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Image Sports & Entertainment Corporate ProfileImage Group is led by experienced executives with broad business experience in developing new products and successfully creating new companies. The management team and directors have extensive contacts in the licensed products and celebrity art world, have managed multi-million dollar companies, and have successfully grown sales in highly competitive markets. To enhance the management team’s depth and breadth of industry contacts, the company has established an advisory board consisting of well-known industry players including: Gerry Cooney, Larry Holmes, Rollie Fingers, Dave Kingman, Debbie Meyer, George Gervin, Donald Trump, Moshe Malamud, Bruce Glatman, George Pataki and Ken Daneyko.
Corporate Profile December 29, 2004 The Company Image Innovations Holdings Inc (“Image Holdings”) operates two wholly owned subsidiaries – Image Sports & Entertainment, which sells celebrity artwork and collectibles through a targeted distribution network that includes major retailers and the Internet, and Image Innovations which creates, sources and markets officially licensed electronic products. Image Sports & Entertainment is quickly becoming a recognized leader in the fast growing, multi-billion dollar industries of Artwork Collectibles and Officially Licensed Products. Image Sports has retained some of the most recognized names in the celebrity art world, including renowned artists Carlo Beninati and Doug London. Image Holdings is a publicly traded company on the OTC Bulletin Board (OTCBB: IMGV) and the sole owner of the subsidiary companies: Image Innovations Inc (“Image Innovations”), Image Innovations Sports & Entertainment Inc (“Image Sports & Entertainment”) and Imaging Innovations Sports & Entertainment Inc. (“Imaging”) (collectively referred to as “Image Group”). Image Group web sites: Image Holdings www.ImageiiHoldings.com Image Sports & Entertainment www.ImageiiSportsEnt.com Image Innovations www.Imageii.com The Management Team Image Group is led by experienced executives with broad business experience in developing new products and successfully creating new companies. The management team and directors have extensive contacts in the licensed products and celebrity art world, have managed multi-million dollar companies, and have successfully grown sales in highly competitive markets. To enhance the management team’s depth and breadth of industry contacts, the company has established an advisory board consisting of well-known industry players including: Gerry Cooney, Larry Holmes, Rollie Fingers, Dave Kingman, Debbie Meyer, George Gervin, Donald Trump, Moshe Malamud, Bruce Glatman, George Pataki and Ken Daneyko. Overview Image Sports & Entertainment develops markets and sells celebrity artwork and collectibles through a targeted distribution network that includes select retailers and the Internet, cruise ships, military installations in the U.S. and Overseas, and celebrity auctions. Image Sports & Entertainment commissions renowned artists to produce authenticated one-of-a kind limited edition products of top tier sports figures. Each collector series consists of the original artwork, artist proofs and limited edition prints signed by both the artist and the celebrity. Revenues will be derived from Celebrity Art and Collectibles, Fine Art & Assemblage Products, Sports & Celebrity Memorabilia Products. 2 Image Innovations develops and sources officially licensed sports and promotional electronic products which it markets in North America. Revenue will be derived from Mass Market Products, Licensed Products, and Premium Products. Competitive edge and barriers to entry Because of the large size of the market, there are numerous companies that compete for market share - many of them very successfully. However, it is the opinion of management and the directors that the Image Group has distinct advantages over its competition for the following reasons: Image Sports & Entertainment has a team of senior managers who have worked in the sports and entertainment industry for between 12 and 15 years and has an advisory board of well known, well connected and highly respected athletes. Using the strengths of this team, Image Sports & Entertainment has established relationships and gained the respect of the celebrities in the sports and entertainment industry. Image’s reputation continues to be enhanced with each successful event that Image hosts or signing that Image completes. Our competitors do not possess the same extensive relationships with licensors and artists. The combination of these factors creates a competitive advantage for us over our competition. It will take years for competitors to develop similar attributes to compete successfully against us. Image has unique products. The sports and entertainment industry has many companies competing with basic memorabilia: balls, jerseys, etc. Image sells similar memorabilia but differentiates itself through the creation of fine art works produced by well known artists. We work with our distribution channels to understand what they want, then develop the product to meet that demand. We have been extremely successful in targeting our fine art creations to high net worth customers through our channels. We manage our costs to allow our distributors (for example cruise ships) to make good margins while presenting unique desirable products to their customers. Image Sports & Entertainment has secured the services of renowned artists Carlo Beninati and Doug London. Beninati who serves as the Creative Director of Image Innovations Sports & Entertainment is dedicated to documenting the history of human accomplishment - remarkable people, historical events, and the wonders of the world - through innovative fine art. His reputation and prestigious client list speaks volumes about a lifetime of dedication to excellence in every aspect of his work. Few artists can boast a client list equal to his. Image Group’s management team has extensive contacts in the licensed products and celebrity art world, and a proven track record of managing multi-million dollar public companies and successfully growing sales in highly competitive markets. There are few Licensor product categories that do not already have existing licensees. A company must have exciting, unique products for a licensor to even consider a licensee proposal – not just “me-too” products. Image Innovations has successfully secured new license agreements based on the strength of its products, as well as its marketing and distribution expertise. Recent Highlights December 20, 2004: Vintage Leroy Neiman Posters Next Exclusive Offering From Innovations Sports & Entertainment 3 December 16, 2004: "Smokin" Joe Lights It Up One More Time for Image Innovations Sports & Entertainment November 24, 2004: Image Innovations Holdings Inc. Signs Vending Machine Distribution Agreement With RB Energy, LLC to Sell Red Bull Energy Drink Through Vending Machines November 18, 2004: Image Innovations Holdings Inc. Sponsors "Rendezvous With Destiny: Battle for Supremacy" Heavyweight Boxing Extravaganza at New York's Famed Madison Square Garden November 15, 2004: Image Innovations Holdings Inc. Files SEC form 10QSB, Quarterly Report November 3, 2004: Image Innovations Holdings Inc. Inks Six Painting Deal With Acclaimed Artist James Fiorentino October 26, 2004: Image Innovations Holdings Inc. Acquires Strategic Storage and Warehouse Facility October 14, 2004: Image Innovations Signs Exclusive Licensing Agreement to Produce Commemorative Coins and Other Products Based on the Breast Cancer Research Stamp Initiated by Acclaimed Physician Dr. Ernie Bodai October 5, 2004: Image Innovations Holdings Inc. Files SEC form 8-K, Entry Material Agreement, Financial Obligation Matter, Financial S October 5, 2004: "Joe Cool" Joins Image Innovations Sports & Entertainment's Growing Team of Living Sports Legends September 23, 2004: Image Innovations Holdings Inc. Files SEC form 8-K, Change in Directors or Principal Officers September 23, 2004: Image Innovations Appoints New Director September 21, 2004: Image Innovations Inc. Provides Officially Licensed NFL Merchandise to Leading National Retailer September 14, 2004: Image Innovations Sports & Entertainment Inc. Acquires LeRoy Neiman Posters of Legendary Larry Holmes Heavyweight Bouts September 7, 2004: Image Innovations Holdings Inc. Files SEC form 8-K, Change in Directors September 7, 2004: Image Innovations Appoints NBC's Political Analyst as Director August 30, 2004: Image Innovations Sports & Entertainment Scores a “Knock Out” with Boxing Legend Muhammad Ali July 19, 2004: Image Innovations Sports & Entertainment introduces limited edition print of the legendary Arnold Palmer July 24, 2004: Image Innovations Holdings Inc. reports second quarter 2004 results Image Innovations Holdings Inc. Officers & Directors Rudy Riska Director & CEO - Mr. Riska will join the Company on January 1, 2005. Following a tour of duty with the US Army he went on to play with The New York Yankees organization for four years. Following his baseball career he began his employment for The Downtown Athletic Club within their athletic department. He eventually went on to serve as Athletic Director of The Downtown Athletic Club, the same post that had been served by John Heisman himself. Notably, Riska had the honor of being The Executive Director of the National Association of Club Athletic Directors of America. Riska will remain Director Emeritus to The Heisman Foundation and its many charitable youth programs. Derick Sinclair, Director & CFO – In 1985, Derick joined BC Rail, Canada’s third largest railway company as a treasury analyst. He advanced through BC Rail’s finance department before his appointment in 1996 as VP Finance of Westel, BC Rail’s telecommunications subsidiary. In 1998, RSL 4 Communications acquired Westel and appointed Derick CFO of their Canadian operations. He joined Image Innovations in 2003 following the sale of RSL Communications. Michael Radcliffe, Director – Michael has more than 15 years experience in the sports and entertainment markets. During his tenure as CEO of several private companies he developed and launched a number of innovative products and built significant relationships within the industry. Michael is COO of Image Sports & Entertainment. David Whittle, Director & Chairman of the Audit Committee - David is a Canadian-qualified Chartered Accountant, and is an experienced senior management executive having held positions as President/CEO, CFO and outside director in both private and public companies. Jack Jacobs, Director & Chairman of the Corporate Governance Committee - Since June 1996, Mr. Jacobs has been a principal of The Fitzroy Group, a firm that specializes in the development of residential real estate in London, England. Since October 2001, Mr. Jacobs has also served as an on-camera military and political analyst for NBC News. Mr. Jacobs received a Bachelor’s degree and Master’s degree from Rutgers University. He is a trustee of Aegis Investments. Mr. Jacobs received three bronze stars, two Silver Stars and the Congressional Medal of Honor for his service in the U.S. Army. Arthur Gononsky, Director & Chairman of the Compensation Committee - Since January 1994, Mr. Gononsky has been the President and Chairman of the Board of Directors of Cementex Latex Corporation, a New York company which imports and compounds natural latex and distributes polyurenthane and silicone rubber compounds. Since January 1994, he has also been the President and Chairman of the Board of Directors of Standard Screen Supply Corporation, a New York company which manufactures screen printing supplies. Mr. Gononsky has also been the President and Chairman of the Board of Directors of Active Process Supply Co., Inc., a New York company which imports and distributes bolting cloth and stencil silk. Mr. Gononsky received his Bachelor’s degree from Yeshiva University and his Master’s degree from New York University. James J Armenakis, Director – James is an attorney admitted to the practice of law in the states of New York and South Carolina. He is a graduate of NYU where he received an LLM in International Law. He specializes in international transactions, litigation, mergers and acquisitions and complex transactional negotiations and real estate transactions. Alain Kardos, Director – In addition to his senior executive careers with Nortel and Wang, Mr. Kardos was a co-founder of Kardos Long Inc. a sports promotion and marketing company responsible for promoting Grand Prix racing in America. Image Innovations Sports & Entertainment Inc. Officers & Directors Michael J. Radcliffe - COO, Director See biography above Derick Sinclair – CFO, Director See biography above 5 Dennis Radcliffe – Special Events Director, Director Dennis has 15 years experience in the sports and entertainment industry. He heads and overseas the operation of all major sports and charity auctions that take place. He is in charge of the ordering process and the coordinating of signings with athletes, entertainers, artists etc. Currently he is working with a world known pop artist in bringing his art to the Home Shopping Networks and major wholesale shopping clubs. Ken Radcliffe – Sales Director, Director Ken Radcliffe has been involved in the Sports and Entertainment field for over 12 years, including a small hiatus during try-outs for the Florida Marlins in 1994. Ken has been instrumental in developing the high- end sports memorabilia industry by introducing quality products to the cruise ship industry, casinos, and major upscale charity events. Among prime clients are Aramark, Center Plate, Costco, and J.C. Penny - to name a few. Ken has coordinated signings and media events many for athletes including Alex Rodriguez, Mark Martin and Joe Montana. Carlo Beninati – Artist, Creative Director Artist Carlo Beninati is dedicated to documenting the history of human accomplishment – remarkable people, historical events, and the wonders of the world - through innovative fine art. His reputation and prestigious client list speaks volumes about a lifetime of dedication to excellence in every aspect of his work. Few artists can boast a client list equal to his. Mr. Beninati has been commissioned by Fortune 500 companies, political, entertainment, and sports personalities. His work has also been included in prestigious public and private collections and is prominently displayed by collectors, galleries, and museums worldwide. He has produced incredible works of art to celebrate some of the greatest legends of our time including Michael Jordan, Tiger Woods, Joe DiMaggio, Ted Williams, Mickey Mantle, Stan Musial, Hank Aaron, Willy Mays, Mario Andretti, Joe Montana, Dan Marino, Frank Sinatra, and many others. Examples of his work include portraits ranging in mediums from charcoal to oil some of which can be seen as fine art limited edition prints. Image Innovations Inc. Officers & Directors Michael Slater - COO, Director Michael possesses many years of extensive retail sales experience at a senior management level. Prior to joining Image Innovations Inc., Michael was National Sales Manager for one of the largest moulding companies in BC Canada, where he was instrumental in establishing strategic alliances in the US market. Michael helped develop and launch Mortgage.com, a publicly traded Company, while National Sales Director for Vered Real Estate S.A. Derick Sinclair – CFO, Director See biography 6 Image Innovations Holdings Inc. Advisory Board To enhance the management team’s depth and breadth of industry contacts, the Company has established an advisory board consisting of well-know industry players. Listed below are some of the individuals currently on the Company’s advisory board: Larry Holmes – record 44 knockouts, places him among boxing’s elite. Larry won 48 consecutive bouts and has the longest heavyweight reign in boxing history from 1978 – 1985. Gerry Cooney – was a heavyweight title contender against Larry Holmes in 1982, although defeated he ended his career with a 28 –3 record. Gerry founded FIST (Fighters Initiative for Support and Training) a non-profit organization dedicated to helping retired boxers re-enter mainstream life. “Rollie” Fingers – was a legendary relief pitcher for the Oakland A’s, the San Diego Padres and the Saint Louis Cardinals. Fingers was inducted into the Baseball Hall of Fame in 1992 with a career 341 saves and he is a winner of the prestigious Cy Young Award. Dave Kingman - Known throughout his career as “Skyking” and “Kong” for his trademark tape measure homeruns Kingman played 16 seasons with the Giants, Mets, Padres, Angels, Yankees, Cubs and A’s. Dave won the National League Home Run crown in 1979 and 1982. Debbie Meyer – in 1972 was the first woman to win gold medals in three individual swimming events in the Olympics. Since her retirement one of Debbie’s priorities has been working with young people. George Gervin – is the greatest player in the history of the San Antonio Spurs franchise. In his 12 year career with the Spurs, Gervin scored 23,602 points and holds virtually every club scoring record. Gervin was an ABA All Star three times and an NBA All Star nine consecutive times. Ken Danekyo - appeared in 1,283 career regular-season National Hockey League games and won three Stanley Cups with the New Jersey Devils. His games-played total is the most in team history and ranks 35th in league history. Pending Developments American Stock Exchange: Image Innovations Holdings, Inc. has applied to the American Stock Exchange. The company has obtained verbal approval, with written acceptance to follow. United States Postal Service: The USPS has made a significant contribution to breast cancer awareness in the United States through sales of a breast cancer stamp. To date the USPS has sold 600 million stamps and raised over $40 million for breast cancer programs. The Image Group expects to finalize an agreement with USPS in early 2005 and become the official designer for USPS endorsed stamps and accessories (posters, pins, mugs, bracelets etc.) related to breast cancer awareness programs. TITLE-4-ART and TITLE-4-SPORTS: Image Group has developed a process to issue a registered title to owners of fine art and memorabilia. Image has patents pending on the TITLE-4-ART and TITLE-4-SPORTS process. Image has received 7 approval from Princess Cruise Line to register titles for all art and sports memorabilia sold on their ships. Princess has estimated that they will register approximately 150,000 titles with Image in 2005 generating between $4 and $6 million of revenues. Image believes that they will be able to market this concept not only to the ships within our distribution network but to all channels retailing fine art and memorabilia. Sports Marketing and Managing: Image has recently formed a sports marketing and managing company. Our first contract will be an exclusive 3 year agreement with NFL great Peyton Manning. Through the relationships developed in our sports and entertainment business, Image identified a niche market that will provide additional revenues to our celebrities while at the same time providing a marketing tool in our distribution network (for example we have proven that sales at onboard auctions increase significantly when the celebrity is present). Image is in a unique position and has created a business opportunity to provide these services. Other: Upon formal execution of the Peyton Manning Endorsement and Autograph Agreement, both Peyton Manning, along with legendary great Archie Manning, will be joining the Advisory Board of Image Innovations Holdings. Image Innovations Holdings Inc. has signed a non-binding letter of intent to purchase a major fine art wholesaler and framing business. Image is completing its due diligence in order to finalize the agreement. Financial Plan The following provides an overview of the financial strategies the Company is currently employing and assumes the funding indicated is provided. Making forward projections for any marketplace is always difficult. The forecasts included in this section of the document are conservative while giving consideration to the projects with the highest degree of success and is considered to represent the likely financial results. An Appendix I has been attached to give the reader a look at a conservative forecast. Note that the financing costs associated with raising the $10 million are described below but have not been included in financial forecasts. o The Company entered into an investment banking agreement with J Giordano Securities Group (“JGSG”) whereby the Company will pay JGSG: 6% of the transaction amount; and upon the closing of the sale of securities, the Company shall issue to JGSG warrants to purchase the same securities of the Company in an amount equal to 10% to be priced on the same terms as the Investors. Should the $10 million be raised JGSG will receive $600,000 in cash and 100,000 warrants expiring in 5 years with a conversion price set at 15 times actual FY2005 net income with a floor price of $5 per share and a ceiling of $7. o Legal and accounting fees associated with this financing are estimated to be approximately $30,000. Revenue projections: 2005 revenue forecast is based on continued development of our artwork collectables business and development of new opportunities that have been presented to our company through its existing network. 8 The artwork collectables business will generate revenues of $26.5 million in 2005 as follows: o $1.75 million will be generated from the sale of 2004 inventory. o $15 million from new projects. The management of Image Sports & Entertainment has identified 32 projects for 2005 that are expected to generate $30.5 million in revenues of which $15 million will be earned in 2005 and the remainder earned as the inventory created is sold in subsequent years. Each project has been assigned a start date and an expected sales period consisting of initial sales and balance of sales. Sales are dependent on the “popularity” of the athlete/entertainer as determined by management at Image Sports. As an example Lance Armstrong is projected to be completed in October and all items will be sold within 3 months i.e. there is no carry-over to 2006. Similarly LaBron James is expected to be completed in March and 50% will be sold in 6 months (March 05-August 05) and the remaining 50% will be sold in the following 12 months (Sept 05- Aug 06) which will result in carry-over revenues of $116,000 into 2006. Included in the projects identified for 2005 is the Peyton Manning endorsement and autograph project. The project will begin generating revenues as soon as the contract is signed. We expect to sign before the end of 2004, but are depending on receiving funding from this financing. The football season and the Super Bowl will cause some seasonality to how these revenues are earned. The project has the potential to generate $12 million in 2005. Approximately half of these revenues have been included in the 2005 forecast. o $9.75 million from the Livve-Breast Cancer project. The Livve-Breast Cancer project is expected to start in April and be fully operational in July generating $2 million per month. For forecasting purposes only, revenues have been capped at $1 million per month between May and October 2005. There are 42,000 post offices throughout the United States. These post offices have sold 600 million Livve-Breast Cancer stamps at an eight cent premium (i.e. 8 cents over the required postage). The Livve Licensing Group and the Post Office suggest that products associated with the stamp will enjoy similar success. Image has developed three products: a poster of a painting created by Carlo Beninati using the image on the stamp; a rubber wrist band, similar to the hugely successful Lance Armstrong yellow cancer wrist band: and a magnetic ribbon designed to be displayed on cars. The forecasted revenues are based on selling these products or similar popular products through the post office outlets which would require each outlet on average to buy less than $50 worth of product per month. New opportunities will generate revenues of $3.45 million in 2005 as follows: o $1.95 million commission revenues from sales of Red Bull Energy Drink. Image Group has exclusive distribution rights for the vending machine market in colleges and universities, military installations, stadiums and arenas. The agreement is for five years with automatic renewals thereafter, and Image Group will receive $.10 for every can of Red Bull sold through its network. Image will not incur any costs for installation and maintenance of the machines. Image Innovations will provide the locations and RB Energy, LLC will provide the vending machines and stock, as well as servicing the equipment. 2005 revenues are based on an April start and ramping sales to the 3,000,000 cans per month by September 2005. o $1.5 million from the sale of Pain Goes. Image has an exclusive distribution agreement with The Quigley Corporation, the owner of Pain Goes. Quigley is traded on the NASDQ exchange under the symbol QGLY. Image will distribute Pain Goes, a topical pain relief spray, through its existing distribution channels. Quigley will reimburse Image for display and marketing costs. Image will run a marketing program that will have a popular NASCAR driver, who finished in the top 5 of the 2004 NASCAR Nextel Cup, endorse the product. The revenue projections are based on a February 2005 start and ramping sales to 30,000 units per month by 2007. 9 License and private label products will generate revenues of $1.72 million in 2005 as follows: o $1.52 million from the sale of licensed products. Image Innovations holds licenses with the NFL, Riddell, NHL, and MLB. During 2004 Image Innovations developed products and established a distribution system for those products and had limited success in reaching major retailers. Image Innovations will build on those successes. o $0.2 million from the sale of private label products. Image will develop private label products, an example of which is the RistWell, a beverage dispenser worn on the wrist and designed specifically for sportsmen and women or people on the go. Image has reached an agreement with the holder of the patent for exclusive worldwide rights to manufacture and distribute RistWell, and have preliminary estimates from manufacturers. RistWell is expected to generate $125,000 per month when in full operation. We have not selected a manufacturer and expect that the product will not be launched until the 3rd quarter of 2005. 10 Use of Proceeds: Dollar Amount Create inventory for resale by Image Innovations Sports $8,000,000 & Entertainment. Projects including Endorsement and Autograph Agreement with Peyton Manning, Breast cancer project with the Livve Licensing Group, and signings with but not limited to Lance Armstrong, Mike Piazza, Derick Jeter, Tiger Woods, Michael Jordan, Barry Bonds, Dan Marino, Muhammed Ali, Tony $8,000,000 Stewart, and Kasey Kane. Repay Coach Capital loan $800,000 $800,000 Working Capital $1,200,000 $1,200,000 Total $10,000,000 $10,000,000 Capitalization: Image Holdings has 50,000,000 authorized common shares par value $0.001 and 1,000,000 authorized preferred shares par value $0.01. Image Holdings has 24,910,000 common shares outstanding and no preferred shares outstanding at December 21, 2004. Image Holdings has issued 1,250,000 warrants with strike prices between $1.50 and $6.17 per share at December 21, 2004. Image Holdings has a stock option plan with 2,500,000 options available to be issued. At December 21, 2004 1,585,000 options have been granted, 15,000 have expired, and 995,703 have vested. 11 Income Statement - 2003 actual and 2004 Quarterly Outlook Image Innovations Holdings Inc. Proforma Consolidated Financial Statements 2003 2004 2004 2004 2004 Actual Actual Actual Outlook Actual Q1 Q2 Q3 Q4 Revenues Fine Art & Collectables n/a 174,115 712,575 2,057,133 3,000,000 Livve - Breast Cancer Project n/a - - - - Sports Memorabilia & Assemblages n/a - - - - Sports & Entertainment n/a 174,115 712,575 2,057,133 3,000,000 Licensed Products - 6,853 25,783 240,697 48,345 Private Label/Premium Products 101,743 - - - - Red Bull/Quigley/RistWell - - - - - Licensed Products 101,743 6,853 25,783 240,697 48,345 Total Revenues 101,743 180,968 738,358 2,297,830 3,048,345 COS Fine Art & Collectables n/a 114,661 401,963 792,620 1,560,000 Livve - Breast Cancer Project n/a - - - - Sports Memorabilia & Assemblages n/a - - - - Sports & Entertainment n/a 114,661 401,963 792,620 1,560,000 Licensed Products - 3,051 8,350 153,866 16,366 Private Label/Premium Products 54,768 - - 1,427 - Red Bull/Quigley/RistWell - - - - - Licensed Products 54,768 3,051 8,350 155,293 16,366 COS 54,768 117,712 410,313 947,913 1,576,366 Gross Profit Fine Art & Collectables n/a 59,454 310,612 1,264,513 1,440,000 Livve - Breast Cancer Project n/a - - - - Title for Art & Sports n/a - - - - Sports & Entertainment n/a 59,454 310,612 1,264,513 1,440,000 34% 44% 61% 48% Licensed Products - 3,802 17,433 86,831 31,979 Private Label/Premium Products 46,975 - - (1,427) - Red Bull/Quigley/RistWell - - - - - Licensed Products 46,975 3,802 17,433 85,404 31,979 55% 68% 35% 66% Gross Profit 46,975 63,256 328,045 1,349,917 1,471,979 GM% 46% 35% 44% 59% 48% Overheads 665,670 640,772 946,618 1,015,286 818,996 Overheads as % of revenues n/a 354% 128% 44% 27% Net Income/(Net Loss) before taxes (618,695) (577,516) (618,573) 334,631 652,983 NI before taxes% n/a -319% -84% 15% 21% Interest n/a - 14,667 32,213 36,669 Taxes n/a - - - - Net Income/(Net Loss) (618,695) (577,516) (633,240) 302,418 616,314 n/a n/a n/a 13% 20% 12 Cash Flows & Balance Sheet - 2003 actual and 2004 Quarterly Outlook Image Innovations Holdings Inc. Proforma Consolidated Financial Statements 2003 2004 2004 2004 2004 Actual Actual Actual Outlook Actual Q1 Q2 Q3 Q4 Cash Flows Net Income (516,952) (577,516) (633,240) 302,418 694,107 Depreciation 1,342 1,213 2,409 3,704 11,430 (Increase)/Decrease in Working Capital-Inventory (182,204) 11,738 (281,253) (137,732) (796,712) (Increase)/Decrease in Working Capital (3,542,409) (826,558) (1,886,413) 1,148,612 (697,814) (4,106,974) (1,738,642) (1,718,023) 1,057,437 Investing Capital expenditures (18,659) (40,805) (12,812) (322,623) 0 (18,659) (40,805) (12,812) (322,623) 0 Funding Debt 0 1,136,897 1,052,865 (665,000) Equity-Issue Common Shares 129,650 290 600 0 Equity-Additional Paid up Capital 3,888,465 549,347 1,312,945 0 Issue Common Shares 1,000 Issue Common Shares for Debt 900,000 Cash received on acquisition of Image Holdings 14,623 Demand Loan 175,704 1,091,327 4,018,115 1,686,534 2,366,410 (665,000) 374,854 (129,664) (64,920) 325,764 392,437 Opening cash 0 273,111 143,447 78,527 404,291 Closing Cash 374,854 143,447 78,527 404,291 796,728 Balance Sheet Assets Cash 273,111 143,447 78,527 404,291 796,728 A/R 12,000 119,793 753,673 2,340,831 1,506,000 Other current Assets 0 19,938 28,090 22,200 24,000 Prepaids 135,554 346,474 671,267 691,436 538,704 Inventory Licensed Products 0 39,194 135,274 513,441 672,338 Inventory Sport & Entertainment 0 2,964,847 3,150,020 2,909,585 3,547,400 420,665 3,633,693 4,816,851 6,881,784 7,085,170 Fixed Assets 17,317 56,909 67,312 386,231 374,801 437,982 3,690,602 4,884,163 7,268,015 7,459,971 Liabilities & Shareholders Equity A/P & Accrued Liabilities 22,348 126,139 275,340 294,410 457,259 Loans HE/Mtg/LOC 175,704 8,934 336,897 1,085,716 1,220,716 198,052 135,073 612,237 1,380,126 1,677,975 Intercompany Debt 0 0 0 0 0 198,052 135,073 612,237 1,380,126 1,677,975 Long Term Debt 0 800,000 800,000 0 Shareholders Equity Common Stock 19,370 24,020 24,310 24,910 24,910 Additional Paid up Capital 859,255 4,747,720 5,297,067 6,610,012 6,610,012 R/E (638,695) (1,216,211) (1,849,451) (1,547,033) (852,926) 239,930 3,555,529 3,471,926 5,087,889 5,781,996 437,982 3,690,602 4,884,163 7,268,015 7,459,971 13 Pro Forma Income Statement - 2004 Outlook 2005-2007 Forecast Management’s Base Scenario Image Innovations Holdings Inc. Proforma Consolidated Financial Statements 2004 2005 2006 2007 Outlook Forecast Forecast Forecast Revenues Fine Art & Collectables 5,943,823 16,000,000 18,000,000 26,400,000 Livve - Breast Cancer Project - 9,750,000 24,000,000 24,000,000 Sports Memorabilia & Assemblages - 750,000 1,200,000 1,440,000 Sports & Entertainment 5,943,823 26,500,000 43,200,000 51,840,000 Licensed Products 321,678 1,521,400 3,055,900 5,268,494 Private Label/Premium Products - 200,000 300,000 375,000 Red Bull/Quigley/RistWell - 3,450,000 6,000,000 7,200,000 Licensed Products 321,678 5,171,400 9,355,900 12,843,494 Total Revenues 6,265,501 31,671,400 52,555,900 64,683,494 COS Fine Art & Collectables 2,869,244 8,000,000 9,000,000 13,200,000 Livve - Breast Cancer Project - 4,875,000 12,000,000 12,000,000 Sports Memorabilia & Assemblages - 375,000 600,000 720,000 Sports & Entertainment 2,869,244 13,250,000 21,600,000 25,920,000 Licensed Products 181,633 1,356,064 2,331,094 3,745,848 Private Label/Premium Products 1,427 78,000 117,000 146,250 Red Bull/Quigley/RistWell - 2,277,000 3,960,000 4,752,000 Licensed Products 183,060 3,711,064 6,408,094 8,644,098 COS 3,052,304 16,961,064 28,008,094 34,564,098 Gross Profit Fine Art & Collectables 3,074,579 8,000,000 9,000,000 13,200,000 Livve - Breast Cancer Project - 4,875,000 12,000,000 12,000,000 Title for Art & Sports - 375,000 600,000 720,000 Sports & Entertainment 3,074,579 13,250,000 21,600,000 25,920,000 52% 50% 50% 50% Licensed Products 140,045 165,336 724,806 1,522,646 Private Label/Premium Products (1,427) 122,000 183,000 228,750 Red Bull/Quigley/RistWell 0 1,173,000 2,040,000 2,448,000 Licensed Products 138,618 1,460,336 2,947,806 4,199,396 43% 28% 32% 33% Gross Profit 3,213,197 14,710,336 24,547,806 30,119,396 GM% 51% 46% 47% 47% Overheads 3,343,879 6,403,280 9,520,080 10,565,520 Overheads as % of revenues 53% 20% 18% 16% Net Income/(Net Loss) before taxes (130,682) 8,307,056 15,027,726 19,553,876 NI before taxes% -2% 26% 29% 30% Interest 83,549 962,500 1,050,000 1,050,000 Taxes 0 3,733,887 6,027,258 8,013,199 Net Income/(Net Loss) (214,231) 3,610,669 7,950,468 10,490,677 -3% 11% 15% 16% 14 Pro Forma Cash Flows & Balance Sheet - 2004 Outlook 2005-2007 Forecast Management’s Base Scenario Image Innovations Holdings Inc. Proforma Consolidated Financial Statements 2004 2005 2006 2007 Outlook Forecast Forecast Forecast Cash Flows Net Income (214,231) 3,610,669 7,950,468 10,490,677 Depreciation 18,756 57,600 42,000 42,000 (Increase)/Decrease in Working Capital-Inventory (1,203,959) (3,513,543) (518,255) (435,140) (Increase)/Decrease in Working Capital (5,106,768) (4,260,673) (220,000) (1,511,000) (6,506,202) (4,105,947) 7,254,213 8,586,537 Investing Capital expenditures (376,240) (315,000) (330,000) (330,000) (376,240) (315,000) (330,000) (330,000) Funding Debt 1,524,762 10,000,000 0 0 Equity-Issue Common Shares 130,540 0 0 0 Equity-Additional Paid up Capital 5,750,757 0 0 0 Issue Common Shares Issue Common Shares for Debt Cash received on acquisition of Image Holdings Demand Loan 7,406,059 10,000,000 0 0 523,617 5,579,053 6,924,213 8,256,537 Opening cash 273,111 796,728 6,375,781 13,299,994 Closing Cash 796,728 6,375,781 13,299,994 21,556,531 Balance Sheet Assets Cash 796,728 6,375,781 13,299,994 21,556,531 A/R 1,506,000 6,379,000 6,627,000 8,168,000 Other current Assets 24,000 24,000 24,000 24,000 Prepaids 538,704 130,000 130,000 130,000 Inventory Licensed Products 672,338 1,333,281 1,851,536 2,286,676 Inventory Sport & Entertainment 3,547,400 6,400,000 6,400,000 6,400,000 7,085,170 20,642,062 28,332,530 38,565,207 Fixed Assets 374,801 632,201 920,201 1,208,201 7,459,971 21,274,263 29,252,731 39,773,408 Liabilities & Shareholders Equity A/P & Accrued Liabilities 457,259 660,882 688,882 718,882 Loans HE/Mtg/LOC 1,220,716 1,220,716 1,220,716 1,220,716 1,677,975 1,881,598 1,909,598 1,939,598 Intercompany Debt 0 0 0 0 1,677,975 1,881,598 1,909,598 1,939,598 Long Term Debt 10,000,000 10,000,000 10,000,000 Shareholders Equity Common Stock 24,910 24,910 24,910 24,910 Additional Paid up Capital 6,610,012 6,610,012 6,610,012 6,610,012 R/E (852,926) 2,757,743 10,708,211 21,198,888 5,781,996 9,392,665 17,343,133 27,833,810 7,459,971 21,274,263 29,252,731 39,773,408 15 APPENDIX I The following represents management’s 2005-2007 forecasts based on a conservative scenario. This scenario takes management’s base and adjusts for the following: o Fine Art Wholesalers companies not acquired o The Livve-Breast Cancer project launch delayed to July and revenues are capped at $1 million/month. Each post office outlet generates average revenues of less than $25 per month. o Revenues from the Peyton Manning contract 33% of estimate. o Title 4 Art & Sports not launched. o Sports Marketing and Managing not launched. o Red Bull launch delayed to September. o Pain Goes launch delayed to July. 16 Pro Forma Income Statement - 2004 Outlook 2005-2007 Forecast Management’s Conservative Scenario Image Innovations Holdings Inc. Proforma Consolidated Financial Statements 2004 2005 2006 2007 Outlook Forecast Forecast Forecast Revenues Fine Art & Collectables 5,943,823 14,200,000 17,711,527 26,053,832 Livve - Breast Cancer Project - 5,250,000 12,000,000 12,000,000 Sports Memorabilia & Assemblages - 750,000 1,200,000 1,440,000 Title for Art & Sports - - - - Personal Appearances - - - - Fine Art Wholesalers - - - - Sports & Entertainment 5,943,823 20,200,000 30,911,527 39,493,832 Licensed Products 321,678 1,521,400 3,055,900 5,268,494 Private Label/Premium Products - 200,000 300,000 375,000 Red Bull/Quigley/RistWell - 1,025,000 5,925,000 7,200,000 Licensed Products 321,678 2,746,400 9,280,900 12,843,494 Total Revenues 6,265,501 22,946,400 40,192,427 52,337,326 COS Fine Art & Collectables 2,869,244 7,100,000 8,855,760 13,026,912 Livve - Breast Cancer Project - 2,625,000 6,000,000 6,000,000 Sports Memorabilia & Assemblages - 375,000 600,000 720,000 Title for Art & Sports - - - - Personal Appearances - - - - Fine Art Wholesalers - - - - Sports & Entertainment 2,869,244 10,100,000 15,455,760 19,746,912 Licensed Products 181,633 1,181,814 2,327,157 3,746,113 Private Label/Premium Products 1,427 78,000 117,000 146,250 Red Bull/Quigley/RistWell - 676,500 3,910,500 4,752,000 Licensed Products 183,060 1,936,314 6,354,657 8,644,363 COS 3,052,304 12,036,314 21,810,417 28,391,275 Gross Profit Fine Art & Collectables 3,074,579 7,100,000 8,855,767 13,026,920 Livve - Breast Cancer Project - 2,625,000 6,000,000 6,000,000 Sports Memorabilia & Assemblages - 375,000 600,000 720,000 Title for Art & Sports - - - - Personal Appearances - - - - Fine Art Wholesalers - - - - Sports & Entertainment 3,074,579 10,100,000 15,455,767 19,746,920 52% 50% 50% 50% Licensed Products 140,045 339,586 728,743 1,522,381 Private Label/Premium Products (1,427) 122,000 183,000 228,750 Red Bull/Quigley/RistWell 0 348,500 2,014,500 2,448,000 Licensed Products 138,618 810,086 2,926,243 4,199,131 43% 29% 32% 33% Gross Profit 3,213,197 10,910,086 18,382,010 23,946,051 GM% 51% 48% 46% 46% Overheads 3,343,879 7,711,979 11,971,620 14,185,128 Overheads as % of revenues 53% 34% 30% 27% Net Income/(Net Loss) before taxes (130,682) 3,198,107 6,410,390 9,760,923 NI before taxes% -2% 14% 16% 19% Interest 83,549 962,500 1,050,000 1,050,000 Taxes 0 1,906,171 2,674,914 4,007,144 Net Income/(Net Loss) (214,231) 329,436 2,685,476 4,703,780 -3% 1% 7% 9% 17 Pro Forma Cash Flows & Balance Sheet - 2004 Outlook 2005-2007 Forecast Management’s Conservative Scenario Image Innovations Holdings Inc. Proforma Consolidated Financial Statements 2004 2005 2006 2007 Outlook Forecast Forecast Forecast Cash Flows Net Income (214,231) 329,436 2,685,476 4,703,780 Depreciation 18,756 57,600 42,000 0 (Increase)/Decrease in Working Capital-Inventory (1,203,959) (2,117,793) (515,067) (434,344) (Increase)/Decrease in Working Capital (5,241,768) (2,234,673) (710,000) (1,504,000) (6,641,202) (3,965,430) 1,502,409 2,765,436 Investing Capital expenditures (376,240) (315,000) (330,000) (330,000) (376,240) (315,000) (330,000) (330,000) Funding Debt 1,390,362 10,000,000 0 0 Equity-Issue Common Shares 1,577,885 0 0 0 Equity-Additional Paid up Capital 4,437,812 0 0 0 Issue Common Shares Issue Common Shares for Debt Cash received on acquisition of Image Holdings Demand Loan 7,406,059 10,000,000 0 0 388,617 5,719,570 1,172,409 2,435,436 Opening cash 273,111 661,728 6,381,298 7,553,706 Closing Cash 661,728 6,381,298 7,553,706 9,989,142 Balance Sheet Assets Cash 661,728 6,381,298 7,553,706 9,989,142 A/R 1,506,000 4,351,000 5,091,000 6,625,000 Other current Assets 24,000 24,000 24,000 24,000 Prepaids 538,704 130,000 130,000 130,000 Inventory Licensed Products 672,338 1,337,531 1,852,598 2,286,942 Inventory Sport & Entertainment 3,547,400 5,000,000 5,000,000 5,000,000 6,950,170 17,223,829 19,651,304 24,055,084 Fixed Assets 374,801 632,201 920,201 1,017,701 7,324,971 17,856,030 20,571,505 25,072,785 Liabilities & Shareholders Equity A/P & Accrued Liabilities 457,259 658,882 688,882 718,882 Loans HE/Mtg/LOC 1,085,716 1,085,716 1,085,716 1,085,716 1,542,975 1,744,598 1,774,598 1,804,598 Intercompany Debt 0 0 0 (304,046) 1,542,975 1,744,598 1,774,598 1,500,552 Long Term Debt 10,000,000 10,000,000 10,000,000 Shareholders Equity Common Stock 24,910 24,910 24,910 24,910 Additional Paid up Capital 6,610,012 6,610,012 6,610,012 6,610,012 R/E (852,926) (523,490) 2,161,985 6,937,311 5,781,996 6,111,432 8,796,907 13,572,233 7,324,971 17,856,030 20,571,505 25,072,785 18
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