US Farms, Inc. was established in 1997 as San Diego Soccer Development Corporation and had few name and business activity changes since. Currently US Farms is in a business of growing, marketing and distributing various horticultural products. Its products include cactus, succulents, palm trees, asparagus, tomatoes and other. The company operates through 4 different business segments - California Produce Exchange, Inc. (CPE), American Nursery Exchange, Inc. (ANE), American Aloe Vera Growers, Inc. (AAVG) and California Produce Exchange, Inc. (CPE).
The company is consistently late with their regulatory filings with the Securities and Exchange Commission.
Here's the description from company's SEC filing:
GENERAL
Forward-Looking Statements
This Annual Report on Form 10-KSB, including "Management's Discussion and Analysis or Plan of Operation" in Item 6, contains forward-looking statements, as that term is defined in the statutory safe harbors, that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause the results of International Sports and Media Group, Inc. and its consolidated subsidiaries (the “Company") to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of revenue, costs or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statement concerning proposed new products, services, developments or industry rankings; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include the items discussed in "Management's Discussion and Analysis or Plan of Operation" in Item 6 of this report. The Company assumes no obligation and does not intend to update these forward-looking statements.
Business Development
International Sports & Media Group, Inc. (“the Company” or “ISMG”) was incorporated on December 12, 1995, under the laws of the State of Nevada under the name Roller Coaster, Inc. The company engaged in no operations prior to February 10, 2000. On February 10, 2000, we issued 52,8444 shares (post reverse split) of our previously unissued common stock to the shareholders of San Diego Soccer Development Corporation, a California company ("SDSDC") in exchange for all of the issued and outstanding shares of SDSDC as part of a merger transaction. In December 1999, the Board of Directors of SDSDC had unanimously agreed to a merger with the company, which was then a publicly-traded corporation with no operations or tangible assets. The merger was approved by a vote of shareholders on February 7, 2000. Following the merger, the company assumed SDSDC's reporting obligations under the Securities Exchange Act of 1934. The Articles of Incorporation of Rollercoaster, Inc. were subsequently amended to change its name to San Diego Soccer Development Corporation, and later to International Sports & Media Group, Inc. During the fourth quarter of the year ending December 31, 2005, the Company eliminated all of its previous operations.
ISMG intends to engage in the production and distribution of horticultural products, which primarily includes Aloe Vera. The company hopes to supply various plants, and container-grown plants through a leased nursery and farm facility located in Southern California. ISMG intends to sell its products to home centers, retail merchandisers, independent garden centers, garden center chains, rewholesalers, and landscapers throughout the United States. The company is headquartered in San Diego, California.
The Company will focus on growing Aloe Barbadensis Miller, which is the only recognized “Medicine Plant.” Because of this, ISMG believes hearty Aloe Vera plants and leaves are in high demand. Baby Aloe Vera Plants are potted in 3”, 4” & 6” for houseplants. Premium hand-selected leaf is used exclusively for produce. Quality leaf will be used for Aloe Vera Juice and Aloe Vera Gel. Standard leaf will be used for cosmetics and over-the-counter medicines.
The Company believes it has opportunities to create a leading position with Aloe Vera in the United States. This is due both to the unmatched quality of Aloe product in Southern California, the geographic position of available farms and nurseries in the area, and the high level experience of the Company’s management and consulting team. Aloe is grown in three areas including Southern California, South Texas (hit by a catastrophic freeze in December 2004), and parts of Florida (the quality of this Aloe is regarded as poor).
Discontinued Business
Previously our business plan focused on the objective of making the company a premier sports and news media firm which offered a broad range of services to attract top clients and corporations. As part of the implementation of this business plan, we entered into several relationships in the past year, which have been terminated. The Company is now focused on the plant and nursery business with a particular focus on Aloe Vera.
Paris Saint Germain
In April 2005, we entered into a licensing agreement with Paris Saint Germain (PSG) of France to create a line of energy drinks branded towards the PSG team and its supporters. This agreement was terminated on March 28, 2006.
TSN and www.ussoccer.uk
As of December 31, 2005, we have abandoned our efforts in regard to marketing the Total Soccer Network (TSN). TSN was intended to consist of multiple internet properties focused on the sport of soccer. In furtherance of this plan, on November 19, 2004 we entered into an agreement to acquire www.ussocceruk.com directly from TSV Media LLC through a combination of cash and common stock. This acquisition was to enable ISMG to expand this soccer news site. On January 18, 2005 we modified this agreement to acquire the website for $25,000 and enter into independent consulting agreements with the principals of TSV for certain consulting services related to the website. As of December 31, 2005, this agreement has been terminated.
BioTech Medics, Inc.
On January 25, 2005, we entered into a marketing agreement with BioTech Medics, Inc., a Nevada corporation, whereby we may introduce new products to BioTech and BioTech will introduce new products to us. In connection with this agreement, we issued 20,000 restricted shares (post reverse split) of common stock to BioTech in exchange for 1,000,000 restricted shares of BioTech common stock. This agreement is effective until July 25, 2006 and then automatically renews for two additional eighteen month periods. The shares issued were valued at $20,000. At December 31, 2005 the BioTech shares were valued at $10,000. The Company has recorded another comprehensive loss of $10,000 for the decline in the BioTech share value. The Company does not intend to renew this agreement.
Pan American Relations, Inc.
On May 17, 2005, the board of directors resolved to spin-off its privately-held subsidiary, Pan American Relations, Inc., a California corporation in the form of a stock dividend payable in a ratio of 1 share for each 100 shares of the company then outstanding. The record date for the distribution was June 6, 2005. The distribution date for this dividend was June 30, 2005.
Smart SMS Mexico, LLC
On June 6, 2005, International Sports and Media Group, Inc. entered into a LLC Purchase Agreement (the "Agreement") with American IDC Corp. for the purchase of 10% of Smart SMS Mexico, LLC, a Nevada limited liability company and subsidiary of American IDC. The consideration for the interest was 250,000 shares of restricted common stock (post reverse split) and $100,000 cash, these shares were never issued. At December 31, 2005, this asset was impaired and written down to zero.
Gordon F. Lee, former Chief Executive Officer of International Sports and Media Group, is also an officer, director and controlling shareholder of Smart SMS, formerly American IDC Corp.
Management Change
During the fourth quarter of 2005, the company's former CEO, Gordon Lee, was terminated from his position and Manolo Cevallos, the Company's President resigned. Currently, Yan Skwara serves as President and Chief Financial Officer. Mr. Skwara also serves as Chairman of the Board. Subsequent to December 31, 2005, Lonn Paul resigned as Secretary and Director and Donald Hejmanowski and Darin Price were appointed as new directors of the Company.
Key Personnel
Our future financial success depends to a large degree upon the efforts of Mr. Yan Skwara, our President and Chairman of the Board of Directors. Mr. Skwara has played a major role in developing and executing our business strategy. The loss of Mr. Skwara could have an adverse effect on our business and our chances for profitable operations. While we intend to employ additional management and marketing personnel in order to minimize the critical dependency upon any one person, there can be no assurance that we will be successful in attracting and retaining the persons needed. If we do not succeed in retaining and motivating our current employees and attracting new high quality employees, our business could be adversely affected. We do not maintain key man life insurance on the life of Mr. Skwara.
Corporate Offices
Our executive office is located at 1635 Rosecrans Street, Suite D, San Diego, CA 92106. The telephone number to call for information is (858) 488-7775.
Employees
We presently employ one person, our president, Yan Skwara All other relationships are in the form of independent contractors and consultants.
Insurance
We do not presently have a commercial general liability insurance policy. Although there have been no successful claims of this nature against the Company, there is no assurance that the company will prevail against any future claim. Successful claims could have a serious adverse effect upon our financial condition and its future viability. We will again seek to obtain general liability and product liability insurance at such time when our operations dictate.
We do maintain auto insurance coverage but no workman's compensation coverage.
We do not carry director and officer liability insurance, but we have agreed to indemnify our officers and directors against any personal liability incurred as a result of their association with the Company. This agreement has not been formalized in writing. We have been advised that in the opinion of the Securities and Exchange Commission indemnification for liabilities arising under the Securities Act of 1933 (the "Act") is against public policy as expressed in the Act, and is, therefore, unenforceable. If a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to court of appropriate jurisdiction. We will then be governed by the court's decision.
Intellectual Property
We hold one trademark on the name "San Diego Flash." We will protect our current and future intellectual property through license agreements and trade and services marks on property owned by International Sport and Media Group.
Research and Development Activities
In the last two fiscal years, we did not spend any funds on research and development activities.
Risk Factors
We have sought to identify what we believe to be the most significant risks to our business and common stock, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. We provide the following cautionary discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business and our products. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed here could adversely affect us.
Risks Relating to Our Business
We need ongoing financing to continue our operations.
We will need additional capital to continue our operations and will endeavor to raise funds through the sale of equity shares and revenues from operations.
There can be no assurance that we will generate revenues from operations or obtain sufficient capital on acceptable terms, if at all. Failure to obtain such capital or generate such operating revenues would have an adverse impact on our financial position and results of operations and ability to continue as a going concern. Our operating and capital requirements during the next fiscal year and thereafter will vary based on a number of factors, including the level of sales and marketing activities for our services and products. There can be no assurance that additional private or public finances, including debt or equity financing, will be available as needed, or, if available, on terms favorable to us. Any additional equity financing may be dilutive to stockholders and such additional equity securities may have rights, preferences or privileges that are senior to those of our existing common stock.
Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. Our failure to successfully obtain additional future funding may jeopardize our ability to continue our business and operations.
If we raise additional funds by issuing equity securities, existing stockholders may experience a dilution in their ownership. In addition, as a condition to giving additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders.
Our Financial Results May Be Affected by Factors Outside of Our Control
Our future operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are outside our control. Our anticipated expense levels are based, in part, on our estimates of future revenues and may vary from our projections. We may be unable to adjust spending rapidly enough to compensate for any unexpected revenues shortfall. Accordingly, any significant shortfall in revenues in relation to our planned expenditures would materially adversely affect our business, operating results, and financial condition.
We cannot predict with certainty our revenues and operating results. Further, we believe that period-to-period comparisons of our operating results are not necessarily a meaningful indication of future performance.
Business concentration.
While we consider our relationships with our customers to be satisfactory, given the concentration of our sales to a few key customers, our continued relationships may be subject to the policies and practices of the customers. We continue to concentrate our efforts on expanding our customer base in order to reduce our reliance on our current customers.
We face potential fluctuations in quarterly operating results.
Our quarterly operating results may fluctuate significantly in the future as a result of a variety of factors, most of which are outside our control, including the demand for our services, seasonal trends in purchasing, the amount and timing of capital expenditures; price competition or pricing changes in the industry; technical difficulties or system downtime; general economic conditions, and economic conditions specific to our industry. Our quarterly results may also be significantly impacted by the impact of the accounting treatment of acquisitions, financing transactions or other matters. Particularly at our early stage of development, occurrences such as accounting treatment can have a material impact on the results for any quarter. Due to the foregoing factors, among others, it is likely that our operating results will fall below our expectations or those of investors in some future quarter.
We lack a majority of independent directors.
We cannot guarantee that our board of directors will have a majority of independent directors in the future. In the absence of a majority of independent directors, our executive officers, could establish policies and enter into transactions without independent review and approval thereof. This could present the potential for a conflict of interest between us and our stockholders generally and the controlling officers, stockholders or directors.
Limitation of liability and indemnification of officers and directors may limit shareholder actions.
Our officers and directors are required to exercise good faith and high integrity in our management affairs. Our articles of incorporation provide, however, that our officers and directors shall have no liability to our stockholders for losses sustained or liabilities incurred which arise from any transaction in their respective managerial capacities unless they violated their duty of loyalty, did not act in good faith, engaged in intentional misconduct or knowingly violated the law, approved an improper dividend or stock repurchase, or derived an improper benefit from the transaction. Our articles and bylaws also provide for the indemnification by us of the officers and directors against any losses or liabilities they may incur as a result of the manner in which they operate our business or conduct the internal affairs, provided that in connection with these activities they act in good faith and in a manner that they reasonably believe to be in, or not opposed to, our best interests, and their conduct does not constitute gross negligence, misconduct or breach of fiduciary obligations.
We may be unable to adequately manage potential growth.
We may experience rapid growth which will place a significant strain on our managerial, operational, and financial systems resources. To accommodate our current size and manage growth, we must continue to implement and improve our financial strength and our operational systems, and expand, train and manage our sales and distribution base. There is no guarantee that we will be able to effectively manage the expansion of our operations, or that our facilities, systems, procedures or controls will be adequate to support our expanded operations. Our inability to effectively manage our future growth would have a material adverse effect on us.
We may face market risk, if we enter into financing or other business arrangements denominated in currency other than U.S. dollars.
We believe that we do not have any material exposure to interest or commodity risks. Our financial results are quantified in U.S. dollars and a majority of our obligations and expenditures with respect to our operations are incurred in U.S. dollars. Although we do not believe we currently have any materially significant market risks relating to our operations resulting from foreign exchange rates, if we enter into financing or other business arrangements denominated in currency other than U.S. dollars, variations in the exchange rate may give rise to foreign exchange gains or losses that may be significant.
We are not likely to succeed unless we can overcome the many obstacles we face.
As an investor, you should be aware of the difficulties, delays and expenses we encounter, many of which are beyond our control, including unanticipated market trends, employment costs, and administrative expenses. We cannot assure our investors that our proposed business plans as described in this report will materialize or prove successful, or that we will ever be able to finalize development of our products or services or operate profitably. If we cannot operate profitably, you could lose your entire investment. As a result of the nature of our business, initially we expect to sustain substantial operating expenses without generating significant revenues.
Our auditors have stated we may not be able to stay in business.
Our auditors have issued a going concern opinion, which means that there is doubt that we can continue as an ongoing business for the next 12 months. Unless we can raise additional capital, we may not be able to achieve our objectives and may have to suspend or cease operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Our acquisition strategy involves a number of risks.
We intend to pursue growth through the opportunistic acquisition of companies or assets that will enable us to expand our service lines to provide more cost-effective customer solutions. We routinely review potential acquisitions. This strategy involves certain risks, including difficulties in the integration of operations and systems, the diversion of our management’s attention from other business concerns, and the potential loss of key employees of acquired companies. We may not be able to successfully acquire, and/or integrate acquired businesses into our operations.
Risks Relating to Our Stock
We need to raise additional capital. If we are unable to raise necessary additional capital, our business may fail or our operating results and our stock price may be materially adversely affected.
Due to the lack of revenue and because of our expenses, we need to secure adequate funding. If we are unable to obtain adequate funding, we may not be able to successfully develop and market our products and services and our business will most likely fail. We do not have commitments for additional financing. To secure additional financing, we may need to borrow money or sell more securities, which may reduce the value of our outstanding securities. Under these circumstances, we may be unable to secure additional financing on favorable terms or at all.
Selling additional stock, either privately or publicly, would dilute the equity interests of our stockholders. If we were able to borrow money, we will have to pay interest and may also have to agree to restrictions that limit our operating flexibility. If we are unable to obtain adequate financing, we will have to curtail business operations which would have a material negative effect on operating results and most likely result in a lower stock price.
Our common stock has experienced in the past, and is expected to experience in the future, significant price and volume volatility, which substantially increases the risk that you may not be able to sell your shares at or above the price that you paid for the shares.
Because of the limited trading market for our common stock, and because of the possible price volatility, you may not be able to sell your shares of common stock when you desire to do so. During 2004 and 2005, our common stock was sold and purchased at prices that ranged from a high of $.40 to a low of $0.001 per share. The inability to sell your shares in a rapidly declining market may substantially increase your risk of loss because of such illiquidity because the price for our common stock may suffer greater declines due to its price volatility.
The price of our common stock that will prevail in the market may be higher or lower than the price you pay. Certain factors, some of which are beyond our control, that may cause our share price to fluctuate significantly include, but are not limited to, the following:
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Variations in our quarterly operating results;
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The development of a market in general for our products and services;
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Changes in market valuations of similar companies;
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Announcement by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
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Loss of a major customer or failure to complete significant transactions;
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Additions or departures of key personnel; and
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Fluctuations in stock market price and volume.
Additionally, in recent years the stock market in general, and the OTC Bulletin Board and technology stocks in particular, have experienced extreme price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate to the operating performance of the underlying company. These market and industry factors may materially and adversely affect our stock price, regardless of our operating performance.
Over the past few months, there have been periods of significant increases in trading volume of our common stock during which the price of our stock has both increased and decreased. The historical trading of our common stock is not necessarily an indicator of how it will trade in the future and our trading price as of the date of this report does not necessarily portend what the trading price of our common stock might be in the future.
In the past, class action litigation has often been brought against companies following periods of volatility in the market price of the common stock of those companies. If we become involved in this type of litigation in the future, it could result in substantial costs and diversion of management attention and resources, which could have a further negative effect on your investment in our stock.
Our directors have the right to authorize the issuance of preferred stock and additional shares of our common stock.
Our directors, within the limitations and restrictions contained in our articles of incorporation and without further action by our stockholders, have the authority to issue shares of preferred stock from time to time in one or more series and to fix the number of shares and the relative rights, conversion rights, voting rights, and terms of redemption, liquidation preferences and any other preferences, special rights and qualifications of any such series. We currently have 88,500 shares of Series B Preferred Stock outstanding, We have no intention of issuing any more shares of Series B preferred stock or designating any other classes of preferred stock at the present time. Any issuance of preferred stock could adversely affect the rights of holders of our common stock.
Should we issue additional shares of our common stock at a later time, each investor’s ownership interest in International Sports and Media Group, Inc. would be proportionally reduced. No investor will have any preemptive right to acquire additional shares of our common stock, or any of our other securities.
Our common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Inasmuch as that the current bid and ask price of common stock is less than $5.00 per share, our shares are classified as “penny stock” under the rules of the SEC. For any transaction involving a penny stock, unless exempt, the rules require:
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That a broker or dealer approve a person’s account for transactions in penny stocks; and
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The broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
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Obtain financial information and investment experience objectives of the person; and
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Make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
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Sets forth the basis on which the broker or dealer made the suitability determination; and
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That the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
GENERAL
Forward-Looking Statements
This Annual Report on Form 10-KSB, including "Management's Discussion and Analysis or Plan of Operation" in Item 6, contains forward-looking statements, as that term is defined in the statutory safe harbors, that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause the results of International Sports and Media Group, Inc. and its consolidated subsidiaries (the “Company") to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of revenue, costs or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statement concerning proposed new products, services, developments or industry rankings; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include the items discussed in "Management's Discussion and Analysis or Plan of Operation" in Item 6 of this report. The Company assumes no obligation and does not intend to update these forward-looking statements.
Business Development
International Sports & Media Group, Inc. (“the Company” or “ISMG”) was incorporated on December 12, 1995, under the laws of the State of Nevada under the name Roller Coaster, Inc. The company engaged in no operations prior to February 10, 2000. On February 10, 2000, we issued 52,8444 shares (post reverse split) of our previously unissued common stock to the shareholders of San Diego Soccer Development Corporation, a California company ("SDSDC") in exchange for all of the issued and outstanding shares of SDSDC as part of a merger transaction. In December 1999, the Board of Directors of SDSDC had unanimously agreed to a merger with the company, which was then a publicly-traded corporation with no operations or tangible assets. The merger was approved by a vote of shareholders on February 7, 2000. Following the merger, the company assumed SDSDC's reporting obligations under the Securities Exchange Act of 1934. The Articles of Incorporation of Rollercoaster, Inc. were subsequently amended to change its name to San Diego Soccer Development Corporation, and later to International Sports & Media Group, Inc. During the fourth quarter of the year ending December 31, 2005, the Company eliminated all of its previous operations.
ISMG intends to engage in the production and distribution of horticultural products, which primarily includes Aloe Vera. The company hopes to supply various plants, and container-grown plants through a leased nursery and farm facility located in Southern California. ISMG intends to sell its products to home centers, retail merchandisers, independent garden centers, garden center chains, rewholesalers, and landscapers throughout the United States. The company is headquartered in San Diego, California.
The Company will focus on growing Aloe Barbadensis Miller, which is the only recognized “Medicine Plant.” Because of this, ISMG believes hearty Aloe Vera plants and leaves are in high demand. Baby Aloe Vera Plants are potted in 3”, 4” & 6” for houseplants. Premium hand-selected leaf is used exclusively for produce. Quality leaf will be used for Aloe Vera Juice and Aloe Vera Gel. Standard leaf will be used for cosmetics and over-the-counter medicines.
The Company believes it has opportunities to create a leading position with Aloe Vera in the United States. This is due both to the unmatched quality of Aloe product in Southern California, the geographic position of available farms and nurseries in the area, and the high level experience of the Company’s management and consulting team. Aloe is grown in three areas including Southern California, South Texas (hit by a catastrophic freeze in December 2004), and parts of Florida (the quality of this Aloe is regarded as poor).
Discontinued Business
Previously our business plan focused on the objective of making the company a premier sports and news media firm which offered a broad range of services to attract top clients and corporations. As part of the implementation of this business plan, we entered into several relationships in the past year, which have been terminated. The Company is now focused on the plant and nursery business with a particular focus on Aloe Vera.
Paris Saint Germain
In April 2005, we entered into a licensing agreement with Paris Saint Germain (PSG) of France to create a line of energy drinks branded towards the PSG team and its supporters. This agreement was terminated on March 28, 2006.
TSN and www.ussoccer.uk
As of December 31, 2005, we have abandoned our efforts in regard to marketing the Total Soccer Network (TSN). TSN was intended to consist of multiple internet properties focused on the sport of soccer. In furtherance of this plan, on November 19, 2004 we entered into an agreement to acquire www.ussocceruk.com directly from TSV Media LLC through a combination of cash and common stock. This acquisition was to enable ISMG to expand this soccer news site. On January 18, 2005 we modified this agreement to acquire the website for $25,000 and enter into independent consulting agreements with the principals of TSV for certain consulting services related to the website. As of December 31, 2005, this agreement has been terminated.
BioTech Medics, Inc.
On January 25, 2005, we entered into a marketing agreement with BioTech Medics, Inc., a Nevada corporation, whereby we may introduce new products to BioTech and BioTech will introduce new products to us. In connection with this agreement, we issued 20,000 restricted shares (post reverse split) of common stock to BioTech in exchange for 1,000,000 restricted shares of BioTech common stock. This agreement is effective until July 25, 2006 and then automatically renews for two additional eighteen month periods. The shares issued were valued at $20,000. At December 31, 2005 the BioTech shares were valued at $10,000. The Company has recorded another comprehensive loss of $10,000 for the decline in the BioTech share value. The Company does not intend to renew this agreement.
Pan American Relations, Inc.
On May 17, 2005, the board of directors resolved to spin-off its privately-held subsidiary, Pan American Relations, Inc., a California corporation in the form of a stock dividend payable in a ratio of 1 share for each 100 shares of the company then outstanding. The record date for the distribution was June 6, 2005. The distribution date for this dividend was June 30, 2005.
Smart SMS Mexico, LLC
On June 6, 2005, International Sports and Media Group, Inc. entered into a LLC Purchase Agreement (the "Agreement") with American IDC Corp. for the purchase of 10% of Smart SMS Mexico, LLC, a Nevada limited liability company and subsidiary of American IDC. The consideration for the interest was 250,000 shares of restricted common stock (post reverse split) and $100,000 cash, these shares were never issued. At December 31, 2005, this asset was impaired and written down to zero.
Gordon F. Lee, former Chief Executive Officer of International Sports and Media Group, is also an officer, director and controlling shareholder of Smart SMS, formerly American IDC Corp.
Management Change
During the fourth quarter of 2005, the company's former CEO, Gordon Lee, was terminated from his position and Manolo Cevallos, the Company's President resigned. Currently, Yan Skwara serves as President and Chief Financial Officer. Mr. Skwara also serves as Chairman of the Board. Subsequent to December 31, 2005, Lonn Paul resigned as Secretary and Director and Donald Hejmanowski and Darin Price were appointed as new directors of the Company.
Key Personnel
Our future financial success depends to a large degree upon the efforts of Mr. Yan Skwara, our President and Chairman of the Board of Directors. Mr. Skwara has played a major role in developing and executing our business strategy. The loss of Mr. Skwara could have an adverse effect on our business and our chances for profitable operations. While we intend to employ additional management and marketing personnel in order to minimize the critical dependency upon any one person, there can be no assurance that we will be successful in attracting and retaining the persons needed. If we do not succeed in retaining and motivating our current employees and attracting new high quality employees, our business could be adversely affected. We do not maintain key man life insurance on the life of Mr. Skwara.
Corporate Offices
Our executive office is located at 1635 Rosecrans Street, Suite D, San Diego, CA 92106. The telephone number to call for information is (858) 488-7775.
Employees
We presently employ one person, our president, Yan Skwara All other relationships are in the form of independent contractors and consultants.
Insurance
We do not presently have a commercial general liability insurance policy. Although there have been no successful claims of this nature against the Company, there is no assurance that the company will prevail against any future claim. Successful claims could have a serious adverse effect upon our financial condition and its future viability. We will again seek to obtain general liability and product liability insurance at such time when our operations dictate.
We do maintain auto insurance coverage but no workman's compensation coverage.
We do not carry director and officer liability insurance, but we have agreed to indemnify our officers and directors against any personal liability incurred as a result of their association with the Company. This agreement has not been formalized in writing. We have been advised that in the opinion of the Securities and Exchange Commission indemnification for liabilities arising under the Securities Act of 1933 (the "Act") is against public policy as expressed in the Act, and is, therefore, unenforceable. If a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to court of appropriate jurisdiction. We will then be governed by the court's decision.
Intellectual Property
We hold one trademark on the name "San Diego Flash." We will protect our current and future intellectual property through license agreements and trade and services marks on property owned by International Sport and Media Group.
Research and Development Activities
In the last two fiscal years, we did not spend any funds on research and development activities.
Risk Factors
We have sought to identify what we believe to be the most significant risks to our business and common stock, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. We provide the following cautionary discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business and our products. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed here could adversely affect us.
Risks Relating to Our Business
We need ongoing financing to continue our operations.
We will need additional capital to continue our operations and will endeavor to raise funds through the sale of equity shares and revenues from operations.
There can be no assurance that we will generate revenues from operations or obtain sufficient capital on acceptable terms, if at all. Failure to obtain such capital or generate such operating revenues would have an adverse impact on our financial position and results of operations and ability to continue as a going concern. Our operating and capital requirements during the next fiscal year and thereafter will vary based on a number of factors, including the level of sales and marketing activities for our services and products. There can be no assurance that additional private or public finances, including debt or equity financing, will be available as needed, or, if available, on terms favorable to us. Any additional equity financing may be dilutive to stockholders and such additional equity securities may have rights, preferences or privileges that are senior to those of our existing common stock.
Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. Our failure to successfully obtain additional future funding may jeopardize our ability to continue our business and operations.
If we raise additional funds by issuing equity securities, existing stockholders may experience a dilution in their ownership. In addition, as a condition to giving additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders.
Our Financial Results May Be Affected by Factors Outside of Our Control
Our future operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are outside our control. Our anticipated expense levels are based, in part, on our estimates of future revenues and may vary from our projections. We may be unable to adjust spending rapidly enough to compensate for any unexpected revenues shortfall. Accordingly, any significant shortfall in revenues in relation to our planned expenditures would materially adversely affect our business, operating results, and financial condition.
We cannot predict with certainty our revenues and operating results. Further, we believe that period-to-period comparisons of our operating results are not necessarily a meaningful indication of future performance.
Business concentration.
While we consider our relationships with our customers to be satisfactory, given the concentration of our sales to a few key customers, our continued relationships may be subject to the policies and practices of the customers. We continue to concentrate our efforts on expanding our customer base in order to reduce our reliance on our current customers.
We face potential fluctuations in quarterly operating results.
Our quarterly operating results may fluctuate significantly in the future as a result of a variety of factors, most of which are outside our control, including the demand for our services, seasonal trends in purchasing, the amount and timing of capital expenditures; price competition or pricing changes in the industry; technical difficulties or system downtime; general economic conditions, and economic conditions specific to our industry. Our quarterly results may also be significantly impacted by the impact of the accounting treatment of acquisitions, financing transactions or other matters. Particularly at our early stage of development, occurrences such as accounting treatment can have a material impact on the results for any quarter. Due to the foregoing factors, among others, it is likely that our operating results will fall below our expectations or those of investors in some future quarter.
We lack a majority of independent directors.
We cannot guarantee that our board of directors will have a majority of independent directors in the future. In the absence of a majority of independent directors, our executive officers, could establish policies and enter into transactions without independent review and approval thereof. This could present the potential for a conflict of interest between us and our stockholders generally and the controlling officers, stockholders or directors.
Limitation of liability and indemnification of officers and directors may limit shareholder actions.
Our officers and directors are required to exercise good faith and high integrity in our management affairs. Our articles of incorporation provide, however, that our officers and directors shall have no liability to our stockholders for losses sustained or liabilities incurred which arise from any transaction in their respective managerial capacities unless they violated their duty of loyalty, did not act in good faith, engaged in intentional misconduct or knowingly violated the law, approved an improper dividend or stock repurchase, or derived an improper benefit from the transaction. Our articles and bylaws also provide for the indemnification by us of the officers and directors against any losses or liabilities they may incur as a result of the manner in which they operate our business or conduct the internal affairs, provided that in connection with these activities they act in good faith and in a manner that they reasonably believe to be in, or not opposed to, our best interests, and their conduct does not constitute gross negligence, misconduct or breach of fiduciary obligations.
We may be unable to adequately manage potential growth.
We may experience rapid growth which will place a significant strain on our managerial, operational, and financial systems resources. To accommodate our current size and manage growth, we must continue to implement and improve our financial strength and our operational systems, and expand, train and manage our sales and distribution base. There is no guarantee that we will be able to effectively manage the expansion of our operations, or that our facilities, systems, procedures or controls will be adequate to support our expanded operations. Our inability to effectively manage our future growth would have a material adverse effect on us.
We may face market risk, if we enter into financing or other business arrangements denominated in currency other than U.S. dollars.
We believe that we do not have any material exposure to interest or commodity risks. Our financial results are quantified in U.S. dollars and a majority of our obligations and expenditures with respect to our operations are incurred in U.S. dollars. Although we do not believe we currently have any materially significant market risks relating to our operations resulting from foreign exchange rates, if we enter into financing or other business arrangements denominated in currency other than U.S. dollars, variations in the exchange rate may give rise to foreign exchange gains or losses that may be significant.
We are not likely to succeed unless we can overcome the many obstacles we face.
As an investor, you should be aware of the difficulties, delays and expenses we encounter, many of which are beyond our control, including unanticipated market trends, employment costs, and administrative expenses. We cannot assure our investors that our proposed business plans as described in this report will materialize or prove successful, or that we will ever be able to finalize development of our products or services or operate profitably. If we cannot operate profitably, you could lose your entire investment. As a result of the nature of our business, initially we expect to sustain substantial operating expenses without generating significant revenues.
Our auditors have stated we may not be able to stay in business.
Our auditors have issued a going concern opinion, which means that there is doubt that we can continue as an ongoing business for the next 12 months. Unless we can raise additional capital, we may not be able to achieve our objectives and may have to suspend or cease operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Our acquisition strategy involves a number of risks.
We intend to pursue growth through the opportunistic acquisition of companies or assets that will enable us to expand our service lines to provide more cost-effective customer solutions. We routinely review potential acquisitions. This strategy involves certain risks, including difficulties in the integration of operations and systems, the diversion of our management’s attention from other business concerns, and the potential loss of key employees of acquired companies. We may not be able to successfully acquire, and/or integrate acquired businesses into our operations.
Risks Relating to Our Stock
We need to raise additional capital. If we are unable to raise necessary additional capital, our business may fail or our operating results and our stock price may be materially adversely affected.
Due to the lack of revenue and because of our expenses, we need to secure adequate funding. If we are unable to obtain adequate funding, we may not be able to successfully develop and market our products and services and our business will most likely fail. We do not have commitments for additional financing. To secure additional financing, we may need to borrow money or sell more securities, which may reduce the value of our outstanding securities. Under these circumstances, we may be unable to secure additional financing on favorable terms or at all.
Selling additional stock, either privately or publicly, would dilute the equity interests of our stockholders. If we were able to borrow money, we will have to pay interest and may also have to agree to restrictions that limit our operating flexibility. If we are unable to obtain adequate financing, we will have to curtail business operations which would have a material negative effect on operating results and most likely result in a lower stock price.
Our common stock has experienced in the past, and is expected to experience in the future, significant price and volume volatility, which substantially increases the risk that you may not be able to sell your shares at or above the price that you paid for the shares.
Because of the limited trading market for our common stock, and because of the possible price volatility, you may not be able to sell your shares of common stock when you desire to do so. During 2004 and 2005, our common stock was sold and purchased at prices that ranged from a high of $.40 to a low of $0.001 per share. The inability to sell your shares in a rapidly declining market may substantially increase your risk of loss because of such illiquidity because the price for our common stock may suffer greater declines due to its price volatility.
The price of our common stock that will prevail in the market may be higher or lower than the price you pay. Certain factors, some of which are beyond our control, that may cause our share price to fluctuate significantly include, but are not limited to, the following:
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Variations in our quarterly operating results;
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The development of a market in general for our products and services;
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Changes in market valuations of similar companies;
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Announcement by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
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Loss of a major customer or failure to complete significant transactions;
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Additions or departures of key personnel; and
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Fluctuations in stock market price and volume.
Additionally, in recent years the stock market in general, and the OTC Bulletin Board and technology stocks in particular, have experienced extreme price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate to the operating performance of the underlying company. These market and industry factors may materially and adversely affect our stock price, regardless of our operating performance.
Over the past few months, there have been periods of significant increases in trading volume of our common stock during which the price of our stock has both increased and decreased. The historical trading of our common stock is not necessarily an indicator of how it will trade in the future and our trading price as of the date of this report does not necessarily portend what the trading price of our common stock might be in the future.
In the past, class action litigation has often been brought against companies following periods of volatility in the market price of the common stock of those companies. If we become involved in this type of litigation in the future, it could result in substantial costs and diversion of management attention and resources, which could have a further negative effect on your investment in our stock.
Our directors have the right to authorize the issuance of preferred stock and additional shares of our common stock.
Our directors, within the limitations and restrictions contained in our articles of incorporation and without further action by our stockholders, have the authority to issue shares of preferred stock from time to time in one or more series and to fix the number of shares and the relative rights, conversion rights, voting rights, and terms of redemption, liquidation preferences and any other preferences, special rights and qualifications of any such series. We currently have 88,500 shares of Series B Preferred Stock outstanding, We have no intention of issuing any more shares of Series B preferred stock or designating any other classes of preferred stock at the present time. Any issuance of preferred stock could adversely affect the rights of holders of our common stock.
Should we issue additional shares of our common stock at a later time, each investor’s ownership interest in International Sports and Media Group, Inc. would be proportionally reduced. No investor will have any preemptive right to acquire additional shares of our common stock, or any of our other securities.
Our common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Inasmuch as that the current bid and ask price of common stock is less than $5.00 per share, our shares are classified as “penny stock” under the rules of the SEC. For any transaction involving a penny stock, unless exempt, the rules require:
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That a broker or dealer approve a person’s account for transactions in penny stocks; and
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The broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
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Obtain financial information and investment experience objectives of the person; and
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Make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
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Sets forth the basis on which the broker or dealer made the suitability determination; and
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That the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
