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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2003
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
COMMISSION FILE NO. 000-15034
NIMBUS GROUP, INC.
------------------
(Exact name of registrant as specified in its charter)
FLORIDA 65-0924433
(State of Incorporation) (I.R.S. Employer
Identification Number)
2875 NE 191ST STREET, SUITE PH 2
AVENTURA, FL 33180
(Address of principal executive offices) (Zip Code)
305-692-3732
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of January 31, 2004,
7,688,889 shares of Common Stock, $.001 par value were outstanding.
NIMBUS GROUP, INC.
TABLE OF CONTENTS
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
Item 4. Controls and Procedures 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Nimbus Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, June 30,
2003 2003
Unaudited Audited
----------------------- -----------------------
ASSETS
Current assets:
Cash and cash equivalents $ 22,344 $ 354
Accounts receivable 50,000 150,000
Shareholder receivable - 20,123
Prepaid expenses and other current assets 45,345 7,300
----------------------- -----------------------
Total current assets 117,689 177,777
----------------------- -----------------------
Total assets 117,689 177,777
======================= =======================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable $ 183,121 $ 277,418
Accrued expenses 235,960 100,218
Deferred revenue 50,000 100,000
Loan payable 30,000 -
----------------------- -----------------------
Total current liabilities 499,081 477,636
----------------------- -----------------------
Commitments and Contingencies
Shareholders' equity (deficiency):
Preferred shares, $0.001 par value, 10 million shares
authorized, no shares issued and outstanding - -
Common shares, $0.001 par value, 50 million shares authorized
7,688,889 and 7,438,889 shares issued and outstanding respectively 7,689 7,439
Additional paid-in capital 11,038,546 10,988,796
Accumulated deficit (11,427,627) (11,296,094)
----------------------- -----------------------
Total shareholders' equity (deficiency) (381,392) (299,859)
----------------------- -----------------------
Total liabilities and shareholders' equity (deficiency) 117,689 177,777
======================= =======================
The accompanying notes are an integral part of these condensed
consolidated financial statements.
1
Nimbus Group, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations
(Unaudited)
For the three-months ended For the six months-ended
December 31, December 31,
--------------------------- -----------------------------
2003 2002 2003 2002
-------------------- -------------------- -------------------- --------------------
Net royalty revenues $ - $ - $ 25,867 $ -
Licensing fees 50,000 - 100,000 -
-------------------- -------------------- -------------------- --------------------
Gross margin 50,000 - 125,867 -
-------------------- -------------------- -------------------- --------------------
Operating expenses:
General and administrative expenses 107,489 - 317,040 -
Royalties 30,000 - 30,000 -
-------------------- -------------------- -------------------- --------------------
Total operating expenses 137,489 - 347,040 -
-------------------- -------------------- -------------------- --------------------
Net loss from operations (87,489) - (221,173) -
Other income/(expense):
Other income/(expense) - - 2,758 -
-------------------- -------------------- -------------------- --------------------
Net loss from continuing operations (87,489) - (218,415) -
Discontinued Operations:
Gain (Loss) from discontinued operations - 65,832 86,882 (456,436)
-------------------- -------------------- -------------------- --------------------
Net (loss) $ (87,489) $ 65,832 $ (131,533) $ (456,436)
==================== ==================== ==================== ====================
Basic and diluted loss per common share $ (0.01) $ (0.01) $ (0.02) $ (0.06)
==================== ==================== ==================== ====================
Weighted average number of common
shares outstanding 7,788,889 7,438,889 7,788,889 7,438,889
==================== ==================== ==================== ====================
The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
Nimbus Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the six-months
ended December 31,
--------------------------------------
(Unaudited)
2003 2002
------------------------- -------------------------
Cash flows from operating activities:
Net loss $ (131,533) $ (456,436)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization - (252,734)
Provision for impairment of assets to be disposed of - 278,982
Accounts receivable 100,000 50,168
Shareholder receivables 20,123 (1,631)
Inventory - 692,958
Prepaid expenses and other current assets (38,045) 16,749
Other assets - (2,069)
Accounts payable (94,297) (265,105)
Accrued expenses 135,742 11,555
Amounts due to related party - 415,466
Deferred revenue (50,000) (13,957)
------------------------- -------------------------
Net cash (used in) provided by operating activities (58,010) 473,946
------------------------- -------------------------
Cash flows from investing activities:
Purchase of property and equipment - (4,091)
------------------------- -------------------------
Net cash used in investing activities - (4,091)
------------------------- -------------------------
Cash flows from financing activities:
Proceeds from issuance of stock 50,000 -
Loans 30,000 -
------------------------- -------------------------
Net cash provided by financing activities 80,000 -
------------------------- -------------------------
Net decrease in cash and cash equivalents 21,990 469,855
Cash and cash equivalents at beginning of period 354 30,552
------------------------- -------------------------
Cash and cash equivalents at end of period 22,344 500,407
========================= =========================
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
NIMBUS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS AND DISCONTINUED OPERATIONS
Nimbus Group, Inc. (the "Company) is implementing its plan and changing its
focus to the development and wholesale distribution of fragrances and skincare
products, both proprietary and under license. This new focus capitalizes on
current management's expertise. The Company acquired licensing rights to certain
brands that enabled the Company to enter into sub-licensing and distribution
agreements that has generated income for the Company.
Cara Mia is the first brand the Company acquired from Omniscient Corp. that
began distribution through a licensing agreement with Victory International
(USA) LLC. Cara Mia Skincare initially launched in Puerto Rico with four
products created specifically as skincare solutions. The Company only
distributes its product lines via licensed wholesale distributors that service
specialty retail stores across the United States and to worldwide importers and
exclusive distributors. The Company does not directly manufacture any product or
take positions in inventory.
Prior to September 26, 2001, Take to Auction.com, Inc. ("TTA"), a Company which
sold products online through multiple distribution channels, reorganized its
corporate structure and changed its primary business focus. On September 26,
2001, TTA, Nimbus Group Inc., a Florida corporation and wholly-owned subsidiary
of TTA ("Nimbus"), and TTA Solutions, Inc., a Florida corporation and
wholly-owned subsidiary of Nimbus ("TTA Solutions"), entered into an Agreement
and Plan of Merger (the "Merger Agreement"). Additionally, another wholly-owned
subsidiary of Nimbus, Nimbus Jets, Inc., ("Nimbus Jets") was formed. As a result
of the Merger, Nimbus (the "Company") became the parent Company of the two
wholly-owned subsidiaries, TTA and Nimbus Jets . All revenues generated in
fiscal 2002 and prior related solely to TTA. The Nimbus Jets and TTA were
dormant during the six months ended December 31, 2003. All revenues were
generated by the parent company Nimbus Group, Inc.
During January 2002, the Company's Board adopted a formal plan of disposal of
TTA, in connection with an overall strategic program designed to focus the
Company's resources on Nimbus Jets and the development of a national air taxi
service.
On February 19, 2003, Watch Junction, Inc. purchased the technology and certain
assets of TTA. Watch Junction is owned 100% by the former President of TTA Mr.
Albert Friedman. Mr. Friedman made a cash payment in the amount of $50,000 and
returned 305,610 shares of our common stock back to us for the purchase of the
technology and assets.
TTA operated the Perfumania.com retail storefront prior to January 2003, which
offered fragrance and fragrance-related products. As of December 31, 2002, the
Company owed Perfumania.com approximately $2.1 million relating primarily to
inventory purchased pursuant to a license agreement. On January 28, 2003, E Com
Ventures, Inc. ("ECMV"), the parent of Perfumania.com, advised that the Company
was in default of the Website Operations Services Agreement (the "Agreement")
for non-payment of amounts due of approximately $1.9 million to Perfumania.com
in connection with the Agreement. To settle the breach of contract claim, the
Agreement was terminated in exchange for a release of the outstanding
obligations owed to Perfumania.com. On February 28, 2003, the Company completed
the process of returning the operations of Perfumania.com back to ECMV.
4
NOTE 2. ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
by the Company and subsidiaries (the "Company") in accordance with accounting
principles generally accepted in the United States for interim financial
information and pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six months ended
December 31, 2003 are not necessarily indicative of the results that may be
expected for the fiscal year ending June 30, 2004.
The balance sheet information at June 30, 2003 has been derived from the audited
financial statements at that date.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Transition Report on Form 10-K for
the six months transition period ended June 30, 2003.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications to the Company's 2002 consolidated financial
statements were made to conform them to classifications used in the 2003
consolidated financial statements.
NOTE 3. GOING CONCERN
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. However, the Company has
incurred net losses since inception in the amount of approximately $11.4 million
and has a deficiency in working capital of approximately $381,392 at December
31, 2003. These factors, among others, indicate that the Company may be unable
to continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
The Company's continuation as a going concern is dependent upon future events,
including obtaining financing adequate to support the Company's cost structure
and business plans.
5
NOTE 4. RELATED PARTY TRANSACTIONS
During November 2000, the Company loaned its former Chairman of the Board
approximately $100,000. During 2002, principal payments of approximately $7,000
were made. This loan was classified as shareholder receivables in the
accompanying consolidated balance sheet. As of June 30, 2003 the balance was
$20,123. The loan was satisfied in August 2003. As of December 31, 2003 there
are no outstanding loans to related parties.
On February 19, 2003, Watch Junction, Inc. ("Watch") purchased the technology
and certain assets of Take to Auction (the "Technology Sale"). Watch Junction
is owned 100% by the former President of TTA, Mr. Albert Friedman. Mr. Friedman
made a cash payment in the amount of $50,000 and returned 305,610 shares of our
common stock back to us for the licensing rights of the technology and the
purchase of certain assets. The Company believes that this transaction was made
at fair market value.
On May 19, 2003, the Company entered into an agreement with Omniscent Corp. to
acquire certain rights to a portfolio of fragrance brands and Skincare line that
include; The Cara Mia Swiss Formulated Skincare line. The Cara Mia line
initially debuted with four products created specifically to repair and
rejuvenate the users skin. The purchase price for the development and licensing
rights is for up to 2,500,000 shares of preferred convertible stock or a cash
payment of $500,000 at the Company's option, for the design and development
rights and 30% of all revenues and or sub-licensing fees. If issued, the
preferred shares will be convertible into shares of common stock of our Company
on a one to one basis at the option of the holder, but in no event may the
preferred shares be converted into more than 19.9% of our issued and outstanding
common stock. Sharon Lallouz is the principal shareholder of Omniscent Corp.
and is also the spouse of the Company's Chief Executive. Mr. Lallouz was
appointed Chief Executive Officer and director of the Company subsequent to the
acquisition. As of this date no determination has been made as to whether this
acquisition will be consummated. The Company has not closed on its transaction
with Omniscent Corp. The two companies have agreed to extend the closing date
until such time that the Company can seek shareholder approval through a special
meeting of its shareholders.
Effective May 21, 2003 the Company also entered into an assignment agreement
with Omniscent, where it acquired the licensing rights of the Phantom Fragrances
brand licensed to Moar International. Under the terms of the licensing agreement
a royalty fee of 5% on net sales of the brand is payable to us by Moar
International. Under the assignment agreement 1.5% from the 5% will revert to
Omniscent leaving the Company with a net of 3.5% of all royalties collected from
this licensing assignment. The Company anticipates the launch of the Phantom
Fragrance line will commence in March 2004.
6
On June 10, 2003 ECMV and Perfumania.com signed an agreement effective as of
March 1 2003, in which Perfumania.com extinguished the receivable due from the
Company, various assets and liabilities were transferred between Perfumania.com
and the Company and the operations of Perfumania.com were transitioned back to
ECMV by the Company.
On September 1, 2003 Omniscent Corp. loaned the Company $30,000, which is an
interest free loan due on demand. The Company also sold Omniscent Corp., 305,610
shares of the common stock of the corporation for $50,000 at $.16 per share
which was approximately 115% of the closing trading price of the Company's
common stock on September 1, 2003.
NOTE 5. SUBSEQUENT EVENTS AND AGREEMENT
On January 22, 2004, the Company entered into an Acquisition Term Sheet with
Fragex, S.A., a privately held French corporation. In general, the Acquisition
Term Sheet provides that the Company shall receive a 51% equity interest in
Fragex in consideration of 1,115,000 shares of restricted common stock of the
Company. However, 51% voting control of Fragex shall remain with its current
shareholders. The Acquisition Term Sheet contains standard conditions to
closing, including, but not limited to, satisfactory completion by the Company
and Fragex of their due diligence, execution of definitive transaction
documents, and any necessary regulatory approval.
NOTE 6. LEASE
On December 28, 1999, the Company entered into a five year operating lease
agreement for its corporate headquarters. The monthly rent payments under this
lease were approximately $14,500 from the period January 1, 2000 to April 1,
2003. This lease was assumed by ECMV. On April 1, 2003 the Company moved to
another office building in Aventura, Florida and leased facilities at 2999 N.E.
191st Street for the period from April 1, 2003 to December 15, 2003 for
initially $3,883 and then for $1,702 for suites 805 and 903, respectively. On
December 31, 2003 this lease was terminated by mutual agreement between the
Company and the landlord. The Company entered into a new 3 year lease in the
building next door with occupancy and lease agreement effective on December 14,
2003 for monthly rent payments of $1,400.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains "forward-looking statements" within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements include, among others, statements concerning the Company's outlook
for 2004 and beyond, the Company's expectations, beliefs, future plans and
strategies, anticipated events or trends, and similar expressions concerning
matters that are not historical facts. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. The forward-looking statements in this report are subject to
risks and uncertainties that could cause actual results to differ materially
from those expressed in or implied by the forward-looking statements. These
risks and uncertainties are described in more detail in our Transition Report on
Form 10-K for the year-ended June 30, 2003 filed with the Securities and
Exchange Commission.
7
OVERVIEW
Currently the Company is implementing its plan and is focusing its efforts to
the development of fragrance and cosmetics brands, both proprietary and under
license. This new focus capitalizes on current management's expertise. The
Company acquired a portfolio of brands that enabled the Company to enter into
licensing and distribution agreements that has generated income for the Company.
Cara Mia is the first brand in the portfolio the Company acquired from
Omniscient Corp. that began distribution through a licensing agreement with
Victory International (USA) LLC. Cara Mia Skincare initially launched in Puerto
Rico with four products created specifically as a skincare solutions. Victory
intends to continue this brand roll-out in the continental United States
starting in January 2004. The Company distributes its product lines via licensed
wholesale distributors that service specialty retail stores across the United
States and to worldwide importers and exclusive distributors. The Company does
not directly manufacture any product nor takes positions in inventory.
On May 19, 2003, we entered into an agreement with Omniscent Corp. to acquire
certain rights to a portfolio of fragrance brands and Skincare line that
include; The Cara Mia Swiss Formulated Skincare line, Phantom Women and Men
Fragrances, as well as Ultra-E Fragrance for the Young Set in its developmental
stage. The Cara Mia line will initially debut with four products created
specifically to repair and rejuvenate the users skin. The other two brands are
Phantom Parfum and Ultra-e fragrances. The purchase price for these development
and licensing rights is for up to 2,500,000 shares of preferred convertible
stock or a cash payment of $500,000 at the Company's option, for the design and
development rights and 30% of all revenues and or sub-licensing fees. As of this
date no determination has been made as to whether this acquisition will be
consummated. The Company had until January 31, 2004 to determine whether it will
close on the acquisition. The two companies have agreed to extend the closing
date until such time that the Company can seek shareholder approval through a
special meeting of its shareholders.
8
Effective May 20, 2003, we entered into a licensing agreement with Victory
International USA LLC to distribute its Cara Mia Cosmetics brand worldwide.
Under the terms of the agreement, Victory is to advance the company $200,000
against royalties of 12% on all net sales made by Victory International USA LLC.
First deposit of $50,000 was received on May 21, 2003, the second was received
on July 9, 2003 and the balance has been received as of November 30, 2003.
Ongoing royalties are payable quarterly.
Effective May 21, 2003, we also acquired the licensing rights for the Phantom
Fragrances brand, which is licensed to Moar International. Under the terms of
the licensing agreement a royalty fee of 5% on net sales of the brand will be
paid to us by Moar International. First payment has been changed from August
2003 to March 2004 due to production delays.
RESULTS OF OPERATIONS
We have materially changed the focus and business plan of our company. In
addition, we have discontinued our prior operations. As such, comparisons of
our historical results of operations may be meaningless.
FOR THE THREE MONTHS ENDED DECEMBER 31, 2003 COMPARED TO THE THREE MONTHS ENDED
DECMEBER 31, 2002
NET REVENUES. Revenues of $50,000 were recorded for the three-month period ended
December 31, 2003. These revenues consisted of royalties earned in connection
with the Victory International LLC royalty agreement.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist of payroll and related expenses for executive, accounting and
administrative personnel, professional fees and other general corporate
expenses. General and administrative expenses for the three-month period ended
December 31, 2003 were $194,371.
GAIN ON DISCONTINUED OPERATIONS. The gain of $86,882 for the three months ended
December 31, 2003 represents amounts previously accrued as accounts payable in
connection with the discontinued operations which the Company does not have to
pay.
NET (LOSS) The net loss totaled $87,489 for the three months ended December 31,
2003 as compared to income of $65,832 for the three months ended December 31,
2002.
FOR THE SIX MONTHS ENDED DECEMBER 31, 2003 COMPARED TO THE SIX MONTHS ENDED
DECMEBER 31, 2002
NET REVENUES. Revenues of $125,867 were recorded for the six-month period ended
December 31, 2003. These revenues consisted of licensing fees earned in
connection with the Victory International LLC agreement
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist of payroll and related expenses for executive, accounting and
administrative personnel, professional fees and other general corporate
expenses. General and administrative expenses for the six-month period ended
December 31, 2003 were $317,040.
9
GAIN ON DISCONTINUED OPERATIONS. The gain of $86,882 for the six months ended
December 31, 2003 represents amounts previously accrued as accounts payable in
connection with the discontinued operations which the Company does not have to
pay.
NET (LOSS) The net loss totaled $131,533 for the six months ended December 31,
2003 as compared to a loss of $456,436 for the six months ended December 31,
2002.
LIQUIDITY AND CAPITAL RESOURCES
Our principal capital requirements during the next twelve months will be to fund
the operations of our future business plan. We have had negative cash flows
since inception, resulting primarily from our wholly-owned subsidiary, TTA. Our
working capital since inception has been provided primarily by the proceeds from
our initial capitalization of $1,000,000, other private placements, the issuance
of promissory notes to affiliates, and our initial public offering consummated
in June 2000. If required, we may satisfy future cash needs through third party
loans, related party advances or equity financing. The Company can not provide
any assurances that such funding will be available or that such funding will be
available on acceptable terms.
Cash and cash equivalents at December 31, 2003 were $22,344. Cash and cash
equivalents at June 30, 2003 were $354. Our working capital (deficit) totaled
approximately $(381,392) at December 31, 2003 and $299,859 at June 30, 2003.
Cash flows from financing activities for the six months ended December 31, 2003
was $80,000, which was $50,000 in proceeds from the stock sale to Omniscent
Corp. and $30,000 in loans from Omniscent Corp. On September 1, 2003 Omniscent
Corp. loaned our company $30,000, which is an interest free loan due on demand.
The Company also sold Omniscent Corp. 305,610 shares of the common stock of the
corporation for $50,000 at $.016 per share which is approximately 115% of the
closing trading price of the Company's unrestricted common stock on September 1,
2003.
We have incurred net losses since inception, and our ability to ultimately
obtain profitable operations is dependent upon future events, including without
limitation, obtaining financing adequate to support our cost structure and
future business plans There can be no assurance that a new business strategy
will be evaluated and completed in a timely manner, that it will be successfully
implemented, or that our future cash flows will be sufficient to meet all of our
obligations and commitments. The failure to generate such sufficient cash flows
could significantly adversely affect the market value of our common stock, the
operation of our business, the results of operations and our financial
condition.
INCOME TAXES
The Company utilizes the asset and liability method of accounting for deferred
income taxes. Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using tax rates in effect for the year in which the
differences are expected to reverse. A valuation allowance is established when
it is more likely than not that some or all of the deferred tax assets will not
be realized. At December 31, 2003 a 100% valuation allowance was made.
10
SIMPLE IRA PLAN
The Company sponsored the Nimbus Group, Inc. SIMPLE IRA Plan (the "Plan"), a
defined contribution plan provided pursuant to the requirements of the Internal
Revenue Code of 1986, as amended. All employees were eligible to participate in
the Plan as of the first day of any month. Participants made pre-tax
contributions to the Plan subject to a statutorily prescribed annual limit. The
Company was required to make matching contributions, not to exceed 3% of a
participant's annual compensation, to the Plan. Each participant was fully
vested in their account, including the participant's contributions, the
Company's matching contribution and the investment earnings thereon.
Contributions by the participants or by the Company to the Plan, and the income
earned on such contributions, are generally not taxable to the participants
until withdrawn. Contributions by the Company are generally deductible by the
Company when made. The participant's and the Company's contributions are held in
an IRA. The Company had accrued a matching contribution to the Plan at June 30,
2003 of approximately $28,000. As of December 31, 2004 there was no resolution.
WARRANTS
As required by Statement of Financial Position No. 123, ("SFAS No. 123") the
Company accounts for warrants issued to non-employees not issued in conjunction
with debt by amortizing the fair value of such warrants over the vesting period.
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130"), establishes standards for recording and displaying
comprehensive income and its components. SFAS No. 130 requires certain
components of equity to be recorded as other comprehensive income. The Company
has no items requiring comprehensive income disclosure during the three months
ended December 31, 2003, 2002, and 2001.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the quarter ended December 31, 2003, there have been no material changes
in the information about our market risk as set forth in item 7A of the
Company's Form 10-K for the six months ending June 30, 2003. As of December 31,
2003, we had no short or long-term investments.
ITEM 4: CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company carried out an
evaluation of the effectiveness of the design and operation of its disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. This evaluation
was done under the supervision and with the participation of the Company's
Principal Executive Officer and Principal Financial Officer. Based upon that
evaluation, they concluded that the Company's disclosure controls and procedures
are effective in gathering, analyzing and disclosing information needed to
satisfy the Company's disclosure obligations under the Exchange Act.
11
CHANGES IN INTERNAL CONTROLS
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect those controls since the most recent
evaluation of such controls.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
During October 2003, the Company entered into a three year business consulting
agreement with Jack Smith, under which Mr. Smith shall act as a business
consultant for the Company and provide advice on licensing, retail, marketing
and general business issues. The Company issued options to purchase 371,000
shares of common stock exercisable at $.18 per share (approximately 113% of the
closing price of the Company's common stock on October 27, 2003) to Jack Smith,
as an inducement for Mr. Smith to enter into a consulting agreement with the
Company.
12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On November 21, 2003, the AMEX suspended trading of the Company common stock due
to failure to file its 10K transition report and the quarterly report on Form
10-Q for September 30. 2003 on a timely basis. AMEX will recommence trading of
our common stock upon the filing of and review of such reports by the staff of
AMEX. On December 26, 2003 the Company filed its 10-K transition report for the
six months ending June 30, 2003 and the quarterly report on Form 10-Q for
December 31, 2003 and AMEX allowed the Company's stock to resume trading on
December 31, 2003.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index to Exhibits.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
31.1 Certification by Chief Executive Officer pursuant to Section
302.
31.2 Certification by Interim Chief Financial Officer pursuant to
Section 302.
32.1 Section 906 Certification by Chief Executive Officer
32.2 Section 906 Certification by Interim Chief Financial Officer
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this Form 10-Q is
filed.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized officer.
NIMBUS GROUP, INC.
By: /s/ Lucien Lallouz
-------------------
Lucien Lallouz
Chief Executive Officer
By: /s/ Michael Wellikoff
----------------------
Michael Wellikoff
Interim Chief Financial Officer
Date: February 10, 2004
13
CERTIFICATIONS
EXHIBIT 31.1
I, LUCIEN LALLOUZ, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Nimbus Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the liability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditor and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: February 10, 2004
/s/ Lucien Lallouz
- ------------------
Lucien Lallouz
Chief Executive Officer
EXHIBIT 31.2
I, MICHAEL WELLIKOFF, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Nimbus Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the liability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditor and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: February 10, 2004
/s/ Michael Wellikoff
- ---------------------
Michael Wellikoff
Interim Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO\
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Nimbus Group, Inc. (the
"Company") on Form 10-Q for the period ended December 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Lucien
Lallouz, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: February 10, 2004
/s/ Lucien Lallouz
- ------------------
Lucien Lallouz
Chief Executive Officer
EXHIBIT 32.2
CERTIFICATION PURSUANT TO\
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Nimbus Group, Inc. (the
"Company") on Form 10-Q for the period ended December 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Michael
Wellikoff, Principal Financial Officer of the Company, certify, pursuant to 18
U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: February 10, 2004
/s/ Michael Wellikoff
- ---------------------
Michael Wellikoff
Interim Chief Financial Officer