corporation of any class or classes, and whether or not of unissued shares authorized by the Certificate of Incorporation as originally filed or by any amendment thereof or out of shares of stock of the Corporation acquired by it after the issuance thereof, and whether issued for cash or other consideration; or,
B.
Any obligation that the Corporation may issue or sell which is convertible into or exchangeable for any stock of the Corporation of any class or classes., or to which is attached or pertinent any warrant or warrants or other instruments conferring on the holder the right to subscribe for or purchase from the Corporation any shares of its stock or any class or classes.
This right shall be deemed waived by any Shareholder who does not exercise it and pay for the shares preempted within thirty (30) days after receipt of written notice from the Corporation stating the price, terms and conditions of the issue of shares and inviting the Shareholder to exercise this preemptive right. This right may also be waived by a written waiver signed by the Shareholder.
ARTICLE VII. BOARD OF DIRECTORS
There shall be two (2) directors of the corporation; however, such number may be changed as provided in the Bylaws or by law. The name and address of the initial Directors of the corporation are:
SHANE E. HARWELL
10010 San Pedro Avenue, Suite 310
San Antonio, Texas 78216
SUSAN HARWELL
10010 San Pedro Avenue, Suite 310
San Antonio, Texas 78216
The persons named as the initial Directors shall hold this office until the first Meeting of the Shareholders or until otherwise replaced by a successor.
ARTICLE VIII. INCORPORATOR
The name and street address of the person signing this Certificate of Incorporation is:
SHANE E. HARWELL
10010 San Pedro Avenue, Suite 310
San Antonio, Texas 18216
ARTICLE IX. AMENDMENT OF CERTIFICATE
The Certificate of Incorporation may be amended in the manner provided by law.
ARTICLE X. IMDEMNIFICATION
The Corporation shall indemnify any office or director or any former officer or director, to the full extent permitted by law.
ARTICLE XI. BYLAWS
The power to adopt, alter, amend, and repeal the Bylaws shall be vested in the Board of Directors and the Shareholders as provided by law; however, the Shareholders shall not have the power to adopt or amend the Bylaws that fixes a greater quorum or voting requirement for Shareholders than is required by law.
IN WITNESS WHEREOF, the undersigned, as Incorporator has executed the foregoing certificate of Incorporation on the 2 nd of October, 2006.
/s/ SHANE E. HARWELL
SHANE E. HARWELL
Incorporator
DESIGNATION AND ACCEPTANCE BY REGISTERED AGENT
In compliance with Section 1002, Oklahoma General Corporation Act, the following is submitted: That HARCOM PRODUCTIONS, INC. desiring to organize under the laws of the State of Oklahoma, with its principal office at 7401 East 46 th Place, Tulsa, Oklahoma 74145, County of Tulsa, State of Oklahoma, as its agent to accept service of process within this state.
ACKNOWLEDGEMENT:
Having been named to accept service of process for the above-named Corporation, at the place designated in Article V of this Certificate of Incorporation, the undersigned agrees to act n this capacity and agrees to comply with the provisions of Oklahoma law relative to keeping the designated office open.
/s/ CHARLES HARWELL
CHARLES HARWELL
Registered Agent
STATE OF OKLAHOMA
ARTICLES OF AMENDMENT TO
CERTIFICATE OF INCORPORATION
OF
HARCOM PRODUCTIONS, INC.
HARCOM PRODUCTIONS, INC., a corporation organized and existing under and by the virtue of the Oklahoma General Corporation Act, does hereby certify:
FIRST : That a meeting oftheJ3oardofDirectors of HARCOM PRODUCTIONS, INC., resolutions were duly adopted setting forth proposed amendments to the Articles of Il1corporationof said corporation, declaring said amendments to be advisable and calling a meeting of the stockholders of said Corporation for consideration thereof. The resolutions settil1g forth the proposed amendments are as follows:
RESOLVED , that the Articles of Incorporation of this corporation be amended by changing the Article thereof numbered "Article III" so that, as amended. said Article shall be and read as follows:
The maximum number of shares of stock that this Corporation is authorized to issue and have outstanding at any one time is 100,000,000 shares of common stock having a par value of $0.01 per share.
RESOLVED , that the Articles of Incorporation of this corporation be amended by changing the Article thereof numbered "Article VII" so that, as amended, said Article shall be and read as follows:
The Board of Directors shall consist of not less than one (1) Director and not more than fifteen (15) Directors and the total number of Directors may from time to time be increased or decreased in such manner as is described in the Company's By-Laws, provided, however, that the number of Directors shall not be reduced to less than one (1).
SECOND : That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 1074 of the Oklahoma General Corporation Act at which meeting the necessary number of shares as acquired by statute were voted in favor of the amendment.
THIRD : The amendments were approved by the shareholders. The number of votes cast for the amendments by the shareholders were sufficient for approval.
IN WITNESS WHEREOF , said corporation has caused this certificate to be signed this 5th day of October, 2006.
/s/ SHANE E. HARWELL
SHANE E. HARWELL, President
STATE OF OKLAHOMA
CERTIFICATE OF CONVERSION
HARCOM PRODUCTIONS, LLC, a limited liability company duly organized and existing under and by the virtue of the Limited Liability Company Act of the State of Oklahoma does hereby state as follows:
1.
That at a meeting of the members of HARCOM PRODUCTIONS, LLC, resolutions were duly adopted setting forth a proposed conversion of said company.
2.
That the limited liability company presently known as HAR COM PRODUCTIONS, LLC, f/kla POWERHOUSE, LLC, which was formed on February 5, 1999, proposes to convert from a limited liability company to a corporation.
3.
That the name of the corporation, as set forth in the Certificate of Incorporation, shall be HARCOM PRODUCTIONS, INC.
4.
That this conversion shall be effective as of the date of filing of this Certificate, and, the Certificate of Incorporation filed contemporaneously herewith.
5.
That this conversion was duly adopted in accordance with the provisions set forth in Section 2054.2 of the Oklahoma Limited Liability Company Act.
IN WITNESS WHEREOF , said company bas caused this certificate to be signed this 2nd day of October, 2006.
HARCOM PRODUCTIONS, LLC
By:
/s/ SHANE E. HARWELL
SHANE E. HARWELL, Member Manager
PLAN OF CONVERSION
This Plan of Conversion, is entered into on this, the 2nd day of October, 2006, by and between by and between any and all Members of HARCOM PRODUCTIONS, LLC, as to the plan set forth below:
WITNESSTH
WHEREAS , HARCOM PRODUCTIONS, LLC, a limited liability company, duly organized and existing under and by the virtue of the Limited Liability Company Act of the State of Oklahoma;
WHEREAS , HARCOM PRODUCTIONS, LLC plans to convert to a corporation;
NOW, THEREFORE, IT IS AGREED, as follows:
DEFINITIONS
For purposes of this Plan of Conversion, the following definitions shall apply:
“Converting entity” means- HARCOM PRODUCTIONS, LLC; and,
“Converted entity” means- HARCOM PRODUCTIONS, INC.
SPECIFIC PROVISIONS
1.
That this Plan of Conversion shall be unanimously approved by all persons holding an ownership interest in HARCOM PRODUCTIONS, LLC.
2.
That the limited liability company presently known as HARCOM PRODUCTIONS, LLC, which was formed on February 5, 1999, proposes to convert from a limited liability company to a corporation., duly organized and existing under and by the virtue of the General Corporation Act of the State of Oklahoma;
3.
That the name of the corporation, as set forth in the Certificate of Incorporation, shall be HARCOM PRODUCTIONS, INC.;
Page 1 of 4
4.
That upon conversion of Members' ownership interests in. HARCOM PRODUCTONS, LLC, into ownership interests, or, shares of HARCOM PRODUCTIONS, INC., the Members’ ownership interests in HARCOM PRODUCTIONS, LLC, shall be converted at a proportional amount of the newly issued shares of HARCOM PRODUCTIONS, INC.
5.
That, unless amended by the Board of Directors of HARCOM PRODUCTIONS, INC., the maximum number of shares of stock that HARCOM PRODUCTIONS, INC. shall be authorized to issue and have outstanding at any one time is 1,000,000 shares of common stock having a par value of $0.001 per share.
6.
That the persons named as the initial Directors of HARCOM PRODUCTIONS, INC. shall hold this office until the first Meeting of the Shareholders or until otherwise replaced by a successor.
7.
That HARCOM PRODOCTIONS, INC. shall have the right to indemnify any officer or director or any former officer or director, to the full extent permitted by law.
8.
That the power to adopt, alter, amend and repeal the Bylaws shall be vested in the Board of Directors and the Shareholders as provided by law; however, the Shareholders shall not have the power to adopt or amend the Bylaws that fixes a greater quorum or voting requirement for Shareholders than is required by law.
EFFECTIVENESS OF CONVERSION
9.
That this conversion shall be effective upon the filing of HARCOM PRODUCTIONS, LLC's Certificate of Conversion, and the Certificate of Incorporation for HARCOM PRODUCTIONS, INC.
GENERAL EFFECT OF CONVERSION
10.
That when the conversion Contemplated herein takes effect:
(a)
the converting entity continues to exist without interruption in the organizational form of the converted entity rather than in the organizational form of the converting entity;
(b)
all rights, title, and interests to all property owned by the converting entity continues to be owned, subject to any existing liens or other encumbrances on the property, by the converted entity in the new organizational form without:
(1)
reversion or impairment;
Page 2 of 4
(2)
further act or deed; or
(3)
any transfer or assignment having occurred;
(c)
all liabilities and obligations of the converting entity continue to be liabilities and obligations of the converted entity in the new organizational form without impairment or diminution because of the conversion;
(d)
the rights of creditors or other parties with respect to or against the previous owners or members of the converting entity in their capacities as owners or members in existence when the conversion takes effect continue to exist as to those liabilities and obligations and may be enforced by the creditors and obligees as if a conversion had not occurred;
(e)
a proceeding pending by or against the converting entity or by or against any of the converting entity1s owners or members in their capacities as owners or members may be continued by or against the converted entity in the new organizational form and by or against the previous owners or members without a need for substituting a party;
(f)
the ownership or membership interests of the converting entity that are to be converted into ownership or membership interests of the converted entity as provided in the plan of conversion are converted as provided by the plan. and if the converting entity is a domestic entity, the former owners or members of the domestic entity are entitled only to the rights provided in the plan of conversion or a right of dissent and appraisal under the laws of the State of Oklahoma;
(g)
if after the conversion takes effect, an owner or member of the converted entity as an owner or member is liable for the liabilities or obligations of the converted entity, the owner or member is liable for the liabilities and obligations of the converting entity that existed before the conversion took effect only to the extent that the owner or member:
(1)
agrees in writing to be liable for the liabilities or obligations;
(2)
was liable before the conversion took effect for the liabilities or obligations; or
Page 3 of 4
(3)
by becoming an owner or member of the converted entity, becomes liable under other applicable law for the existing liabilities and obligations of the converted entity.
IN WITNESS WHEREOF, we, all of the current Members of HARCOM PRODUCTIONS, LLC, have executed this Plan of Conversion as of the date first written above. Furthermore, the foregoing Plan of Conversion is unanimously agreed to, and, adopted by all Members of HARCOM PRODUCTIONS, LLC, as evidenced below.
Dated: October 2, 2006
Signed:
/s/ SHANE E. HARWELL
SHANE E. HARWELL, MEMBER
Dated: October 2, 2006
Signed:
/s/ SUSAN HARWELL
SUSAN HARWELL, MEMBER
Page 4 of 4
SECOND AMENDMENT TO THE
ARTICLES OF ORGANIZATION
OF
THE POWERHOUSE, L.L.C.
AN
OKLAHOMA LIMITED LIABILITY COMPANY
TO:
THE OKLAHOMA SECRETARY OF STATE
101 State Capitol
Oklahoma City, OK 73105
The purpose of this amendment is to change the name of the limited liability company.
FIRST. The limited liability company was originally named THE POWERHOUSE, L.L.C. and Articles of Organization were filed on or about February 5, 1999
SECOND. The Company changed its name to POWERHOUSE PRODUCTIONS, L.L.C. Amended Articles of Organization for PowerHouse Productions, L.L.C. were filed on or about February 26, 1999.
THIRD. The Company wishes to again change the name of the limited liability company to HARCOM PRODUCTIONS, L.L.C.
IN WITNESS WHEREOF, this Second Amendment has been executed on the 25th day of June, 1999, by the undersigned.
SOLE ORGANIZER
/s/ John B. Wimbish
John B. Wimbish
AMENDMENT TO THE
ARTICLES OF ORGANIZATION
OF
THE POWERHOUSE, L.L.C.
AN
OKLAHOMA LIMITED LIABILITY COMPANY
TO:
THE OKLAHOMA SECRETARY OF STATE
101 State Capitol
Oklahoma City, OK 73105
The purpose of this amendment is to change the name of the limited liability company.
FIRST. The current name of the limited liability company is THE POWERHOUSE, L.L.C. (the "Company").
SECOND. The Articles of Organization for The PowerHouse, L.L.C. were filed on or about February 5, 1999.
THIRD. The Company wishes to change the name of the limited liability company to POWERHOUSE PRODUCTIONS, L.L.C.
IN WITNESS WHEREOF, this Amendment has been executed on the 25 th day of February, 1999, by the undersigned.
SOLE ORGANIZER
/s/ John B. Wimbish
John B. Wimbish
BY-LAWS
OF
HARCOM PRODUCTIONS, INC.
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office for the transaction of business of the corporation shall be fixed or may be changed by approval of a majority of the authorized Directors, and additional offices may be established and maintained at such other place or places as the Board of Directors may from time to time designate.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any time be established by the Board of Directors at any place or places where the corporation is qualified to do business.
ARTICLE II
DIRECTORS – MANAGEMENT
Section 1. RESPONSIBILITY OF BOARD OF DIRECTORS. Subject to the provisions of applicable law and to any limitations in the Articles of Incorporation of the corporation relating to action required to be approved by the Shareholders, or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors. The Board may delegate the management of the day-to-day operation of the business of the corporation to an executive committee or others, provided that the business and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the Board.
Section 2. STANDARD OF CARE. Each Director shall perform the duties of a Director, including the duties as a member of any committee of the Board upon which the Director may serve, in good faith, in a manner such Director believes to be in the best interests of the corporation, and with such care, including reasonable inquiry, as a prudent person would use under similar circumstances.
Section 3. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number of Directors shall be up to fifteen (15) until changed by a duly adopted amendment to the Articles of Incorporation or by an amendment to this by-law adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.
1
Section 4. ELECTION AND TERM OF OFFICE OF DIRECTORS. Three Directors shall be elected at each annual meeting of the Shareholders to hold office until the next annual meeting. Each Director, including a Director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified. The election of Directors shall be on a staggered basis. Dependent on the total number of Directors approved, election shall be for no more than twenty percent (20%) of the Board of Directors in any given year when the total number of Directors exceeds five (5) Directors.
Section 5. VACANCIES. Vacancies in the Board of Directors may be filled by a majority of the remaining Directors, though less than a quorum, or by a sole remaining Director, except that a vacancy created by the removal of a Director by the vote or written consent of the Shareholders or by court order may be filled only by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of holders of a majority of the outstanding shares entitled to vote. Each Director so elected shall hold office until the next annual meeting of the Shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the Board of Directors shall be deemed to exist in the event of the death, resignation, or removal of any Director, or if the Board of Directors by resolution declares vacant the office of a Director who has been declared of unsound mind by an order of court or convicted of a felony, or if the authorized number of Directors is increased, or if the Shareholders fail, at any meeting of Shareholders at which any Director or Directors are elected, to elect the number of Directors to be voted for at that meeting.
The Shareholders may elect a Director or Directors at any time to fill any vacancy or vacancies not filled by the Directors, but any such election by written consent shall require the consent of a majority of the outstanding shares entitled to vote.
Any Director may resign effective on giving written notice to the Chairman of the Board, the President, the Secretary, or the Board of Directors, unless the notice specifies a later time for that resignation to become effective. If the resignation of a Director is effective at a future time, the Board of Directors may elect a successor to take office when the resignation becomes effective.
No reduction of the authorized number of Directors shall have the effect of removing any Director before that Directors’ term of office expires.
Section 6. REMOVAL OF DIRECTORS. Subject to applicable law, the entire Board of Directors or any individual Director may be removed from office. In such case, the remaining Board members may elect a successor Director to fill such vacancy for the remaining unexpired term of the Director so removed.
Section 7. NOTICE, PLACE AND MANNER OF MEETINGS. Meetings of the Board of Directors may be called by the Chairman of the Board, or the President, or any
2
Vice President, or the Secretary, or any one (1) Director and shall be held at the principal executive office of the corporation, unless some other place is designated in the notice of the meeting. Members of the Board may participate in a meeting through use of a conference telephone or similar communications equipment so long as all members participating in such a meeting can hear one another. Accurate minutes of any meeting of the Board or any committee thereof, shall be maintained by the Secretary or other officer designated for that purpose.
Section 8. ORGANIZATIONAL MEETINGS. The organizational meetings of the Board of Directors shall be held immediately following the adjournment of the Annual Meetings of the Shareholders.
Section 9. OTHER REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at the corporate offices, or such other place as may be designated by the Board of Directors, as follows:
Time of Regular Meeting: 9:00 A.M.
Date of Regular Meeting: Second Friday of March, June, September and December.
If said day shall fall upon a holiday, such meetings shall be held on the next succeeding business day thereafter. No notice need be given of such regular meetings.
Section 10. SPECIAL MEETINGS - NOTICES - WAIVERS. Special meetings of the Board may be called at any time by the President or, if he or she is absent or unable or refuses to act, by any Vice President or the Secretary or by any one (1) Director if only one is provided.
At least forty-eight (48) hours notice of the time and place of special meetings shall be delivered personally to the Directors or personally communicated to them by a corporate officer by telephone or telegraph. If the notice is sent to a Director by letter, it shall be addressed to him or her at his or her address as it is shown upon the records of the corporation, or if it is not so shown on such records or if not readily ascertainable, at the place in which the meetings of the Directors are regularly held. In case such notice is mailed, it shall be deposited in the United States mail, postage prepaid, in the place in which the principal executive officer of the corporation is located at least four (4) days prior to the time of the holding of the meeting. Such mailing, telegraphing, telephoning or delivery as above provided shall be due, legal and personal notice to such Director.
When all of the Directors are present at any Directors’ meeting, however, called or noticed, and either (i) sign a written consent thereto on the records of such meeting, or, (ii) a majority of the Directors is present and if those not present sign a waiver of notice of such meeting or a consent to holding the meeting or an approval of the minute thereof, whether prior to or after the holding of such meeting, which said waiver, consent or approval shall be filed with the Secretary of the corporation, or, (iii) if a Director attends a meeting without notice but without protesting, prior thereto or at its commencement,
3
the lack of notice, then the transactions thereof are as valid as if had at a meeting regularly called and noticed.
Section 11. DIRECTORS’ ACTION BY UNANIMOUS WRITTEN CONSENT. Any action required or permitted to be taken by the Board of Directors may be taken without a meeting and with the same force and effect as if taken by a unanimous vote of Directors, if authorized by a writing signed individually or collectively by all members of the Board. Such consent shall be filed with the regular minutes of the Board.
Section 12. QUORUM. A majority of the number of Directors as fixed by the Articles of Incorporation or By-Laws shall be necessary to constitute a quorum for the transaction of business, and the action of a majority of the Directors present at any meeting at which there is a quorum, when duly assembled, is valid as a corporate act; provided that a minority of the Directors, in the absence of a quorum, may adjourn from time to time, but may not transact any business. A meeting at which a quorum is initially present may continue to transact business, notwithstanding the withdrawal of Directors, if any action taken is approved by a majority of the required quorum for such meeting.
Section 13. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an adjourned meeting need not be given to absent Directors if the time and place be fixed at the meeting adjourned and held within twenty-four (24) hours, but if adjourned more than twenty-four (24) hours, notice shall be given to all Directors not present at the time of the adjournment.
Section 14. COMPENSATION OF DIRECTORS. Directors, as such, shall not receive any stated salary for their services, but by resolution of the Board a fixed sum and expense of attendance, if any, may be allowed for attendance at each regular and special meeting of the Board; provided that nothing herein contained shall be construed to preclude any Director from serving the corporation in any other capacity and receiving compensation therefore.
Section 15. COMMITTEES. Committees of the Board may be appointed by resolution passed by a majority of the whole Board. Committees shall be composed of two (2) or more members of the Board and shall have such powers of the Board as may be expressly delegated to it by resolution of the Board of Directors, except those powers expressly made non-delegable by applicable law.
Section 16. ADVISORY DIRECTORS. The Board of Directors from time to time may elect one or more persons to be Advisory Directors who shall not by such appointment be members of the Board of Directors. Advisory Directors shall be available from time to time to perform special assignments specified by the President, to attend meetings of the Board of Directors upon invitation and to furnish consultation to the Board. The period during which the title shall be held may be prescribed by the Board of Directors. If no period is prescribed, the title shall be held at the pleasure of the Board.
4
Section 17. RESIGNATIONS. Any Director may resign effective upon giving written notice to the Chairman of the Board, the President, the Secretary or the Board of Directors of the Corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The Officers of the corporation shall be a President, a Secretary, and a Treasurer. The corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries, or one or more Assistant Treasurers, and such other Officers as may be appointed in accordance with the provisions of Section 3 of this Article. Any number of offices may be held by the same person.
Section 2. ELECTION. The Officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article, shall be chosen annually by the Board of Directors, and each shall hold office until he or she shall resign or shall be removed or otherwise disqualified to serve or a successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such other Officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided by the By-Laws or as the Board of Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if any, of any officer under any contract of employment, any officer may be removed, either with or without cause, by the Board of Directors, at any regular or special meeting of the Board, or except in case of an Officer chosen by the Board of Directors by any Officer upon whom such power of removal may be conferred by the Board of Directors.
Any Officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
Section 5. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filed in the manner prescribed in the By-Laws for regular appointment to that office.
5
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an officer be elected, shall, if present, preside at meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned by the Board of Directors or prescribed by the By-Laws. If there is no President, the Chairman of the Board shall in addition be the Chief Executive Officer of the corporation and shall have the powers and duties prescribed in Section 7 of this Article.
Section 7. PRESIDENT/CHIEF EXECUTIVE OFFICER. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the chairman of the Board, if there be such an officer, the President shall be the Chief Executive Officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and Officers of the corporation. He or she shall preside at all meetings of the Shareholders and in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board of Directors. The President shall be ex officio a member of all the standing committees, including the Executive Committee, if any, and shall have the general powers and duties of management usually vested in the office of President of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or the By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to, all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or the By-Laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book of minutes at the principal office or such other place as the Board of Directors may order, of all meetings of Directors and Shareholders, with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at Directors’ meetings, the number of shares present or represented at Shareholders’ meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office or at the office of the corporation’s transfer agent, a share register, or duplicate share register showing the names of the Shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings of the Shareholders and of the Board of Directors required by the By-Laws or by law to be given. He or she shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by the By-Laws.
6
Section 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained in accordance with generally accepted accounting principles, adequate and correct accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, earnings (or surplus) and shares. The books of accounts shall at all reasonable times be open to inspection by any Director.
This officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the Board of Directors. He or she shall disburse the funds of the corporation as may be ordered by the Board of Directors, shall render to the President and Directors, whenever they request it, an account of all of his or her transactions and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or the By-Laws.
ARTICLE IV
SHAREHOLDERS’ MEETINGS
Section 1. PLACE OF MEETINGS. All meetings of the Shareholders shall be held at the principal executive office of the corporation unless some other appropriate and convenient location be designated for that purpose from time to time by the Board of Directors.
Section 2. ANNUAL MEETINGS. The annual meetings of the Shareholders shall be held, each year, at the time and on the day following:
Time of Meeting: 10:00 A.M.
Date of Meeting: November 15th of each year
If this day shall be a legal holiday, then the meeting shall be held on the next succeeding business day, at the same hour. At the annual meeting, the Shareholders shall elect a Board of Directors, consider reports of the affairs of the corporation and transact such other business as may be properly brought before the meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the Shareholders may be called at any time by the Board of Directors, the Chairman of the Board, the President, a Vice President, the Secretary, or by one or more Shareholders holding not less than one-tenth (1/10) of the voting power of the corporation. Except as next provided, notice shall be given as for the annual meeting.
Upon receipt of a written request addressed to the Chairman, President, Vice President, or Secretary, mailed or delivered personally to such officer by any person (other than the Board) entitled to call a special meeting of Shareholders, such Officer shall cause notice to be given, to the Shareholders entitled to vote, that a meeting will be held at a time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of such request. If such notice is
7
not given within twenty (20) days after receipt of such request, the persons calling the meeting may give notice thereof in the same manner provided by these By-Laws.
Section 4. NOTICE OF MEETINGS - REPORTS. Notice of meetings, annual or special, shall be given in writing not less than ten (10) nor more than sixty (60) days before the date of the meeting to Shareholders entitled to vote thereat. Such notice shall be given by the Secretary or the Assistant Secretary, or if there be no such officer, or in the case of his or her neglect or refusal, by any Director or Shareholder.
Such notices or any reports shall be given personally or by mail and shall be sent to the Shareholder’s address appearing on the books of the corporation, or supplied by him or her to the corporation for the purpose of the notice.
Notice of any meeting of Shareholders shall specify the place, the day and the hour of meeting, and (1) in case of a special meeting, the general nature of the business to be transacted and no other business may be transacted, or (2) in the case of an annual meeting, those matters which Board at date of mailing, intends to present for action by the Shareholders. At any meetings where Directors are to be elected notice shall include the names of the nominees, if any, intended at date of notice to be presented by management for election.
If a Shareholder supplies no address, notice shall be deemed to have been given if mailed to the place where the principal executive office of the corporation is situated, or published at least once in some newspaper of general circulation in the County of said principal office.
Notice shall be deemed given at the time it is delivered personally or deposited in the mail or sent by other means of written communication. The Officer giving such notice or report shall prepare and file an affidavit or declaration thereof.
When a meeting is adjourned for forty-five (45) days or more, notice of the adjourned meeting shall be given as in case of an original meeting. Save, as aforesaid, it shall not be necessary to give any notice of adjournment or of the business to be transacted at an adjourned meeting other than by announcement at the meeting at which said adjournment is taken.
Section 5. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The transactions of any meeting of Shareholders, however called and notice, shall be valid as though a meeting had been duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the Shareholders entitled to vote, not present in person or by proxy, sign a written waiver of notice, or a consent to the holding of such meeting or an approval shall be filed with the corporate records or made a part of the minutes of the meeting.
8
Attendance shall constitute a waiver of notice, unless objection shall be made as provided in applicable law.
Section 6. SHAREHOLDERS ACTING WITHOUT A MEETING - DIRECTORS. Any action which may be taken at a meeting of the Shareholders, may be taken without a meeting or notice of meeting if authorized by a writing signed by all of the Shareholders entitled to vote at a meeting for such purpose, and filed with the Secretary of the corporation, provided, further, that while ordinarily Directors can be elected by unanimous written consent, if the Directors fail to fill a vacancy, then a Director to fill that vacancy may be elected by the written consent of persons holding a majority of shares entitled to vote for the election of Directors.
Section 7. OTHER ACTIONS WITHOUT A MEETING. Unless otherwise provided for under applicable law or the Articles of Incorporation, any action which may be taken at any annual or special meeting of Shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize to take such action at a meeting at which all shares entitled to vote thereon were present and voted.
Unless the consents of all Shareholders entitled to vote have been solicited in writing,
(1) Notice of any Shareholder approval without a meeting by less than unanimous written consent shall be given at least ten (10) days before the consummation of the action authorized by such approval, and
(2) Prompt notice shall be given of the taking of any other corporate action approved by Shareholders without a meeting be less than unanimous written consent, to each of those Shareholders entitled to vote who have not consented in writing.
Any Shareholder giving a written consent, or the Shareholder’s proxy holders, or a transferee of the shares of a personal representative of the Shareholder or their respective proxy holders, may revoke the consent by a writing received by the corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary of the corporation, but may not do so thereafter. Such revocation is effective upon its receipt by the Secretary of the corporation.
Section 8. QUORUM. The holder of a majority of the shares entitled to vote thereat, present in person, or represented by proxy, shall constitute a quorum at all meetings of the Shareholders for the transaction of business except as otherwise provided by law, by the Articles of Incorporation, or by these By-Laws. If, however, such majority shall not be present or represented at any meeting of the Shareholders, the shareholders entitled to vote thereat, present in person, or by proxy, shall have the power to adjourn the meeting from time to time, until the requisite amount of voting shares shall be present. At such adjourned meeting at which the requisite amount of voting shares shall
9
be represented, any business may be transacted which might have been transacted at a meeting as originally notified.
If a quorum be initially present, the Shareholders may continue to transact business until adjournment, notwithstanding the withdrawal of enough Shareholders to leave less than a quorum, if any action taken is approved by a majority of the Shareholders required to initially constitute a quorum.
Section 9. VOTING. Only persons in whose names shares entitled to vote stand on the stock records of the corporation on the day of any meeting of Shareholders, unless some other day be fixed by the Board of Directors for the determination of Shareholders of record, and then on such other day, shall be entitled to vote at such meeting.
Provided the candidate’s name has been placed in nomination prior to the voting and one or more Shareholders has given notice at the meeting prior to the voting of the Shareholder’s intent to cumulate the Shareholder’s votes, every Shareholder entitled to vote at any election for Directors of any corporation for profit may cumulate their votes and give one candidate a number of votes equal to the number of Directors to be elected multiplied by the number of votes to which his or her shares are entitled to, or distribute his or her votes on the same principle among as many candidates as he or she thinks fit.
The candidates receiving the highest number of votes up to the number of Directors to be elected are elected.
The Board of Directors may fix a time in the future not exceeding thirty (30) days preceding the date of any meeting of Shareholders or the date fixed for the payment of any dividend or distribution, or for the allotment of rights, or when any change or conversion or exchange of shares shall go into effect, as a record date for the determination of the Shareholders entitled to notice of and to vote at any such meeting, or entitled to receive any such dividend or distribution, or any allotment of rights or to exercise the rights in respect to any such change, conversion or exchange of shares. In such case only Shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting, to receive such dividends, distribution or allotment of rights, or to exercise such rights, as the case may be notwithstanding any transfer of any share on the books of the corporation after any record date fixed as aforesaid. The Board of Directors may close the books of the corporation against transfers of shares during the whole or any part of such period.
Section 10. PROXIES. Every Shareholder entitled to vote, or to execute consents, may do so, either in person or by written proxy, executed in accordance with the provisions of applicable law filed with the Secretary of the corporation.
Section 11. ORGANIZATION. The President, or in the absence of the President, any Vice President, shall call the meeting of the Shareholders to order, and shall act as Chairman of the meeting. In the absence of the President and all of the Vice Presidents, Shareholders shall appoint a Chairman for such meeting. The Secretary of the corporation
10
shall act as Secretary of all meetings of the Shareholders, but in the absence of the Secretary at any meeting of the Shareholders, the presiding officer may appoint any person to act as Secretary of the meeting.
Section 12. INSPECTORS OF ELECTION. In advance of any meeting of Shareholders, the Board of Directors may, if they so elect, appoint inspectors of election to act at such meeting or any adjournment thereof. If inspectors of election be not so appointed, or if any persons so appointed fail to appear or refuse to act, the chairman of any such meeting may, and on the request of any Shareholder or his or her proxy shall, make such appointment at the meeting in which case the number of inspectors shall be either one (1) or three (3) as determined by a majority of the Shareholders represented at the meeting.
ARTICLE V
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES. Certificates for shares shall be of such form and device as the Board of Directors may designate and shall state the name of the record holder of the shares represented thereby; its number; date of issuance; the number of shares for which it is issued; a statement of the rights, privileges preferences and restriction, if any; a statement as to the redemption or conversion, if any; a statement of liens or restrictions upon transfer or voting, if any; if the shares be assessable or, if assessments are collectible by personal action, a plain statement of such facts.
All certificates shall be signed in the name of the corporation by the Chairman of the Board or Vice Chairman of the Board or the President or Vice President and by the Chief Financial officer or an Assistant Treasurer or the Secretary or any Assistant Secretary, certifying the number of shares and the class or series of shares owned by the Shareholder.
Any or all of the signatures on the certificate may be facsimile. In case any Officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed on a certificate shall have ceased to be that Officer, transfer agent, or registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an Officer, transfer agent, or registrar at the date of issuance.
Section 2. TRANSFER ON THE BOOKS. Upon surrender to the Secretary or transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
11
Section 3. LOST OR DESTROYED CERTIFICATES. Any person claiming a certificate of stock to be lost or destroyed shall make an affidavit or affirmation of that fact and shall, if the Directors so require, give the corporation a bond of indemnity, in form and with one or more sureties satisfactory to the Board, of the stock represented by said certificate may be issued in the number of shares as the one alleged in at least double the value certificate, whereupon a new same tender and for the same to be lost or destroyed.
Section 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint one or more transfer agents or transfer clerks, and one or more registrars which shall be an incorporated bank or trust company, either domestic or foreign, who shall be appointed at such times and places as the requirements of the corporation may necessitate and the Board of Directors may designate.
Section 5. CLOSING STOCK TRANSFER BOOKS - RECORD DATE. In order that the corporation may determine the Shareholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect to any other lawful action, the Board may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days prior to the date of such meeting nor more than sixty (60) days prior to any other action.
If no record date is fixed; the record date for determining Shareholders entitled to notice of or to vote at a meeting of Shareholders shall be at the close of business on the business day next preceding the day on which notice is given or if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. The record date for determining Shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board is necessary, shall be the day on which the first written consent is given.
The record date for determining Shareholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto, or the sixtieth (60th) day prior to the date of such other action, whichever is later.
ARTICLE VI
RECORDS - REPORTS – INSPECTION
Section 1. RECORDS. The corporation shall maintain, in accordance with generally accepted accounting principles, adequate and correct accounts, books and records of its business and properties. All of such books, records and accounts shall be kept at its principal executive office as fixed by the Board of Directors from time to time.
Section 2. INSPECTION OF BOOKS AND RECORDS. All books and records shall be open to inspection of the Directors and Shareholders from time to time and in the manner provided under applicable law.
12
Section 3. CERTIFICATION AND INSPECTION OF BY-LAWS. The original or a copy of these By-Laws, as amended or otherwise altered to date, certified by the Secretary, shall be kept at the corporation’s principal executive office and shall be open to inspection by the Shareholders at all reasonable times during office hours.
Section 4. CHECK, DRAFTS, ETC. All checks, drafts, or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as shall be determined from time to time by the Board of Directors.
Section 5. CONTRACT, ETC. – HOW EXECUTED. The Board of Directors, except as in the By-Laws otherwise provided, may authorize any Officer or Officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation. Such authority may be general or confined to specific instances. Unless so authorized by the Board of Directors, no Officer, agent or employee shall have any power or authority to bind the corporation by any contract or agreement, or to pledge its credit, or to render it liable for any purpose or to any amount except as may be provided under applicable law.
ARTICLE VII
ANNUAL REPORTS
Section 1. REPORT TO SHAREHOLDERS, DUE DATE. The Board of Directors shall not be required to file an annual report to be sent to the Shareholders. This report shall be available at the annual meeting of Shareholders to be held during the next fiscal year and in the manner specified in Section 4 of the Article IV of these By-Laws for giving notice to Shareholders of the corporation. The annual report shall contain a balance sheet as of the end of the fiscal year and an income statement and statement of changes in financial position for the fiscal year, accompanied by any report of independent accountants or, if there is no such report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the books and records of the corporation. No report shall be necessary in the event the corporation transacts no business and is not a fully operational entity during the course of the fiscal year.
ARTICLE VIII
AMENDMENTS TO BY-LAWS
Section 1. AMENDMENT BY SHAREHOLDERS. New BY-Laws may be adopted or these By-Laws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that if the Articles of Incorporation of the corporation set forth the number of authorized Directors of the corporation, the authorized number of Directors may be changed only by an amendment of the Article of Incorporation.
13
Section 2. POWERS OF DIRECTORS. Subject to the right of the Shareholders to adopt, amend or repeal By-Laws, as provided in Section 1 of this Article VIII, and the limitations, if any, under law, the Board of Directors may adopt, amend or repeal any of these By-Laws other than a By-Law or amendment thereof changing the authorized number of Directors.
Section 3. RECORD OF AMENDMENTS. Whenever an amendment or new By-Law is adopted, it shall be copied in the book of By-Laws with the original By-Laws, in the appropriate place. If any By-Law is repealed, the fact of repeal with the date of the meeting at which the repeal was enacted or written assent was filed shall be stated in said book.
ARTICLE IX
CORPORATE SEAL
Section 1. SEAL. The corporate seal shall be circular in form, and shall have inscribed thereon the name of the corporation, the date and State of incorporation.
ARTICLE X
MISCELLANEOUS
Section 1. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other corporations standing in the name of this corporation may be voted or represented and all incidents thereto may be exercised on behalf of the corporation by the Chairman of the Board, the President or any Vice President and the Secretary or an Assistant Secretary.
Section 2. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a subsidiary shall not be entitled to vote on any matter. A subsidiary for these purposes is defined as a corporation, the shares of which possessing more than 25% of the total combined voting power of all classes of shares entitled to vote, are owned directly or indirectly through one (1) or more subsidiaries.
Section 3. INDEMNITY. Subject to applicable law, the corporation may indemnify any Director, Officer, agent or employee as to those liabilities and on those terms and conditions as appropriate. In any event, the corporation shall have the right to purchase and maintain insurance on behalf of any such persons whether or not the corporation would have the power to indemnify such person against the liability insured against.
Section 4. ACCOUNTING YEAR. The accounting year of the corporation shall be fixed by resolution of the Board of Directors.
14
EXHIBIT 5
HARRISON LAW, P.A.
|
Diane J. Harrison Bar Admissions: Florida and Nevada |
6860 Gulfport Blvd. S. PMB 162 South Pasadena, Florida 33707 Phone: (941) 723-7564 Fax: (941) 531-4935 HarrisonDJEsq@tampabay.rr.com |
December 26, 2006
Board of Directors
Harcom Productions, Inc.
7401 East 46 th Place
Tulsa, OK 74145
Re: Registration Statement on Form SB-2 of Harcom Productions, Inc.
You have requested our opinion as counsel for Harcom Productions, Inc., (the “Company”), in connection with a Registration Statement on Form SB-2 (the “Registration Statement”) to be filed by the Corporation with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933 (the “Act”), as to the legality of the 1,487,500 shares (the “Shares”) of Common Stock, par value $0.01 per share, of the Corporation which are being registered in the Registration Statement.
We have made such legal examination and inquiries as we have deemed advisable or necessary for the purpose of rendering this opinion and have examined originals or copies of the following documents and corporate records:
1. Articles of Incorporation, and amendments thereto;
2. Bylaws, and amendments thereto;
3. The Company's resolutions of the Board of Directors authorizing the issuance of shares; and
4. Such other documents and matters as we have deemed necessary to render the following opinion.
In rendering this opinion, we have relied upon, with the consent of the Company and its members: (i) the representations of the Company and its members and other representatives as set forth in the aforementioned documents as to factual matters; and (ii) assurances from public officials and from members and other representatives of the Company as we have deemed necessary for purposes of expressing the opinions expressed herein. We have not undertaken any independent investigation to determine or verify any information and representations made by the Company and its members and representatives in the foregoing documents and have relied upon such information and representations in expressing our opinion.
We have assumed in rendering these opinions that no person or party has taken any action inconsistent with the terms of the above-described documents or prohibited by law. This opinion letter is limited to the matters stated herein and no opinions are to be implied or inferred beyond the matters expressly stated herein.
Based upon the foregoing, it is our opinion that each outstanding share of Common Stock registered in this offering when distributed and sold in the manner referred to in the Registration Statement, will be legally issued, fully paid, and non-assessable under Oklahoma law, including the statutory provisions, all applicable provisions of the Oklahoma Constitution and all reported judicial decisions interpreting those laws.
We hereby consent to the use of this opinion in the registration statement filed with the Commission in connection with the registration of the Shares and to the reference to our firm under the heading “Legal Matters” in the registration statement and the prospectus included therein. In giving such consent, we do not consider that we are “experts” within the meaning of such term as used in the Securities Act of 1933, as amended, or the rules and regulations of the Commission issued thereunder, with respect to any part of the registration statement, including this opinion as an exhibit or otherwise.
Sincerely,
/s/ Diane J. Harrison
Diane J. Harrison, Esq.
HARCOM PRODUCTIONS, INC.
CODE OF BUSINESS CONDUCT AND ETHICS
(ADOPTED BY THE BOARD OF DIRECTORS ON NOVEMBER 11, 2006)
INTRODUCTION
This Code of Business Conduct and Ethics covers a wide range of business practices and procedures. It does not cover every issue that may arise but it sets out basic principles to guide all employees of Harcom Productions, Inc. and its subsidiaries, if any (the "Company"). All of our officers, directors and employees must conduct themselves accordingly and seek to avoid even the appearance of improper behavior. The code should also be provided to and followed by the Company's agents and representatives, including consultants.
If a law conflicts with a policy in this Code, you must comply with the law. If you have any questions about these conflicts, you should ask your supervisor how to handle the situation.
Those who violate standards in this Code will be subject to disciplinary action, up to and including termination of employment. If you are in a situation that you believe may violate or lead to a violation of this Code, follow the guidelines described in Section 14 of this Code.
1. COMPLIANCE WITH LAWS, RULES AND REGULATIONS
Obey the law, both in letter and in spirit, is the foundation on which our ethical standards are built. All employees must respect and obey the laws of the cities, states and countries in which we operate. Although not all employees are expected to know the details of these laws, it is important to know enough about them to determine when to seek advice from supervisors, managers or other appropriate personnel.
2. CONFLICTS OF INTEREST
A "conflict of interest" exists when a person's private interests interferes in any way with the interests of the Company. A conflict situation can arise when an employee, officer or director takes actions or has interests that may make it difficult to perform his or her Company work objectively and efficiently. Conflicts of interest may also arise when an employee, officer or director, or members of his or her family, receives improper personal benefits as a result of his or her position in the Company. Loans to, or guarantees of obligations of, employees and their family members may create conflicts of interest.
It is almost always a conflict of interest for a Company employee to work simultaneously for a competitor, customer or supplier. You are not allowed to work for a competitor as a consultant or board member. The best policy is to avoid any direct or indirect business connection with our customers, suppliers or competitors, except on our behalf. Conflicts of interest are prohibited as a matter of Company policy, except under guidelines approved by our Board of Directors. Conflicts of interest may not always be clear-cut, so if you have a question, you should consult with higher levels of management. Any employee, officer or director who becomes aware of a conflict or potential conflict should bring it to the attention of a supervisor, manager or other appropriate personnel or consult with the procedures described in Section 14 of this Code.
3. INSIDER TRADING
Employees who have access to confidential information are not permitted to use or share that information for stock trading purposes or for any other purpose except the conduct of our business. All non-public information about the Company should be considered confidential information. To use non-public information for persona financial benefit or to "tip" others who might make an investment decision on the basis of this information is not only unethical but also illegal.
4. CORPORATE OPPORTUNITIES
Employees, officer and directors are prohibited from taking for themselves personally, opportunities that are discovered through the use of corporate property, information or position without the consent of the Board of Directors. No employee may use corporate property, information or position for improper personal gain, and no employee may compete with the Company, directly or indirectly.
5. COMPETITION AND FAIR DEALING
We seek to outperform our competition fairly and honestly. Stealing proprietary information, possessing trade secret information that was obtained without the owner's consent, or inducing such disclosures by past or present employees of other companies is prohibited. Each officer, director and employee should respect the rights of and deal fairly with the Company's customers, suppliers, competitors and employees. No employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other intentional unfair-dealing practice.
The purpose of business entertainment and gifts in a commercial setting is to create good will and sound working relationships, not to gain unfair advantage with customers. No gift, or entertainment should ever be offered, given, provided or accepted by any Company employee, family member of an employee or agent, unless it (a) is not in cash, (b) is consistent with customary business practices, (c) is not excessive in value, (d) cannot be construed as a bribe or payoff and (e) does not violate any laws or regulations. Please discuss with your supervisor any gifts or proposed gifts that you are not certain are appropriate.
6. DISCRIMINATION AND HARASSMENT
The diversity of the Company's employees is a tremendous asset. We are firmly committed to providing equal opportunity in all respects aspects of employment and will not tolerate illegal discrimination or harassment of any kind. Examples include derogatory comments based on racial or ethnic characteristics and unwelcome sexual advances.
7. HEALTH AND SAFETY
The Company strives to provide each employee with a safe and healthy work environment. Each employee has responsibility for maintaining a safe and healthy workplace for all employees by following safety and health rules and practices and reporting accidents, injuries and unsafe equipment, practices or conditions.
Violence and threatening behavior are not permitted. Employees should report to work in condition to perform their duties, free from the influence of illegal drugs or alcohol. The use of alcohol and/or illegal drugs in the workplace will not be tolerated.
8. RECORD-KEEPING
The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions. For example, only the true and actual number of hours worked should be reported.
Many employees regularly use business expense accounts, which must be documented and recorded accurately. If you are not sure whether a certain expense is legitimate, ask your supervisor or the Company's controller or chief financial officer.
All of the Company's books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company's transactions and must conform to both applicable legal requirements and to the Company's systems of accounting and internal controls. Unrecorded or "off the books" funds or assets should not be maintained unless permitted by applicable laws or regulations.
Business records and communications often become public, and we should avoid exaggeration, derogatory remarks, guesswork or inappropriate characterizations of people and companies that can be misunderstood. This applies equally to e-mail, internal memos and formal reports. Records should always be retained or destroyed according to the Company's record retention policies. In accordance with these policies, in the event of litigation or governmental investigation please consultant your supervisor. All e-mail communications are the property of the Company and employees, officers and directors should not expect that Company or personal e-mail communications are private. All e-mails are the property of the Company. No employee, officer or director shall use Company computers, including to access the internet, for personal or non-Company business.
9. CONFIDENTIALITY
Employees must maintain the confidentiality of confidential information entrusted to them by the Company or its customers, except when disclosure is required by laws or regulations. Confidential information includes all non-public information that might be of use to competitors, or harmful to the Company or its customers, if disclosed. It also includes information that suppliers and customers have entrusted to us. The obligation to preserve confidential information continues even after employment ends. In connection with this obligation, employees, officers and directors may be required to execute confidentiality agreements confirming their agreement to be bound not to disclose confidential information. If you are uncertain whether particular information is confidential or non-public, please consult your supervisor.
10. PROTECTION AND PROPER USE OF COMPANY ASSETS
All officers, directors and employees should endeavor to protect the Company's assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company's profitability. Any suspected incident of fraud or theft should be immediately reported for investigation. Company equipment should not be used for non-Company business.
The obligation of officers, directors and employees to protect the Company's assets includes it proprietary information. Proprietary information includes intellectual property such as trade secrets, patents, trademarks and copyrights, as well as business, marketing and service plans, engineering and manufacturing ideas, designs, databases, records, salary information and any unpublished financial data and reports. Unauthorized use or distribution of this information would violate Company policy. It could also be illegal and result in civil or even criminal penalties.
11. PAYMENTS TO GOVERNMENT PERSONNEL
The Unites States Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country.
In addition, the U. S. government has a number of laws and regulations regarding business gratuities that may be accepted by U. S. government personnel. The promise, offer or delivery to an official or employee of the U. S. government of a gist, favor or other gratuity in violation of these rules would not only violate Company policy, but could also be a criminal offense. State and local governments, as well as foreign governments, may have similar rules.
12. WAIVERS OF THE CODE OF BUSINESS CONDUCT AND ETHICS
Any waiver of the provisions of this Code may be made only by the Board of Directors and will be promptly disclosed as required by law or stock exchange rule or regulation.
13. REPORTING ANY ILLEGAL OR UNETHICAL BEHAVIOR
Employees are encouraged to talk with supervisors, managers or Company officials about observed illegal or unethical behavior, and when in doubt about the best course of action in a particular situation. It is the Company's policy not to allow retaliation for reports of misconduct by others made in good faith by employees. Employees are expected to cooperate in internal investigations of misconduct, and the failure to do so could serve as grounds for termination.
Any employee may submit a good faith concern regarding questionable accounting or auditing matters without fear of dismissal or retaliation of any kind.
14. COMPLIANCE PROCEDURES
We must all work to ensure prompt and consistent action against violations of this Code. However, in some situations, it is difficult to know if a violation has occurred. Since we cannot anticipate every situation that may arise, it is important that we have a way to approach a new question or problem. These are steps to keep in mind:
o Make sure you have all the facts. In order to reach the rights solutions, we must be as fully informed as possible.
o Ask yourself, what specifically am I being asked to do - does it seem unethical or improper? This will enable you to focus on the specific question you are faced with, and the alternatives you have. Use your judgment and common sense; if something seems unethical or improper, it probably is.
o Clarify your responsibility and role. In most situations, there is shared responsibility. Are your colleagues informed? It may help to get others involved and discuss the problem.
o Discuss the problem with your supervisor. This is the basic guidance for all situations. In many cases, your supervisor will be more knowledgeable about the question, and will appreciate being brought into the decision-making process. Keep in mind that it is your supervisor's responsibility to help solve problems. If your supervisor does not or cannot remedy the situation, or you are uncomfortable binging the problem to the attention of your supervisor, bring the issue to the attention of the human resources supervisor, or to an officer of the Company.
o You may report ethical violations in confidence and without fear of retaliation. If your situation requires that your identity be kept secret, your anonymity will be protected. The Company does not permit retaliation of any kind for good faith reports of ethical violations.
o Always ask first - act later. If you are unsure of what to do in any situation, seek guidance before your act.
CODE OF ETHICS FOR THE PRESIDENT
AND SENIOR FINANCIAL OFFICERS
OF HARCOM PRODUCTIONS, INC.
Harcom Productions, Inc. (the "Company") has a Code of Business Conduct and Ethics applicable to all employees, officers and directors of the Company. The President, Chief Executive Officer (CEO) and senior financial officers who are in place at any given time in the employ of Harcom Productions Inc. are bound by the provisions set forth therein relating to ethical conduct, conflicts of interest and compliance with law. In addition to the Code of Business Conduct and Ethics, the President, Chief Executive Officer (CEO) and senior financial officers who are in place at any given time in the employ of Harcom Productions Inc. are also subject to the following specific policies:
1. The President, CEO and senior financial officers in the employ of Harcom Productions Inc. are responsible for full, fair, accurate, timely and understandable disclosure in the periodic reports and other filings required to be made by the Company with the Securities and Exchange Commission. Accordingly, it is the responsibility of the President, CEO and senior financial officers in the employ of Harcom Productions to promptly to bring to the attention of the Board of Directors any material information of which he or she may become aware that affects the disclosures made by the Company in its public filings or otherwise impairs the ability of the Company to make full, fair, accurate, timely and understandable public disclosures.
2. The President, CEO and senior financial officers in the employ of Harcom Productions Inc. shall promptly bring to the attention of the Company's Audit Committee any information he or she may have concerning (a) significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's financial reporting, disclosures or internal controls.
3. The President, CEO and senior financial officers in the employ of Harcom Productions Inc. shall promptly bring to the attention of the Board of Directors and the Audit Committee any information he or she may have concerning any violation of the Company's Code of Business Conduct and Ethics, including any actual or apparent conflicts of interest between personal and processional relationships, involving management or other employees who have a significant rule in the Company's financial reporting, disclosures or internal controls.
4. The President, CEO and senior financial officers in the employ of Harcom Productions Inc. shall promptly bring to the attention of the Board of Directors and Audit Committee any information he or she may have concerning evidence of a material violation of the securities or other laws, rules or regulations applicable to the Company and the operation of its business, by the Company or any agent thereof, or of violation of the Code of Business Conduct and Ethics or of these additional procedures.
5. The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of the Code of Business Conduct and Ethics of these additional procedures by the CEO and the Company's senior financial officers. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to the Code of Business Conduct and Ethics and to these additional procedures, and shall include written notices to the individual involved that the Board has determined that there has been a violation, censure by the Board, demotion or reassignment of the individual involved, suspension with or without pay or benefits (as determined by the Board) and termination of the individual's employment. In determining what action is appropriate in a particular case, the Board of Directors or such designee shall take into account all relevant information, including the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action and whether or not the individual in question had committed other violations in the past.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the reference to our firm under the captions “Experts” and “Selected Financial Data” and to the use of our report dated December 17, 2006, on Harcom Productions, L.L.C.’s financial statements for the years ended December 31, 2004 and 2005 included in the Registration Statement (Form SB-2) and related Prospectus of Harcom Productions, L.L.C., dated December 22, 2006.
/s/ Killman Murrell & Company, P.C.
Odessa, Texas
December 22, 2006