File No. 333-37198
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As filed with the Securities & Exchange Commission on May 17, 2000
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST EFFECTIVE AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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UNITED MANAGEMENT, INC.
(Name of small business issuer in its charter)
Nevada 6770 98-0204736
(State or jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Identification No.) Classification Code No.)
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Suite 104, 1456 St. Paul St., Kelowna,
British Columbia, Canada V1Y 2E6
(Address of principal place of business or intended principal place of business
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Christine M. Cerisse
United Management, Inc.
Suite 104, 1456 St. Paul St., Kelowna
British Columbia, Canada V1Y 2E6
(250) 868-8177 tel.
(Name, address and telephone number of agent for service)
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Copies to
Antoine M. Devine, Esq.
Foley & Lardner
One Maritime Plaza, 6th Floor
San Francisco, CA 94111
(415) 438-6456
Approximate date of proposed sale to the public: As soon as practicable after
this Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
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Title of each Amount Proposed maximum Proposed maximum Amount of
class of securities to be offering price aggregate registration
to be registered registered per unit (1) offering price fee
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Common Stock,
par value 288,420 $.40 $115,368 $53.00
$0.0001
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(1) Estimated solely for the purpose of calculating the registration fee and
pursuant to Rule 457.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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RECONFIRMATION OFFERING
PROSPECTUS
UNITED MANAGEMENT, INC.
288,420 SHARES OF COMMON STOCK
$.40 PER SHARE
This Prospectus relates to the reconfirmation offering required
pursuant to Rule 419 of Regulation C under the Securities Act of 1933 concerning
288,420 shares of common stock, $.0001 par value of United Management, Inc. The
shares were initially sold in connection with an initial public offering of
288,420 shares of common stock, which was completed in December 2000. In
December 2000, we executed an agreement with RRUN Ventures, Inc., a Nevada
corporation, and its shareholders to acquire all of the issued and outstanding
shares of capital stock of RRUN in exchange for 305,439 shares of our common
stock. This Prospectus is being furnished to investors in the offering for such
investors to consider reconfirming their investment as a result of the proposed
acquisition.
Prior to the offering and this reconfirmation offering, there has been
no market for common stock and we cannot assure you that a market will exist
after the proposed acquisition is completed.
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The offering and the reconfirmation offering are being conducted in
accordance with Rule 419 of Regulation C under the Act.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The offering and the confirmation offering involve a speculative
investment, a high degree of risk, and suitable only for persons who can afford
the loss of their entire investment.
We are subject to the information requirements of the Securities
Exchange Act of 1934 and in accordance therewith, we file reports and other
information with the Securities and Exchange Commission. The Company intends to
furnish to its shareholders, after the close of each fiscal year, an annual
report that will contain audited financial statements certified by its
independent certified public accountants. In addition, we may furnish to our
shareholders quarterly reports containing unaudited financial information.
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Offering Information
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Number of shares
sold in initial Price Gross proceeds to Offering Net
public offering per share United Management expenses proceeds
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288,420 $.40 $115,368 $10,000 $105,368
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The date of this Prospectus is December 18, 2000
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TABLE OF CONTENTS
Page
OFFERING INFORMATION..........................................................1
PROSPECTUS SUMMARY............................................................3
RISK FACTORS..................................................................7
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419 DEPOSIT OF
OFFERING PROCEEDS AND SECURITIES.............................................14
MERGER.......................................................................16
DILUTION.....................................................................18
USE OF PROCEEDS..............................................................18
CAPITALIZATION...............................................................19
PLAN OF OPERATION............................................................20
DESCRIPTION OF BUSINESS......................................................22
PRINCIPAL SHAREHOLDERS.......................................................32
MANAGEMENT...................................................................34
EXECUTIVE COMPENSATION.......................................................35
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................36
LEGAL PROCEEDINGS............................................................36
MARKET FOR OUR COMMON STOCK..................................................36
DESCRIPTION OF SECURITIES....................................................38
SHARES ELIGIBLE FOR FUTURE RESALE............................................38
WHERE CAN YOU FIND MORE INFORMATION?.........................................39
REPORTS TO STOCKHOLDERS......................................................39
LEGAL MATTERS................................................................40
EXPERTS......................................................................40
INDEMNIFICATION OF OFFICERS AND DIRECTORS....................................40
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.....................................................40
FINANCIAL STATEMENTS.........................................................F-1
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. Because this is a summary, it may not contain all of the information
that you should consider before receiving a distribution of our common stock.
You should read this entire prospectus carefully.
United Management, Inc.
We were organized as a Nevada corporation on January 29, 1997 for the
purpose of creating a corporate vehicle to seek, investigate and, if such
investigation warrants, acquire an interest in business opportunities presented
to us by persons or firms who or which desire to employ our funding in their
business or to seek the perceived advantages of a publicly-held corporation. In
December 2000, we completed an initial public offering of 288,420 shares of our
common stock at a price of $.40 per share pursuant to a Registration Statement
that became effective with the Securities and Exchange Commission on November
28, 2000. In December 2000, the Company executed an agreement with RRUN
Ventures, Inc., a Nevada corporation, and its shareholders to acquire all of the
issued and outstanding shares of capital stock of RRUN Ventures, Inc. in
exchange for 305,439 shares of our common stock. RRUN's core business venture is
RAHX, a platform that uses Peer to Peer (P2P) technologies to enable and enhance
the distribution of digital media files over the Internet.
Negotiations between us and RRUN
In December 2000, we commenced negotiations to acquire RRUN. The
President of RRUN is Ray Hawkins, who also serves as CEO. RRUN indicated that it
was interested in seeking the perceived advantages of a publicly-held
corporation and requested information from us. In turn, we requested and
received background information on RRUN including certain financial information.
Once such information was exchanged, the parties began to negotiate the
structure of the transaction. The Company indicated that it was interested in
acquiring all of the outstanding capital stock of RRUN so that RRUN would be a
wholly-owned subsidiary. RRUN indicated that such structure would be acceptable
provided that the current shareholders of RRUN received such number of shares of
common stock which would in the aggregate represent at least 51% of our
outstanding shares of common stock. An agreement was thereupon drafted and in
December 2000, we executed the agreement with RRUN and its shareholders to
acquire 100% of the stock of RRUN in exchange for 305,439 shares of our common
stock.
The Offering and Reconfirmation Offering
288,420 shares of common stock were offered at a purchase price of $.40
per share on a "best efforts, all or none" basis. The offering was conducted
directly by the Company without the use of a professional underwriter and was
completed in December 2000. This Prospectus is being furnished to investors in
the offering for such investors to consider reconfirming their investment as a
result of our proposed Acquisition.
Securities Outstanding
There are presently 500,000 shares of common stock outstanding of an
authorized issuance of 100,000,000 shares of common stock. If the Acquisition is
completed, 593,859 shares of common stock will be outstanding.
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Expiration Date
This offering will expire on November 28, 2001. There is no minimum
number of securities that must be sold in the offering.
Escrow
We deposited the proceeds of this offering into an escrow account with
City National Bank, N.A., Los Angeles, California ("escrow agent"). A
certificate bearing the investor's name was issued and delivered to the escrow
agent for safekeeping.
After this post-effective amendment is declared effective, we will
commence the reconfirmation offering. Upon reconfirmation, we will notify the
escrow agent to release the proceeds and the securities to us. We will
distribute the certificates to the shareholders. Investors will receive a
supplement to the prospectus indicating the amount of proceeds and securities
released and the date of release.
Reconfirmation Offering Conducted in Compliance with Rule 419
We are a blank check company and, consequently, this reconfirmation
offering is being conducted in compliance with Rule 419. The investors have
certain rights and will receive the substantive protection provided by the rule.
To that end, the securities purchased by investors and the funds received in our
initial public offering are deposited and held in an escrow account established
pursuant to Rule 419, and shall remain in the escrow account until an
acquisition meeting specific criteria is completed. Before the acquisition can
be completed and before the deposited funds and deposited securities can be
released to us and the investors, respectively, we are required to update the
registration statement with a post-effective amendment, and within five business
days after the effective date thereof, we are required to furnish the investors
with the prospectus produced thereby containing the terms of a reconfirmation
offer and information regarding the proposed acquisition candidate and its
business, including audited financial statements. According to Rule 419,
investors must have no fewer than 20 and no more than 45 business days from the
effective date of the post-effective amendment to decide to reconfirm their
investment and remain an investor or, alternately, require the return of their
investment. Each investor shall have 20 business days from the date of this
prospectus to reconfirm his/her investment. Any investor not making any decision
within the 20 business day period will automatically have his/her investment
returned.
The rule further provides that if we do not complete an acquisition
meeting the specified criteria within 18 months of the effective date of its
initial public offering, all of the deposited funds in the escrow account must
be returned to investors.
Reconfirmation Offer
This prospectus relates to a reconfirmation by our shareholders of
their investment. Pursuant to Rule 419, the proceeds of our initial public
offering and the securities purchased pursuant thereto, both of which are
currently held in the escrow account, will not be released from the escrow
account until (1) we execute an agreement for an acquisition or merger meeting
certain criteria; (2) a post-effective amendment which includes the terms of the
reconfirmation offer, as well as information about the merger agreement and
audited financial statements is filed; and (3) we conduct a reconfirmation offer
pursuant to which shareholders representing 80% of the initial public offering
proceeds elect to reconfirm their investments. This 80% shall be computed 20
business days after the effective date of this post-effective amendment. Once an
investor has sent his/her letter of reconfirmation, such letter of
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reconfirmation may not be revoked. In the event the investors do not vote to
reconfirm the offering, the deposited funds shall be returned to investors on a
pro rata basis. Such funds will be returned within 5 business days of failure to
approve the merger.
Terms of the Reorganization Agreement
The terms of the merger are set forth in the Reorganization Agreement
dated December 18, 2000 and consummation of the merger is conditioned upon,
among other things, the acceptance of the reconfirmation offer by holders of at
least 80% of the shares owned by the investors. As a result of the consummation
of the merger, RRUN will be merged into United Management, with United
Management as the surviving entity. Upon consummation of the merger, (i) each
shareholder who holds shares of our common stock registered pursuant to a
registration statement declared effective by the SEC on November 28, 2000 prior
to the merger and who accepts the reconfirmation offer shall continue to hold
his or her share certificate(s) representing our registered common stock; and
(ii) each stockholder of registered common stock who rejects the reconfirmation
offer will be paid his or her pro rata share of the amount in the escrow account
of $.40 per share. At the effective date of the merger, 100% of the issued and
outstanding shares of RRUN shall be canceled. We shall issue 305,439 shares of
our common stock to RRUN shareholders after the effective date, and our current
shareholders shall own 288,420 shares, representing 48.6% of the surviving
entity.
Recent Developments
Our board of directors believes that the merger represents a good
investment opportunity for our shareholders and recommends that the investors
elect to accept the reconfirmation offering. The merger agreement was approved
by the directors and shareholders of RRUN by written consent dated December 18,
2000. The merger agreement was confirmed by the unanimous consent of the
directors on December 18, 2000.
Accounting Treatment
Although we are the legal surviving corporation, for accounting
purposes, the merger is treated as a purchase business acquisition of United
Management by RRUN in a reverse acquisition, and a recapitalization of RRUN.
RRUN is the acquirer for accounting purposes because the former RRUN
stockholders received the larger portion of the common stockholder interests and
voting rights retained by the our former stockholders. Because RRUN is the
acquirer for accounting purposes under APB Opinion No. 16, the surviving entity
shall adopt RRUN's fiscal year end, December 31.
High Risk
Investment in our securities is highly speculative, involves a high
degree of risk, and only persons who can afford the loss of their entire
investment should vote to reconfirm their investment.
Use of Proceeds
In our initial public offering, we generated $115,368 in proceeds. No
portion of the deposited funds has been or will be expended to merge RRUN into
us. The deposited funds will be transferred to us pursuant to the merger
agreement if and when a business combination is effected.
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Certain Income Tax Consequences
In management's opinion, the merger is intended to qualify as a
"tax-free reorganization" for purposes of the United States federal income tax
so that stockholders of United Management and RRUN subject to United States tax
will not recognize gain or loss from the transaction. In addition, the
transaction is not intended to result in the recognition of gain or loss to
either RRUN or us in the respective jurisdictions where each of them is subject
to taxation. NO OPINION OF COUNSEL NOR A RULING FROM THE INTERNAL REVENUE
SERVICE HAS BEEN OBTAINED IN REFERENCE TO THE FOREGOING. THE FOREGOING IS FOR
GENERAL INFORMATION ONLY AND OUR STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TRANSACTION TO THEM.
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RISK FACTORS
RRUN Has a Limited Operating History. RRUN's operations are subject to
the many risks inherent in a development stage business enterprise operating in
a market dependent upon new technology. The likelihood of the success of RRUN
must be considered in light of the problems, expenses, difficulties,
complications, and delays frequently encountered in connection with a new
business and the competitive environment in which it operates. Since inception,
RRUN's efforts have been limited primarily to organizational activities and it
has generated no revenues to date. It's operating history is insufficient for an
investor to rely on such history in making a judgment as to RRUN's future
performance. RRUN cannot be certain that its business strategy will be
successful or that it will successfully address the risks and uncertainties
related to RRUN's limited operating history.
We Cannot Assure You That RRUN's Operating Results Will Be Profitable.
RRUN's lack of operating history and unproven business model make it difficult
to accurately forecast RRUN's future revenues or results of operations. RRUN has
no meaningful historical financial data upon which to base planned operating
expenses, and its sales and operating results are difficult to forecast. A
variety of factors may cause RRUN's annual and quarterly operating results to
fluctuate significantly. Many of these factors are outside of RRUN's control and
include:
o the effectiveness of its sales and marketing campaign;
o market acceptance of RRUN's products;
o the amount and timing of its operating costs and capital
expenditures;
o introductions by its competitors of new or enhanced services
or products; o price competition and fluctuations in the
prices of the products that RRUN sells; o changes in its
management team and key personnel; and o fluctuations in
general economic conditions and economic conditions specific
to RRUN's industry.
One or more of these factors could materially and adversely affect
gross margins and operating results in future periods. Given RRUN's stage of
development and level of revenues, there can be no assurance as to the
attainability of the estimates, the reliability of the assumptions on which they
are based, or that RRUN will, at any point, attain profitability.
We Cannot Assure You That RRUN's Products Will Attain Market
Acceptance. There is no assurance that RRUN's products will attain market
acceptance or that they will achieve projected margins. In order to market its
products profitably, RRUN needs to successfully complete evaluation periods with
the end-users of the products. Accordingly, the failure of RRUN to establish and
maintain relationships with these parties could adversely effect RRUN's
business, financial condition, and results of operations. There is no guarantee
that potential customers who currently use a competitor's products will be
willing to shift to RRUN's products.
RRUN May Not Receive Adequate Cooperation From the Major Record Labels.
Even though RAHX is a viable solution to the digital music dilemma, there is no
assurance that the major records labels will cooperate with RRUN. If the major
record labels do not cooperate in providing content, then RRUN will move towards
securing relationships with independent record labels. The Internet has become a
valuable tool for independents, as they can forgo many of the middlemen in music
distribution and place their materials directly in the hands of consumers.
However, dependence on independent labels may adversely effect RRUN's ability to
become profitable and to sustain profitability.
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We May Not Acquire Enough Content to Achieve Profitability. RRUN's
success depends on its ability to obtain a sufficient amount and variety of
digital recorded music for distribution. Until a significant number of artists
and their record labels adopt a strategy of digitally delivering music over the
Internet, the growth of its business might be limited. RRUN relies on record
companies and artists for digital recorded music to be distributed using its
format. RRUN believes record companies will remain reluctant to distribute their
recorded music digitally unless they are satisfied that the digital delivery of
their music over the Internet will not result in the unauthorized copying and
distribution of that music. If record companies do not believe that recorded
music can be securely delivered over the Internet, they will not allow the
digital distribution of their recorded music and RRUN might not have sufficient
content to attract consumers. If RRUN cannot offer a sufficient amount and
variety of digital recorded music for syndication, its business might be harmed.
Customers Might Not Accept RRUN's Platform. RRUN's success will depend
on acceptance of its platform as a method for digital delivery of recorded music
over the Internet. Factors that might influence market acceptance of its
platform include the following:
o the availability of sufficient bandwidth on the Internet to
enable consumers to download digital recorded music rapidly
and easily;
o the willingness of consumers to invest in computer technology
for downloading digital music;
o the cost of time-based Internet access;
o the amount and variety of digital recordings available for
purchase through its technology relative to those available
through other online digital delivery companies, digital music
websites or through traditional physical delivery of
recordings;
o the availability of portable devices to listen to digitally
recorded music;
o the fidelity and quality of the sound of the digital recorded
music; and
o the level of consumer comfort with the process of downloading
and paying for digital music over the Internet, including ease
of use and lack of concern about transaction security.
RRUN is Dependent on the Continued Viability of the Infrastructure of
the Internet and Other Commercial Online Services. To the extent that the
Internet and other online services continue to experience growth in the number
of users and frequency of use by consumers resulting in increased bandwidth
demands, RRUN cannot assure you that the infrastructure for the Internet and
other online services will be able to support the demands placed upon them. The
Internet and other online services have experienced outages and delays as a
result of damage to portions of their infrastructure. Outages or delays could
adversely affect online sites, e-mail, and the level of traffic on all sites.
Since RRUN intends to distribute its products through the Internet, its business
would suffer if the viability of the infrastructure of the Internet were to
decline. In addition, the Internet or other online services could lose their
viability due to delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet or other online
service activity or due to increased governmental regulation. Insufficient
availability of telecommunications services to support the Internet or other
online services could also result in slower response times and negatively impact
use of the Internet and other online services generally, and RRUN's sites in
particular. If the infrastructure of the Internet and other online services do
not effectively support growth that may occur, RRUN may not achieve or sustain
profitability, and its business, results of operations and financial condition
will consequently suffer.
RRUN is Dependent on Key Personnel. The success of RRUN is highly
dependent upon certain key management and technical personnel. Ray Hawkins and
Pavel Bains have played important
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roles in RRUN's founding, development and promotion. Although the Company
intends to enter into employment agreements with both Mr. Hawkins and Mr. Bains,
the loss of the services of either of them could adversely effect RRUN's
business, financial condition, and results of operations. RRUN intends to apply
for and obtain "key man" life insurance on the life of Mr. Hawkins and Mr.
Bains. There can be no assurance that either of these persons will remain with
RRUN in the future due to circumstances either within or outside of their
control. In addition, competition for qualified personnel is intense, and there
can be no assurance that RRUN will be able to hire or retain additional
qualified personnel. Any inability to attract and retain qualified personnel
would adversely effect RRUN's business.
The Market for Digital Delivery of Music Over the Internet is Highly
Competitive, and if RRUN Cannot Compete Effectively, It May Not Achieve
Profitability. Competition in the business of digital delivery of music over the
Internet is increasing. If RRUN does not compete effectively or if it
experiences pricing pressures, reduced margins or loss of market share resulting
from increased competition, its business might be harmed. New companies continue
to enter the market and current competitors are expanding their products and
services. Many of these potential competitors are likely to enjoy substantial
competitive advantages, including the following:
o larger audiences;
o larger technical, production and editorial staffs;
o greater brand recognition;
o access to more recorded music content;
o a more established Internet presence;
o a larger advertiser base; and
o substantially greater financial, marketing, technical and
other resources.
If Standards for the Secure, Digital Delivery of Recorded Music Are Not
Adopted, the Piracy Concerns of Record Companies and Artists Might Not Be
Satisfied, and They Might Not Use RRUN's Platform for Digital Delivery of Their
Music. Because other digital recorded music formats do not contain mechanisms
for tracking the source or ownership of digital recordings, users are able to
download and distribute unauthorized or "pirated" copies of copyrighted recorded
music over the Internet. This piracy is a significant concern to record
companies and artists, and is the reason many record companies and artists are
reluctant to digitally deliver their recorded music over the Internet. The
Secure Digital Music Initiative (SDMI) is a committee formed by the Recording
Industry Association of America (RIAA) to propose a standard format for the
secure digital delivery and use of recorded music. If a standard format is not
adopted, however, unsecure copies of recorded music may continue to be available
on the Internet, and record companies and artists might not permit the digital
delivery of their music. Additionally, as long as pirated recordings are
available, many consumers will choose free pirated recordings rather than paying
for legitimate recordings. Accordingly, if a standard format for the secure
digital delivery of music is not adopted, RRUN's business might be harmed. It
has designed its current products to be adaptable to different music industry
and technology standards. Numerous standards in the marketplace, however, could
cause confusion as to whether its products and services are compatible. If a
competitor were to establish the dominant industry standard, its business could
be harmed.
If RRUN's Platform Does Not Provide Sufficient Rights Reporting
Information, Record Companies and Artists Are Unlikely to Digitally Deliver
Their Recorded Music Using Its Platform. Record companies and artists must be
able to track the number of times their recorded music is downloaded so that
they can make appropriate payments to music rights organizations, such as the
American Society of Composers, Authors and Publishers, Broadcast Music
Incorporated and
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SESAC, Inc. If RRUN's products and services do not accurately or completely
provide this rights reporting information, record companies and artists might
not use its platform to digitally deliver their recorded music, and its business
might be harmed.
RRUN's Business Might Be Harmed if It Fails to Price Its Products and
Services Appropriately. The price of Internet products and services is subject
to rapid and frequent change. RRUN may be forced for competitive or technical
reasons to reduce or eliminate prices for certain of its products or services.
If this happens, its revenues will decline, and its business might be harmed.
RRUN Might Not Be Able to Scale Its Technology Infrastructure to Meet
Demand for Its Products and Services. RRUN's success will depend on its ability
to scale its technology infrastructure to meet the demand for its products and
services. Adding new capacity will be expensive, and RRUN might not be able to
do so successfully. In addition, it might not be able to protect its new or
existing data centers from unexpected events as it scales its systems. To the
extent that it does not address any capacity constraints effectively, its
business would be harmed.
RRUN Might Not Be Successful in Its Attempts to Keep Up With Rapid
Technological Change and Evolving Industry Standards. The markets for RRUN's
products and services are characterized by rapidly changing technology, evolving
industry standards, changes in customer needs, emerging competition, and
frequent new product and service introductions. Its future success will depend,
in part, on its ability to:
o use leading technologies effectively;
o continue to develop its strategic and technical expertise;
o enhance its current products and services;
o develop new products and services that meet changing customer
needs;
o advertise and market its products and services; and
o influence and respond to emerging industry standards and other
technological changes.
This must be accomplished in a timely and cost-effective manner. RRUN
may not be successful in effectively using new technologies, developing new
products or services or enhancing its existing products or services on a timely
basis. These new technologies or enhancements may not achieve market acceptance.
RRUN's pursuit of necessary technological advances may require substantial time
and expense. Finally, RRUN may not succeed in adapting its services to new
technologies as they emerge.
Consumers Might Not Readily Accept Devices That Will Play Digitally
Downloaded Music. RRUN believes that the market for digitally recorded music
delivered over the Internet will not develop significantly until consumers are
able to enjoy this music on more convenient mediums than a personal computer.
Several consumer electronics companies have introduced or announced plans to
introduce devices that will allow digital music delivered over the Internet to
be played away from the personal computer. If companies fail to introduce easily
usable devices, consumers do not accept these devices or its products and
services are incompatible with these devices, its business would be harmed. In
addition, digital music can be transferred to a compact disc, but that transfer
requires a compact disc recorder (CD-R). Many desktop computer manufacturers
offer CD-Rs in their computers. If companies do not continue to offer CD-Rs in
their computers, consumers do not accept CD-Rs or its products and services are
incompatible with CD-Rs, its business might be harmed.
RRUN Might Incur Liability for the Content of the Recorded Music That
It Digitally Delivers. Because RRUN digitally delivers recorded music to third
parties, it might be sued for negligence, copyright or trademark infringement or
other reasons. These types of claims have been
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brought, sometimes successfully, against providers of online products and
services in the past. Others could also sue it for the content that is
accessible from its website through links to other websites. These claims might
include, among others, claims that by hosting, directly or indirectly, the
websites of third parties, it is liable for copyright or trademark infringement
or other wrongful actions by these third parties through these websites. Even if
these claims do not result in liability, RRUN could incur significant costs in
investigating and defending against these claims. RRUN has taken steps to
prevent these claims.
Under the Digital Millennium Copyright Act of 1999, Internet service
providers are insulated from several types of these claims, upon compliance with
the requirement that they appoint an agent to receive claims relating to their
service, and RRUN intends to appoint an agent. In 1998, Congress passed the
Internet Freedom Act, which imposes a three-year moratorium on state and local
taxes on Internet-based transactions. RRUN cannot assure you that this
moratorium will be extended. Failure to renew this moratorium would allow
various states to impose taxes on e-commerce, which might harm its business.
RRUN May Encounter System Failures or Delays That Might Harm Its
Business. RRUN's operations depend on its ability to protect its computer
systems against damage from fire, water, power loss, telecommunications
failures, computer viruses, vandalism and other malicious acts, and similar
unexpected adverse events. Interruptions or slowdowns in its services could
result from the failure of its telecommunications providers to supply the
necessary data communications capacity in the time frame it requires, as well as
from deliberate acts. Despite precautions it has taken, unanticipated problems
affecting its systems could in the future cause temporary interruptions or
delays in the services it provides. Customers might become dissatisfied by any
system failure or delay that interrupts its ability to provide service to them
or slows its response time. Sustained or repeated system failures or delays
would affect its reputation, which would harm its business. Slow response time
or system failures could also result from straining the capacity of its software
or hardware due to an increase in the volume of products and services delivered
through its servers.
RRUN Depends on Proprietary Rights to Develop and Protect Its
Technology. RRUN's success and ability to compete substantially depends on its
internally developed technologies and trademarks, which it protects through a
combination of patent, copyright, trade secret and trademark laws. Patent
applications or trademark registrations may not be approved. Even if they are
approved, its patents or trademarks may be successfully challenged by others or
invalidated. If its trademark registrations are not approved because third
parties own these trademarks, its use of these trademarks would be restricted
unless it enters into arrangements with the third-party owners, which might not
be possible on commercially reasonable terms or at all. The primary forms of
intellectual property protection for its products and services internationally
are patents and copyrights. Patent protection throughout the world is generally
established on a country-by-country basis. To date, RRUN has not applied for any
patents outside the United States. It may do so in the future. Copyrights
throughout the world are protected by several international treaties, including
the Berne Convention for the Protection of Literary and Artistic Works. Despite
these international laws, the level of practical protection for intellectual
property varies among countries. In particular, United States government
officials have criticized countries such as China and Brazil for inadequate
intellectual property protection. If its intellectual property is infringed in
any country without a high level of intellectual property protection, its
business could be harmed. RRUN generally enters into confidentiality or license
agreements with its employees, consultants and corporate partners, and generally
controls access to and distribution of its technologies, documentation and other
proprietary information. Despite its efforts to protect its proprietary rights
from unauthorized use or disclosure, parties may attempt to disclose, obtain or
use its solutions or technologies. The steps RRUN has taken may not prevent
misappropriation of its solutions or technologies, particularly in foreign
countries where laws
-11-
<PAGE>
or law enforcement practices may not protect its proprietary rights as fully as
in the United States. RRUN has licensed, and it may license in the future,
certain proprietary rights to third parties. While it attempts to ensure that
the quality of its brand is maintained by its business partners, they may take
actions that could impair the value of its proprietary rights or its reputation.
In addition, these business partners may not take the same steps RRUN has taken
to prevent misappropriation of its solutions or technologies.
Difficulties Presented by International Economic, Political, Legal,
Accounting and Business Factors Could Harm Its Business in International
Markets. A key component of RRUN's strategy is to expand into international
markets. The following risks are inherent in doing business on an international
level and RRUN has little or no control over them:
o unexpected changes in regulatory requirements;
o export restrictions;
o export controls relating to encryption technology;
o longer payment cycles;
o problems in collecting accounts receivable;
o political and economic instability; and
o potentially adverse tax consequences.
In addition, other factors that may also affect it and over which it
has some control include the following:
o difficulties in staffing and managing international
operations;
o differences in music rights reporting structures; and
o seasonal reductions in business activity.
One or more of the factors listed above may harm its present or future
international operations and, consequently, its business.
Government Regulation of the Internet Might Harm RRUN's Business. The
applicability to the Internet of existing laws governing issues such as property
ownership, libel and personal privacy is uncertain. In addition, governmental
authorities may seek to further regulate the Internet with respect to issues
such as user privacy, pornography, acceptable content, e-commerce, taxation, and
the pricing, characteristics and quality of products and services. Finally, the
global nature of the Internet could subject it to the laws of a foreign
jurisdiction in an unpredictable manner. Any new legislation regulating the
Internet could inhibit the growth of the Internet and decrease the acceptance of
the Internet as a communications and commercial medium, which might harm its
business. In addition, the growing use of the Internet has burdened the existing
telecommunications infrastructure and has caused interruptions in telephone
service. Telephone carriers have petitioned the government to regulate the
Internet and impose usage fees on Internet service providers. Any regulations of
this type could increase RRUN's costs of using the Internet and impede its
growth, which could in turn decrease the demand for its services or otherwise
harm its business.
We may fail to obtain a sufficient number of investors to reconfirm the
offering. A business combination with an acquisition candidate cannot be closed
unless, after the reconfirmation offering required by Rule 419, a sufficient
number of investors representing 80% of the maximum offering proceeds elect to
reconfirm their investment. If, after completion of the reconfirmation offering,
a sufficient number of investors do not reconfirm their investment, the business
combination
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<PAGE>
will not be closed. If so, none of the securities held in escrow will be issued
and the funds will be returned to you on a proportionate basis without interest.
Issuance of shares in acquisition. Our Certificate of Incorporation
authorizes the issuance of a maximum of 100,000,000 shares of common stock,
$.0001 par value. The proposed Acquisition, if completed, will result in the
issuance of an additional 305,439 shares of common stock and will result in
substantial dilution in the percentage of the common stock held by its present
shareholders. Moreover, the common stock to be issued in the Acquisition has
been valued on an arbitrary or non-arm's-length basis by management, resulting
in an additional reduction in the percentage of common stock held by our present
shareholders.
Lack of public market for securities. At the present time, there is no
public market for our securities. It is unlikely that a regular trading market
will develop at the conclusion of the reconfirmation offering, or if developed,
that such market will be sustained, or that the securities purchased by the
public in the offering may be resold at their original offering price or at any
other price. Any market for the securities that may develop will, in all
likelihood, be a limited one. While we intend to continue to timely file
periodic reports under the Securities Exchange Act of 1934 for so long as it may
be required to do so, no assurances are given that we will continue to file such
reports on a voluntary basis. In any event, due to the low price of the
securities, many brokerage firms may choose not to engage in market making
activities or effect transactions in such securities. Purchasers of the
securities may have difficulties in reselling such securities and many banks may
not grant loans utilizing such securities as collateral. Further, our securities
will not be eligible for listing on the Nasdaq Stock Market upon completion of
this reconfirmation offering.
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<PAGE>
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
DEPOSIT OF OFFERING PROCEEDS AND SECURITIES
Rule 419 requires that offering proceeds, after deduction for
underwriting commissions, underwriting expenses and dealer allowances, if any,
and the securities purchased by you and other investors in this offering, be
deposited into an escrow or trust account governed by an agreement that contains
certain terms and provisions specified by Rule 419. Under Rule 419, the funds
will be released to us and the securities will be released to you only after we
have met the following three basic conditions:
First, we must execute an agreement for an acquisition of a business or
asset that will constitute our business and for which the fair value of the
business or net assets to be acquired represents at least 80% of the maximum
offering proceeds, but excluding underwriting commissions, underwriting expenses
and dealer allowances, if any. We have entered into an agreement with RRUN.
Second, we must file a post-effective amendment to the registration
statement that includes the results of this offering including, but not limited
to, the gross offering proceeds raised to date, the amounts paid for
underwriting commissions, underwriting expenses and dealer allowances, if any,
amounts dispersed to us and amounts remaining in the escrow account. In
addition, we must disclose the specific amount, use and appropriation of funds
disbursed to us to date, including, payments to officers, directors, controlling
shareholders or affiliates, specifying the amounts and purposes of these
payments, and the terms of a reconfirmation offer that must contain conditions
prescribed by the rules. The post-effective amendment must also contain
information regarding the acquisition candidate and business, including audited
financial statements. This prospectus complies with this requirement.
Third, we will mail to each investor within five business days of the
effective date a post-effective amendment, a copy of the prospectus contained
therein. This prospectus is the reconfirmation prospectus. The reconfirmation
offering shall be made as described under "Prospectus Summary; Reconfirmation
Offering." After we submit a signed representation to the escrow agent that the
requirements of Rule 419 have been met and after the acquisition is closed, the
escrow agent can release the funds and securities.
Accordingly, we entered into an escrow agreement with City National
Bank, N.A., Los Angeles, California, which provides that:
The proceeds are to be deposited into the escrow account maintained by
the escrow agent promptly upon receipt. While Rule 419 permits 10% of
the funds to be released to us prior to the reconfirmation offering, we
do not intend to release these funds. The funds and any dividends or
interest thereon, if any, are to be held for the sole benefit of the
investor and can only be invested in bank deposit, in money market
mutual funds, federal government securities or securities for which the
principal or interest is guaranteed by the federal government.
All securities issued for the offering and any other securities issued,
including stock splits, stock dividends or similar rights are to be
deposited directly into the escrow account promptly upon issuance. Your
name must be included on the stock certificates or other documents
evidencing the securities. The securities held in the escrow account
are to remain as issued, and are to be held for your sole benefit. You
retain the voting rights, if any, to the securities held in your name.
The securities held in the escrow account may neither be transferred or
disposed of nor any interest created in them other than by will or the
laws of descent and distribution, or under a qualified domestic
relations order as defined by the Internal Revenue Code of 1986 or
Table 1 of the Employee Retirement Income Security Act.
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<PAGE>
Warrants, convertible securities or other derivative securities
relating to securities held in the escrow account may be exercised or
converted in accordance with their terms, provided that, however, the
securities received upon exercise or conversion, together with any cash
or other consideration paid for the exercise or conversion, are to be
promptly deposited into the escrow account.
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<PAGE>
MERGER
Background of the Merger Agreement
In November 2000 we commenced a "blank check" offering pursuant to Rule
419 promulgated under the Securities Act. The offering was successful in raising
$115,368 in gross proceeds from investors. Under Rule 419, $115,368 and 288,420
shares purchased by the investors were placed in escrow pending (i) distribution
of a reconfirmation prospectus to each of the investors describing the
acquisition of RRUN; and (ii) the subsequent reconfirmation by the holders of at
least 80% of the shares owned by the investors that they have elected to remain
investors.
In the event approval of the merger is not obtained from at least 80%
of the investors, then the shares deposited in the escrow account will not be
released to the investors. Instead, the $115,368 in offering proceeds in the
escrow account will be released to the investors in proportion to their
investment, at $.40 per share and the share certificates will be cancelled.
Under Rule 419, the value of RRUN must represent at least 80% of the maximum
offering proceeds, or $92,294. Based upon independent audited financial
statements, RRUN has a business value of not less than $92,294.
Terms and Conditions of Merger Agreement
STOCKHOLDERS WISHING TO OBTAIN A COPY OF THE MERGER AGREEMENT, WHICH IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE, MAY OBTAIN ONE WITHOUT CHARGE BY
WRITING TO United Management, Suite 104, 1456 St. Paul St., Kelowna, British
Columbia, Canada V1Y 2E6, ATTENTION: Christine Cerisse.
Pursuant to the merger agreement, RRUN will be merged into us.
Consummation of the transaction contemplated by the merger agreement is
conditioned upon, among other things, reconfirmation by holders of least 80% of
the shares owned by the investors. Upon consummation of the merger, (i) 305,439
shares of common stock shall be issued to former RRUN shareholders. Each
shareholder who holds shares of our common stock registered pursuant to a
registration statement declared effective by the SEC on November 28, 2000 prior
to the merger and who accepts the reconfirmation offer shall, after consummating
of the merger, hold the same number of shares held prior to the merger, but the
aggregate percentage interest in United Management will be increased to 48.6%.
RRUN will merge into United Management with United Management as the surviving
entity.
Our name will be changed to "RRUN Ventures, Inc." after the merger. The
merger is intended to be consummated in such a manner as to be tax-free to all
parties involved under Internal Revenue Code Section 368(a)(1)(A); (ii) each
investor who rejects the reconfirmation offer will be paid his or her pro rata
share of the amount in the escrow account of $.40 per share; (iii) holders of
our common stock, the resale of which is restricted under United States
Securities laws prior to the merger shall tender their shares to us for
cancellation. Consummation of the merger is not subject to any governmental
approvals.
The result of the merger, assuming that 80% of the investors reconfirm
their investment, is that former RRUN shareholders shall own 43% of the
surviving entity while our current shareholders shall own 57% of United
Management.
Investors deciding to accept the reconfirmation offer are directed to
sign a letter of reconfirmation and return it to United Management, Inc.,
Attention: Christine Cerisse, who will forward each letter of reconfirmation to
our escrow agent. Any investor who fails to return his or her
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form so that it is received by Ms. Christine Cerisse within 45 business days
from the date of their reconfirmation prospectus will be deemed to have rejected
the reconfirmation offer and will automatically be sent a check within five
business days representing his or her pro rata share of the funds in the escrow
account for the benefit of the investors.
Certain Income Tax Consequences
The merger is intended to qualify as a "tax-free reorganization" for
purposes of the federal income tax law so that stockholders of United Management
and RRUN will not recognize gain or loss from the transaction. In addition, the
transaction is not expected to result in the recognition of gain or loss to
either United Management or RRUN in the respective jurisdictions where each of
them is subject to taxation. NO OPINION OF COUNSEL NOR A RULING FROM THE
INTERNAL REVENUE SERVICE HAS BEEN OBTAINED IN REFERENCE TO THE FOREGOING. THE
FOREGOING IS FOR GENERAL INFORMATION ONLY AND OUR STOCKHOLDERS SHOULD CONSULT
THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO
THEM.
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<PAGE>
DILUTION
The difference between the initial public offering price per share of
common stock and the net tangible book value per share after this offering
constitutes the dilution to investors in this offering. Net tangible book value
per share of common stock is determined by dividing our net tangible book value
(total tangible assets less total liabilities) by the number of shares of common
stock outstanding.
As of November 15, 2000, our net tangible book value was -$12,489 or
-$.02 per share of common stock. Net tangible book value represents the amount
of our total assets, less any intangible assets and total liabilities. The net
tangible book value of the Company as of June 30, 2000 on an unaudited pro forma
combined basis taking into account the acquisition of RRUN and issuance of
305,439 shares of common stock to the present shareholders of RRUN was $267,283
or approximately $.45 per share (based on 593,859 outstanding shares of common
stock). The result will be an immediate dilution to present shareholders of the
Company, including a substantial dilution to the public investors. The following
table illustrates this dilution:
Public offering price per share $0.40
Net tangible book value per share before offering -0.02
Proforma net tangible book value per share .45
The table is based upon the potential acquisition of RRUN and the
possible issuance of 305,439 shares of common stock to present RRUN
shareholders.
USE OF PROCEEDS
The gross proceeds of this offering were $115,368. Rule 419 permits 10%
of the funds ($11,536) to be released from escrow to us prior to the
reconfirmation of the offering. However, we did not request release of these
funds. We will receive the gross proceeds in the event a business combination
with RRUN is closed in accordance with Rule 419.
We have not incurred and do not intend to incur in the future any debt
from anyone other than management for our organizational activities. Debt to
management will not be repaid. Management is not aware of any circumstances that
would change this policy. Accordingly, no portion of the proceeds are being used
to repay debt. It is anticipated that management will pay the expenses of the
offering.
Under Rule 419, after the reconfirmation offering and the closing of
the business combination, $115,368, plus any dividends received, but less any
amount returned to investors who did not reconfirm their investment under Rule
419, will be released to us, and utilized as follows:
Amount Percent
------ -------
Offering Expenses $10,000 8.7%
Working Capital $105,368 91.3%
Total $115,368 100.0%
=====
The proceeds received in this offering have been placed into the escrow
account pending closing of the pending business combination with RRUN. These
funds are in an insured financial institution in either a certificate of
deposit, interest bearing savings account or in short term federal government
securities as placed by City National Bank, N.A., Los Angeles, California.
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<PAGE>
CAPITALIZATION
Our capitalization as of the date of this Prospectus, and as adjusted
to give effect to the issuance of shares to the shareholders of RRUN upon
completion of the proposed acquisition, is as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
UNITED RRUN PRO
MANAGEMENT, VENTURES, FORMA
INC. INC. ADJUSTMENTS
---------------------------------------------------------------------------------------------------------------------
Loans payable $10,790 $26,572 - $37,362
---------------------------------------------------------------------------
$10,790 $29,572 - $37,362
=====================================================================================================================
SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Share Capital
$50 $6,109 (a) (50) $6,138
(b) 29
Additional Paid In Capital
15,670 175,847 (a) 50 291,186
(b) 115,339
(c) (15,720)
---------------------------------------------------------------------------
Deficit (28,209) (17,552) (c) 8,955 (30,041)
(c) (3,235)
---------------------------------------------------------------------------
$(12,489) $(164,404) $267,283
=====================================================================================================================
(a) Record the cancellation of 500,000 common shares of United Management Inc.
(b) Record the issue of 288,420 common shares of United Management Inc. for cash consideration of
$115,368
(c) Record the reverse take-over transaction
</TABLE>
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PLAN OF OPERATION
The following discussion should be read in conjunction with the
Financial Statements and Notes thereto and is qualified in its entirety by the
foregoing and by other more detailed financial information appearing elsewhere
in this Prospectus.
United Management, Inc.
The Company is in the development stage as of June 30, 2000 and
completed an initial public offering in December 2000 pursuant to a Registration
Statement that became effective with the Securities and Exchange Commission on
November 28, 2000 and sold 288,420 shares of its common stock, $.0001 par value,
at a price of $.40 per share. The offering was conducted directly by us without
the use of a professional underwriter. We are a "blank check" company subject to
Rule 419 of Regulation C which was organized to obtain funding from persons
purchasing in the offering in order to provide a vehicle to take advantage of
business opportunities which management believes arise from time to time.
The deposited funds and the securities to be issued to subscribers are
remaining in escrow and may not be released until an acquisition meeting certain
specified criteria has been made and a sufficient number of subscribers
reconfirm their investments in accordance with the procedure set forth in Rule
419.
We had no revenues for each of the years ended June 30, 2000 and June
30, 1999. We had a net loss of ($16,932) for the year ended June 30, 2000 as
compared to a net loss of ($1,973) for the year ended June 30, 1999. In
addition, at June 30, 2000, we had total assets of $0 and total liabilities of
$3,235.
In December 2000, we executed an agreement with RRUN Ventures, Inc., a
Nevada corporation, and its shareholders to acquire all of the issued and
outstanding shares of capital stock of RRUN in exchange for 305,439 shares of
our common stock. Assuming successful completion of this reconfirmation offering
and the Acquisition, the business of RRUN shall be our sole business.
RRUN Ventures Inc. Plan of Operation
Upon closing of the merger with United Management Inc., RRUN will
require additional funds to finance its operations. RRUN plans to seek financing
within six (6) months of the merger to capitalize its funding requirements. This
financing will satisfy its cash needs for the first twelve (12) to eighteen (18)
months of operations. To further fund RRUN's business efforts it plans to meet
the requirements to complete a listing on the NASDAQ Small Cap Market and
subsequently execute a secondary offering of its common stock. This proposed
listing on the NASDAQ Small Cap Market is planned for eighteen (18) to
twenty-four (24) months after the closing of the merger between RRUN and United
Management Inc.
To ensure the necessary funds will be raised for RRUN, it has begun to
develop a relationship with a leading international investment banking firm.
Over the first twelve (12) months of operations, RRUN will conduct
significant product research and development (R & D) for it's Peer to Peer (P2P)
product, RAHX. From system architecture design to working prototype and Alpha
and Beta releases RAHX will be developed within a accelerated product cycle of
six (6) to nine (9) months.
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The R & D executed by RRUN will include but will not be limited to:
o Development of the RAHX software and its software subset
components.
o Development of the RAHX back end platform system
o Development of various RAHX software licensee user tools
Within the first year of operation RRUN intends to invest significantly
in equipment to be used in developing products, the RAHX back end technology and
corporate file servers. The equipment invested in will include but not limited
to:
o Audio and Video Production Equipment (used for the development
of the Interactive front end websites)
o Web, File, DNS and Proxy Servers (These servers will handle
the products' capacity needs)
o Networking/Communication servers (These servers are used to
load balance the traffic coming through the RAHX websites)
RRUN will continue its main operations out of its Vancouver, BC
facility and intends to open business development offices in New York and Los
Angeles.
RRUN anticipates that its staffing levels of RRUN will increase
significantly to approximately 50 employees over the first year of operations to
properly execute its business plan and to support its aggressive growth
strategy.
In addition to increasing the number of employees, additional senior
management will be required to add experience to the present management team and
further RRUN's development. Over the first twelve (12) months, RRUN intends to
appoint additional members to the Board of Directors and form an advisory board
of industry professionals to guide, counsel and assist it through its business
strategy execution.
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<PAGE>
DESCRIPTION OF BUSINESS
Introduction
United Management, Inc. was incorporated on January 29, 1997 under the
laws of the State of Nevada to engage in any lawful corporate purpose. Other
than issuing shares to its shareholders, we never commenced any other
operational activities. We can be defined as a "blank check" company, whose sole
purpose at this time is to locate and consummate a merger or acquisition with a
private entity. The Board of Directors has elected to commence implementation of
our principal business purpose, described below.
In December 2000, we completed an initial public offering of 288,420
shares of our common stock at a price of $.40 per share pursuant to a
Registration Statement that became effective with the Securities and Exchange
Commission on November 28, 2000. In December 2000, we executed an agreement with
RRUN Ventures, Inc. and its shareholders to acquire all of the issued and
outstanding shares of capital stock of RRUN in exchange for 305,439 shares of
our common stock. RRUN was incorporated in Nevada in October 2000 and is a
multi-media venture development organization focused on content distribution
utilizing the Internet.
Assuming successful completion of the reconfirmation offering and the
Acquisition, the business of RRUN shall be our sole business.
Core Business Venture
RRUN's core business venture is RAHX, a software platform that uses
Peer to Peer (P2P) technologies to enable and enhance the distribution of
digital media files over the Internet. P2P technologies allow users to exchange
digital media files directly from their computers. RAHX focuses on providing
both owners and consumers of media-related content a suite of software products
that address their respective needs. RRUN expects to launch the RAHX venture
before the end of 2001, in order to take advantage of the sudden growth in the
file exchange industry.
RAHX is used in congruence with the product, RAHXWARE, the software
which users use to connect to RAHX.
Opportunities in the Digital Music Industry
There has been a recent media explosion around the controversial music
software company Napster. Napster has caused an uproar within the music
industry, as the company has led the way in pioneering a new process of
distributing music over the Internet. This process has been dubbed file exchange
or Peer-to Peer (P2P). Consumers can now access music files directly with
another consumer without going through a website or centralized server.
However, companies like Napster are currently subject to a number of
highly publicized lawsuits because, among other things, they promote the use of
a software that violates the rights of music copyright owners such as major
record labels Sony and Universal. An opportunity arises for a company to create
a feasible solution that not only generates revenue for the major record labels,
but also allows consumers to continue to download and exchange music easily for
a low cost.
RAHX Business Model
RRUN's core business venture is RAHX, a software platform that uses
Peer to Peer (P2P) technologies to enable and enhance the distribution of
digital media files over the Internet. RAHX
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provides media users and content owners with an end-to-end solution of
distributing music over the Internet by performing the following functions:
1. Facilitating the transfer and exchanging of digital media
files;
2. Managing the income flow from consumers to content owners;
3. Storing the income for the benefit of content owners;
4. Tracking the content use;
5. Distributing the income to content owners; and
6. Protecting the consumers with Internet security and content
owners with digital rights management.
RAHX earns income for RRUN through a two-pronged business model: Direct
to Consumer Model and Licensing Model. In the Direct to Consumer Model, RAHX
provides a file exchange service or P2P media service directly to consumers and
uses its file exchange software to generate transaction fees by acting as an
agent to facilitate transactions between consumers and content owners. In the
Licensing Model, RAHX licenses its software to other P2P media services that
desire a method to generate revenue. RAHX bills these file exchange services
software license fees and transaction facilitation fees. Under this model, RAHX
earns a smaller transaction fee rate than in the direct to consumer model.
The Management
RRUN is operated by a team of professionals from the music, marketing,
and technology sectors with core competencies in music industry
licensing, Gen X & Y marketing, results-oriented business management,
and systems integration software design and programming.
Company History
RRUN Ventures Inc. (RRUN) was founded in Vancouver, British Columbia in
June of 2000. RRUN was incorporated in October 2000 under the laws of Nevada.
RRUN's key venture RAHX, Inc., ("RAHX"), was initially developed by a
corporation controlled by the founders of RRUN. RAHX was conceptualized as a
software solution for the digital media file exchange industry. In November
2000, RRUN purchased the rights to RAHX by acquiring a controlling stake of
RAHX, Inc. The first two RAHX products to emerge are the file exchange software
solution RAHXWARE, and RAHX.net the promotional and support website for all RAHX
products.
Currently RRUN is in start-up phase with a staff of ten and operates in
Vancouver, British Columbia. To date RRUN has achieved the following:
o Identified and secured a start-up management team;
o Begun developing relationships with content owners;
o Begun developing a partnership with technology firm Kaph Data
Engineering;
o Begun sourcing financing and exploring options to initiate an
initial public offering;
o Created a RAHX demo, a RAHX introductory trailer, and a RRUN
website; and
o Developed a relationship with a technology/entertainment law
firm whose clients include: NARAS, AOL, Microsoft, Sony and
BMG.
RRUN's primary strength is its people. This group consists of
individuals who developed their skills in conjunction with the technological
changes in the new economy. This group brings experience
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<PAGE>
in marketing, financial software development, entertainment, technology, and
project management. As a start-up, RRUN is able to move quickly and adapt to a
dynamic environment. However, RRUN must also overcome the barriers that arise in
the start-up phase. These barriers include the lack of:
o Full financial capitalization to maximize operations; and
o Strategic alliances with the major record labels and
associations.
RRUN has already begun moving past these barriers through a number of
steps that will be instrumental for the success of RAHX. First, RRUN has used
its contact base to begin recruitment of experienced advisors and executive
management from the music and media industries. Second, RRUN plans to initiate
an initial public offering on one of the North American Stock Exchanges. Third,
RRUN is seeking to develop relationships with the major record companies in the
music industry.
Products
RAHXWARE
The RAHX platform is used in conjunction with the product RAHXWARE, the
downloadable client software which users use to connect to RAHX.
RAHX.COM and RAHX.net
RAHX.com and RAHX.net are complementary products to RAHX. These
websites are used to promote the RAHX product line and accumulate a user base
for RAHX. The RAHX.com website provides multi-media content to inform and
entertain users and the RAHX.net site provides customer support to RAHX
licensees.
Product Benefits
RRUN believes that RAHX offers the best file exchange solution for
consumer, music artists, and copyright owners.
First, RAHX is designed to accurately record, collect, and distribute
music royalties to their rightful owners. Since digital music emerged on the
Internet, record companies have been searching for a viable system that allows
them to use a financial system that will appeal to consumers. The RAHX Platform
allows for consumers to purchase music for a reasonable price, and in turn
deposit the money into the account of the copyright owner.
Second, if other P2P media services employ the RAHX financial
subsystem, RRUN expects that it will save record companies and copyright owners
the time and money lost in lawsuits.
Third, RRUN anticipates that through RAHX, artists and record labels
can generate revenue for no additional costs. For every dollar generated on a
sale of a CD, tape, or vinyl record, the artist and record label incurs costs
due to the manufacturing and marketing dollars spent on the physical recording.
With digital music, there is no additional manufacturing or marketing costs as
the music product of the artist and record label is only a digital file of a
sound recording.
Fourth, RRUN believes that RAHX will allow consumers to easily locate
outdated or hard-to-find songs; and can provide compensation to copyright owners
for these music recordings. Many times record companies stop distributing music
recordings because it may be too expensive to manufacture and inventory product
that is not in high demand. As a result, consumers are unable to find older
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music, and artists are not able earn revenue from these potential sales. RAHX
can provide a system that will benefit both consumers and artists.
Fifth, RRUN expects that RAHX will give independent artists an
opportunity to showcase their talent and generate revenue from the sales of
their music. Through RAHX, independent artists will have another medium that
directly distributes their music over the Internet. As a result, artists can
maximize their revenues and retain control of their music.
Technology
RAHX uses standard Internet and EDI protocols in combination with XML
programming and various other software tools.
RAHX consists of four subsystems:
o File Exchange System
o Content Management System
o Commercial Transaction System
o Digital Rights Management System
These four systems are integrated to function as one unified RAHX
system.
From System Architecture Design to Alpha and Beta releases and testing
to full release, RAHX will be developed at an accelerated cycle of six (6) to
nine (9) months. The development will require a staff of 25; consisting of
programmers/integrators, project managers, and a projected budget of $2 million.
The technology behind RAHX produces the following features and
capabilities:
o Royalty tracking - RAHX compiles accounting of all music
single downloads by detailing copyright owners and accurately
reporting music royalty remittance;
o Customer debit accounts - RAHX establishes debit accounts for
its customers to facilitate their purchases of downloaded
music;
o Transaction facilitation - RAHX uses a
transaction-facilitating engine that simultaneously debits the
account of a buyer and credits the accounts of the music
owners;
o Catalogue database - RAHX syncs with new and existing and new
music databases to accurately identify all music recordings
within the exchange network; and o Firewall protection - RAHX
provides a security firewall to protect end users.
RRUN intends to file for a patent on RAHX and all of its components
upon completion of its working prototype.
Although the technology used to create RAHX is proprietary, RRUN
expects that others will be able to substantially reproduce the patented results
within six months. To remain on the leading edge, RRUN expects that it must
devote a minimum of approximately 5% of revenues towards RAHX research and
development.
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<PAGE>
Intellectual Property
Patents
The RAHX platform is a proprietary property consisting of numerous
individual proprietary assets. RRUN has begun the preparation of the necessary
documents to achieve its' patents. Preparation of the system architecture
designs that will accompany the patent applications has begun.
In patenting RAHX and its' subsystems, RRUN will patent the base
concept, business model, and subsequently the data model architecture.
The patenting will include software/hardware components at a high
level. Individual software and/or hardware components built to work within the
initial framework of the RAHX platform will also undergo copyright, followed by
patenting.
It takes two to three years to complete a patent, so as the system
grows, it is initially copyrighted and a patent is filed upon integration with
the whole system. At the inception phase any component will be linked to a
manufacturing process that may be copyrighted for uniqueness, and included in
the design requirements for the patent.
Trademarks
RRUN has already begun the process of preparing the documents necessary
to obtain trademarks for the following:
o RRUN Ventures Inc.;
o RAHX, Inc.;
o RAHX.com;
o RAHX.net;
o RAHX; and
o RAHXWARE.
As more names are created for the RAHX and its subsystems, RRUN will
continue to obtain trademarks for their protection.
Market Research
P2P Industry
Peer-to-peer (P2P) computing facilitates direct person-to-person
communication, information, and file sharing from one PC to another. P2P
distributes processing power, file storage, and network traffic to the edges of
the net, thus allowing individual computer users to exchange video, music and
text files without the involvement of a centralized source or server.
P2P computing differs from the traditional server based system by:
o Enabling users to retain control and privacy over their
information compared with posting personal data to a central
server
o Eliminating multiple database support compared with a single
"hub" of information on your PC
o Enabling live file and information viewing compared with a
more static environment
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<PAGE>
o Reducing data transfer times and facilitating a richer, more
personal communications experience
Before P2P media services emerged, Internet users located music over
the web in two ways: (1) spending countless hours searching millions of websites
for specific music recordings, or (2) visit MP3 music sites like MP3.com and
Emusic.com where they were given access to a limited amount of music and were
required to pay for it. As a result, consumers were not able to find the
specific music they were searching for in a cost-effective manner. Napster was
the first P2P media service to enter the market and provide users with a
convenient method of locating music. Users were now able to type a music title
in a search field and any computer that contained the search item throughout the
network was displayed.
Most of the P2P media services have not generated any form of revenue.
The tendency of these companies is to release the software, build a user base
then hope to leverage that customer group to generate advertising revenue. Since
the inception of P2P technology, no universally accepted revenue model has
emerged from any of the current P2P media services such as Napster, Gnutella,
and iMesh.
Although there is no current research available regarding the potential
size of the P2P market, RRUN believes that a large market exists for its
product. Its expectations stem from the fact that music is only the first of
many digital file types that will be transferred between computers over the
Internet. For example, consumers are already able to trade movies in the
controversial Div-X format. Just like MP3s changed the music industry, Div-X is
doing the same for the movie industry. Div-X movies are DVD quality and can be
copied from a PC hard drive to a regular CD. The CD is then played in a standard
DVD player. Other digital files currently being exchanged over P2P media
services are e-books, text documents, photo images, and software programs. As a
result, RRUN believes that the consumer demand for these P2P media services can
only continue to expand, resulting in potentially greater revenue streams for
companies that possess a sustainable business model.
Recent News and Changes
Since RRUN's inception, several actions have taken place that can
effect how the industry and financial markets view RRUN and its RAHX project.
First, BMG and Napster have decided to form an alliance. This is significant in
that BMG is one of the major record labels that are suing Napster. BMG has shown
the entire media industry that P2P technologies are viable and potentially
lucrative innovations that must be embraced rather than halted. Furthermore,
this alliance has opened up new opportunities as other P2P media services will
attempt to form separate partnerships with each of the record labels.
Second, Scour Exchange, another P2P media service recently declared
bankruptcy. Scour was forced to do so because the financial community did not
view investing in a company without a revenue model as a wise choice. This
recent news gives further validity to RAHX as RRUN believes that it has
developed a feasible P2P model that can generate revenue.
Third, Intel has recently made a strategic business move to fund P2P
companies through their Intel Capital division. At the same time Intel has
created a P2P working group among 17 companies, including IBM and Hewlett
Packard. This move signifies the importance of P2P and media services like RAHX,
and how these systems have the potential to expand the scope of the Internet.
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<PAGE>
Competition
Competitors
Currently there are over 25 music P2P services on the Internet, and
seven have emerged as the major participants due to their claims of large
consumer user bases (Napster, Gnutella, Hotline, Cute MX, iMesh, AudioGalaxy,
and Spin Frenzy). Because these companies were the first group to offer P2P
media services, and because they charge no user fees, they claim they have been
able to quickly amass large user bases. Therefore these companies have gained an
initial head start over RAHX.
However, the recent bankruptcy filing by Scour and the alliance between
BMG and Napster prove that these companies cannot continue offering copyrighted
material for free. Napster has proposed implementing a subscription model; and
when such financial system is placed in the next six months, a percentage of
Napster's user base will look for an alternative to paying flat monthly fees.
RRUN believes that RAHX, which may charge for downloads but is designed to offer
superior quality and advanced features, will emerge as the best alternative.
Currently, all of the competitors to RAHX fail to offer security to
their users through the use of technology features like firewalls. In a P2P
network, where all users are directly connected to one another, security becomes
a major issue as the system allows hackers easy access into the computers of
users.
RRUN's Competitive Advantages
Through the RAHX technology, RRUN aims to differentiate itself from
competitors and penetrate the market quickly through a number of competitive
advantages it believes it possesses.
First, RAHX intends to implement a revenue stream that is expected to
satisfy the needs of all stakeholders, mainly music owners and consumers. As
stated, none of the RAHX competitors currently employ any revenue system. With a
viable revenue model, RAHX is designed to avoid infringing upon any copyright.
Second, RAHX is developed to give consumers added security through a
built-in firewall and virus scan component. As stated, no other competitor
offers any security device for their users. As competitors begin to implement
some type of revenue system over the next 12 months, users are expected to shy
away from paying for a system that does not protect their hard-drives.
Third, RRUN expects RAHX to maintain quality standards to ensure
consumers receive a level of quality assurance regarding the music recording(s)
they have purchased. On the current P2P media services, there are no quality
ratings to ensure users receive the correct music recording(s). Users take a
chance each time they download, and are often disappointed that by the end of
their download (which can take anywhere from thirty seconds to one hour) they
have received a song with very poor sound quality.
Fourth, RAHX is designed to account for every downloaded music
recording, ensuring the owners receive credit. Currently no other competitor can
properly track whom the music file belongs to through their P2P network.
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<PAGE>
Marketing Plan
Key Objectives
RRUN's marketing strategy will be a key factor in achieving success in
its overall strategic plan. Effective execution of the marketing strategy will
help it realize the following objectives:
1. Develop a RAHX.net brand awareness;
2. Build a strong RAHX customer base;
3. Develop RAHX awareness in the file exchange industry; and
4. Complete licensing agreements with P2P media services.
Distribution Strategy
The objectives of the distribution strategy are:
1) To most efficiently execute a rapid and widespread deployment of:
o The RAHX digital file exchange executable software
for consumers
o The RAHX platform for licensees
2) To produce and launch the RAHX.com and RAHX.net websites to serve as
the distribution location for the RAHXWARE software product
3) To achieve a significant distribution reach through RAHX licensee
customers that would integrate the RAHX plug-in with their browser, and
distribute RAHX to their users through system wide dynamic upgrades
Promotion Strategy
The objective of the promotion strategy is to effectively invest
promotion and advertising dollars in order to attain a critical mass of RAHX
users and RAHX enabled licensees. Within the first year RRUN expects to:
o Develop RAHX brand awareness
o Build a base of 500,000 RAHX users
o Develop relationships with digital music companies and P2P
media services
o Develop relationships with leading companies in the content
industries (i.e., music, movies, publishing, etc.)
The details of the promotion strategy are as follows:
1) Direct Sales
RRUN intends to build a RAHX sales team that will research, develop,
and maintain relationships with potential and established P2P media services.
This team is expected to serve as liaisons with licensee customers and
constantly be on the front lines searching out new customers at tradeshows,
conventions, etc.
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<PAGE>
2) Internet Marketing
RRUN seeks to develop a marketing program that will research, develop
and implement an online marketing strategy to create RAHX.com and RAHX software
brand awareness and get the RAHX message to consumers and potential licensee
customers. This will include search engine positioning, affiliate programs,
online news releases, direct mailing lists, newsgroup monitoring, newsletter
distribution, and other innovative web marketing tools still in development.
3) Trade Shows
Attendance at industry trade shows can provide RAHX with an excellent
cost effective opportunity to source potential partners, competition, and other
product development opportunities. The RAHX sales team would attend trade shows
that focus on the digital entertainment industry.
4) Promotions
o Promotional teams - RAHX aims to develop brand awareness in
the minds of its target consumer market and increase the RAHX
user base through street-level marketing tactics. The RAHX
Promo Teams will visit local hot spots frequented by the
target consumers, such as universities, nightclubs, sporting
events, etc.
o Sponsorships - RAHX plans to sponsor entertainment, sporting,
music and other events in each American market that target a
typical RAHX consumer. This effort can provide an excellent
opportunity to develop RAHX brand awareness and association of
the RAHX brand with the lifestyle of the target consumer.
5) Advertising
RAHX plans to implement an extensive advertising campaign in each local
market to create RAHX brand awareness and increase RAHX membership. The
advertising campaign will be done through print, radio, and the Internet. Each
of these mediums will be targeted towards the consumer market.
6) Publicity
RAHX seeks to generate publicity through news releases, cutting edge
publicity campaigns and, charity events. These marketing initiatives will strive
to spread the RAHX name in each local market and tie RAHX in with the local
community.
7) Pricing Strategy
RAHX will be offered to consumers and licensees for free through the
RAHX websites. However, as stated, consumers who download music recordings
through RAHXWARE are charged a RAHX suggested $0.50 per music recording. RAHX
and the content owners will set the actual price. Other music sites rates per
music recording are: $0.99 (Emusic.com) and $1.49 (Liquid Audio). At $0.50 per
track, RRUN believes that RAHX can effectively penetrate the market and build a
sustainable business.
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<PAGE>
Operations
Facilities
RRUN operates out of a leased 3600 sq. ft office/production premises in
Vancouver, British Columbia in a Class B commercial building. RRUN has an option
to secure additional space in the building. RRUN is likely to exceed current
facilities after one year when it will either move to larger premises, or move
some departments to another property.
Operating out of Vancouver, BC allows RRUN access to a highly talented
labor pool at a much lower cost than it would outside of Canada.
RRUN intends to open two business development offices in New York and
Los Angeles. These offices are necessary to remain in close proximity to the
major media companies. In doing so, RRUN can develop the numerous business
relationships necessary for success.
Equipment
Within the first four to six months RRUN intends to invest $1,000,000 in
equipment to be used in developing products, the RAHX backend technology, and
corporate file servers. In months seven to twelve, RRUN expects to invest an
additional $600,000.
Labor
RRUN intends to employ 22 people within the first three months and
plans to grow to 50 within a year. The Company plans to use a number of
resources in locating and recruiting talent.
Annual salaries for staff and executives will range through four
levels: $36,000, $60,000, $100,000 and $150,000.
RRUN also has a stock option plan. 460,000 options have been issued to
officers and employees under the plan.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The table below lists as of the date of this Prospectus, the beneficial
ownership of our voting securities by each person known by us to be the
beneficial owner of more than 5% of our securities, as well as the securities
beneficially owned by all our directors and officers. The table indicates the
number and percentage of shares held before and after the proposed acquisition.
Unless specifically indicated, the shareholders listed possess sole voting and
investment power with respect to the shares shown.
Shares Beneficially Shares to be
Directors, Officers and 5% Owned Beneficially Owned
Stockholders Prior to Acquisition After Acquisition
--------------------------- -------------------- ---------------------
Number Percent Number Percent
------ ------- ------ -------
550605 B.C. Ltd. 0 0 140,700(1) 8.2%
4th Floor, 62 W. 8th Avenue
Vancouver, B.C. V5Y 1M7
Ray A. Hawkins 0 0 162,489(2) 9.5%
71-1075 Granville Street
Vancouver, B.C. V6Z 1L4
Pavel Bains 0 0 131,500(2) 7.7%
9351 Granville Street
Richmond, B.C. V6Y 1P9
Edwin Kwong 0 0 119,000(2) 6.9%
986 W. 37th Avenue
Vancouver, B.C. V5Z 2L5
Saya Kyvrikosaios 0 0 119,000(2) 6.9%
#306 - 1139 West Broadway
Vancouver, B.C. V6H 1G1
Christine Cerisse 152,000 30.4% 0 0%
Suite 104, 1456 St. Paul St.
Kelowna, British Columbia
Canada V1Y 2E6
Bob Hemmerling 152,000 30.4% 0 0%
Suite 104, 1456 St. Paul St.
Kelowna, British Columbia
Canada VIY 2E6
All United Management 304,000 60.8% 0 0%
directors
and officers as a group
(2 persons)
All RRUN directors and
officers as a group 400,489(3) 23.3%
(3 persons)
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<PAGE>
(1) Ray A. Hawkins owns 74% of 550605 B.C. Ltd.
(2) Includes 100,000 shares issuable upon the exercise of options.
(3) Includes 300,000 shares issuable upon the exercise of options.
All the stock shown above are common stock. The balance of our
outstanding Common stock are held by 8 persons.
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<PAGE>
MANAGEMENT
RRUN's directors and officers are as follows:
Name Age Position
---- --- --------
Ray Hawkins 31 Director, President and CEO
Edwin Kwong 29 Director, COO
Saya Kyvrikosaios 32 Director, VP Product and Technology
Development
Ray Hawkins - Director, President & CEO. As the President & CEO, Mr.
Hawkins duties include the forging of business development, securing of
partnerships, and overseeing product development, and marketing campaigns.
Mr. Hawkins is a serial entrepreneur with over a decade of experience
in the fields of media, entertainment, and marketing. From 1990-1995, Mr.
Hawkins operated his own music artist management firm, RAH Talent. During that
time Mr. Hawkins also acted as the CEO of Empire Communications, a record label
that produced a number of cutting edge music artists. From 1993-1997 Mr. Hawkins
acted as a music consultant, procuring cutting edge music for movie and
television production houses such as Paramount Pictures and video game companies
such as Electronic Arts. From 1996-1999 Mr. Hawkins was the founder, President,
and CEO of TAXI Communications Network Inc., a leading edge media and marketing
firm that produced a popular local culture magazine, TAXI Vancouver, and
developed urban based marketing campaigns for companies such as Labatt
Breweries, Universal Music, Virgin Megastore and Molson Canada.
Edwin Kwong - Director, COO. Mr. Kwong uses his background in finance
and project management to oversee the day-to-day operations of RRUN.
Mr. Kwong has over 5 years of international management consulting
experience in Project Management and Finance in Canada and Asia. In 1993 Mr.
Kwong received a Bachelor of Commerce in Finance from the University of British
Columbia. In 1996 Mr. Kwong received a Graduate Diploma in Asian Pacific
Management. From 1994-1996 Mr. Kwong worked as Investment Advisor Assistant for
Great Pacific Management in Vancouver. From 1996 to 1997 Mr. Kwong acted as a
consultant in Hong Kong for Manulife International Ltd. and Ernst and Young
Management Consulting. From 1997-1998 Mr. Kwong was a Project Executive for
Hopewell Holdings in Hong Kong and Indonesia. In 1998 Mr. Kwong completed his
Level 1 examination in the Chartered Financial Analyst program. From 1999-2000
Mr. Kwong was the Senior Business Specialist for Intria Items Inc., a financial
technology solutions division of Canadian Imperial Bank of Commerce.
Saya Kyvrikosaios - Director, VP Product and Technology Development.
Mr. Kyvrikosaios is a well-diversified management and technology professional
and uses his skills and experience to lead the product and technology
development for RRUN.
From 1991-1995 Mr. Kyvrikosaios acted as the Branch Manager and
Implementation Consultant for Laurentian Bank. From 1995-1998 Mr. Kyvrikosaios
was the Project Manager and Technology Implementation Consultant for Credit
Union Enterprise Datawest Ltd. From 1998-2000
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<PAGE>
Mr. Kyvrikosaios acted as the Project Leader of Western Canada for INTRIA Items
Inc., a subsidiary of the Canadian Imperial Bank of Commerce. In 1999 Mr.
Kyvrikosaios received his Bachelor's degree in Business Administration from
Simon Fraser University.
The above listed officers and directors will serve until the next
annual meeting of the shareholders or until their death, resignation,
retirement, removal, or disqualification, or until their successors have been
duly elected and qualified. Vacancies in the existing Board of Director are
filled by majority vote of the remaining Directors. The officers serve at the
will of the Board of Directors. There are no family relationships between any
executive officer and director.
Conflicts of Interest
Members of our management are associated with other firms involved in a
range of business activities. Consequently, there are potential inherent
conflicts of interest in their acting as officers and directors of the Company.
Because the officers and directors are engaged in other business activities,
management anticipates it will devote only a minor amount of time to our
affairs.
Our officers and directors are now and may in the future become
shareholders, officers or directors of other companies that may be formed for
the purpose of engaging in business activities similar to those conducted by us.
Accordingly, additional direct conflicts of interest may arise in the future
with respect to individuals acting on our behalf or other entities. Moreover,
additional conflicts of interest may arise with respect to opportunities that
come to the attention of these individuals in the performance of their duties.
We do not currently have a right of first refusal pertaining to opportunities
that come to management's attention where the opportunity may relate to our
proposed business operations.
The officers and directors are, so long as they remain officers or
directors, subject to the restriction that all opportunities contemplated by our
plan of operation that come to their attention, either in the performance of
their duties or in any other manner, will be considered opportunities of, and be
made available to us and the other companies that they are affiliated with on an
equal basis. A breach of this requirement will be a breach of the fiduciary
duties of the officer or director. If we or the companies that the officers and
directors are affiliated with both desire to take advantage of an opportunity,
then those officers and directors would abstain from negotiating and voting upon
the opportunity. However, all directors may still individually take advantage of
opportunities if we should decline to do so. Except as set forth above, we have
not adopted any other conflict of interest policy with respect to those
transactions.
EXECUTIVE COMPENSATION
RRUN's officers have agreed to act without cash compensation until
authorized by the Board of Directors. They have accepted and executed stock
options agreements in lieu of current cash compensation.
The Company will execute management compensation agreements with the
current officers executives within 60 days of the consummation of the merger
with United Management, Inc. None of the directors are accruing any compensation
pursuant to any agreement with RRUN.
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<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Name Title Salary Options Exercise Price Expiration Date
---- ----- ------ -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ray Hawkins CEO $0 100,000 $.10 12/1/03
Edwin Kwong COO $0 100,000 $.10 12/1/03
Saya Kyvrikosaios VP $0 100,000 $.10 12/1/03
</TABLE>
No retirement, pension or insurance programs or other similar programs
have been adopted by RRUN for the benefit of its employees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 2000, RRUN issued 4,200,000 shares at an ascribed value of
$209,315 to founding shareholders, and to a company controlled by certain
founding shareholders, in connection with the acquisition of its technology
asset.
As of December 8, 2000, RRUN Ventures, Inc. owed a total of $29,861.59
to RRUN Ventures, Inc.'s President and CEO, Ray Hawkins. There is no loan
agreement in place for funds forwarded to RRUN Ventures, Inc. This debt is
interest free and has no specific terms of repayment.
In November 2000, RRUN purchased 159 shares of common stock of Kaph
Data Engineering Inc. ("Kaph") in exchange for 400,000 shares of its common
stock. The purchase represents 15% of the outstanding shares of Kaph.
LEGAL PROCEEDINGS
There is no litigation pending or threatened by or against us.
MARKET FOR OUR COMMON STOCK
There is no trading market for our common stock at present and there
has been no trading market to date. Management has not undertaken any
discussions with any prospective market maker concerning the participation in
the aftermarket for our securities and management does not intend to initiate
any discussions until we have consummated a merger or acquisition. We cannot
guarantee that a trading market will ever develop or if a market does develop,
that it will continue.
Market Price
Our common stock is not quoted at the present time. The Securities and
Exchange Commission has adopted a Rule that established the definition of a
"penny stock," for 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. For any transaction involving a
penny stock, unless exempt, the rules require: (i) that a broker or dealer
approve a person's account for transactions in penny stocks; and (ii) the broker
or dealer receive 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 (i) obtain financial information and investment experience and
objectives of the person; and (ii) make a reasonable determination that the
transactions in penny stocks are suitable for that person and that 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
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<PAGE>
in a penny stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlight form, (i) sets forth the basis on
which the broker or dealer made the suitability determination; and (ii) that the
broker or dealer received a signed, written agreement from the investor prior to
the transaction. Disclosure also has to be made about the risks of investing in
penny stock in both public offering and in secondary trading, and about
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.
Management intends to strongly consider undertaking a transaction with
any merger or acquisition candidate that will allow our securities to be traded
without the aforesaid limitations. However, we cannot predict whether, upon a
successful merger or acquisition, we will qualify our securities for listing on
Nasdaq or some other national exchange, or be able to maintain the maintenance
criteria necessary to insure continued listing. Failure to qualify our
securities or to meet the relevant maintenance criteria after qualification in
the future may result in the discontinuance of the inclusion of our securities
on a national exchange. However, trading, if any, in our securities may then
continue in the non-Nasdaq over-the-counter market. As a result, a shareholder
may find it more difficult to dispose of, or to obtain accurate quotations as to
the market value of, our securities.
Escrow
The common stock under this offering will remain in escrow until our
closing of a business combination with RRUN under the requirements of Rule 419.
There are currently ten holders of our outstanding common stock. The outstanding
common stock was sold in reliance upon an exemption from registration contained
in Section 4(2) of the Securities Act. None of our officers, directors, current
shareholders or any of their affiliates or associates purchased any of the
shares in this offering.
Penny Stock Regulation
For transactions covered by Rule 15g-9 under the `34 Act, a
broker-dealer must furnish to all investors in penny stocks, a risk disclosure
document required by the rule, make a special suitability determination of the
purchaser and have received the purchaser's written agreement to the transaction
prior to the sale. In order to approve a person's account for transactions in
penny stock, the broker or dealer must (1) obtain information concerning the
person's financial situation, investment experience and investment objectives;
(2) reasonably determine, based on the information required by paragraph (i)
that transactions in penny stock are suitable for the person and that the person
has sufficient knowledge and experience in financial matters that the person
reasonably may be expected to be capable of evaluating the rights of
transactions in penny stock; and (3) deliver to the person a written statement
setting forth the basis on which the broker or dealer made the determination
required by paragraph (ii) in this section, stating in a highlighted format that
it is unlawful for the broker or dealer to effect a transaction in a designated
security subject to the provisions of paragraph (ii) of this section unless the
broker or dealer has received, prior to the transaction, a written agreement to
the transaction from the person; and stating in a highlighted format immediately
preceding the customer signature line that the broker or dealer is required to
provide the person with the written statement and the person should not sign and
return the written statement to the broker or dealer if it does not accurately
reflect the person's financial situation, investment experience and investment
objectives and obtain from the person a manually signed and dated copy of the
written statement.
A penny stock means any equity security other than a security (i)
registered, or approved for registration upon notice of issuance on a national
securities exchange that makes transaction reports
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<PAGE>
available pursuant to 17 CFR 11Aa3-1 (ii) authorized or approved for
authorization upon notice of issuance, for quotation on the Nasdaq NMS ; (iii)
that has a price of five dollars or more or (iv) whose issuer has net tangible
assets in excess of $2,000,000 demonstrated by financial statements dated less
than fifteen months previously that the broker or dealer has reviewed and has a
reasonable basis to believe are true and complete in relation to the date of the
transaction with the person. Consequently, the rule may affect the ability of
broker-dealers to sell the Company's securities.
Dividends
We have not paid any dividends to date, and have no plans to do so in
the immediate future.
Transfer Agent
We do not have a transfer agent at this time.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 100,000,000 shares, of common
stock, par value $.0001 per share. There are 500,000 shares of common stock
issued and outstanding, as of the date of this filing.
Common Stock
All shares of common stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of common stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as fully
paid and nonassessable shares. Cumulative voting in the election of directors is
not permitted, which means that the holders of a majority of the issued and
outstanding shares of common stock represented at any meeting where a quorum is
present will be able to elect the entire Board of Directors if they so choose.
In that event, the holders of the remaining shares of common stock will not be
able to elect any directors. In the event of liquidation, each shareholder is
entitled to receive a proportionate share of our assets available for
distribution to shareholders after the payment of liabilities and after
distribution in full of preferential amounts, if any. All shares of our common
stock issued and outstanding are fully paid and nonassessable. Holders of stock
are entitled to share pro rata in dividends and distributions with respect to
the common stock, as may be declared by the Board of Directors out of funds
legally available therefor.
There are no outstanding options or warrants to purchase, or securities
convertible into, our common equity. The 500,000 shares of our common stock
currently outstanding are restricted securities as that term is defined in the
Securities Act.
SHARES ELIGIBLE FOR FUTURE RESALE
There has been no public market for our common stock and we cannot
assure you that a significant public market for our common stock will be
developed or be sustained after this offering. Sales of substantial amounts of
common stock in the public market after this offering, or the possibility of
substantial sales occurring, could adversely affect prevailing market prices for
the common stock or our future ability to raise capital through an offering of
equity securities.
Upon completion of this offering, we will have 788,420 shares
outstanding. The 288,420 shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act unless
purchased by "affiliates" of United Management, Inc., as that term is defined in
-38-
<PAGE>
Rule 144 under the Securities Act described below. The 500,000 shares currently
outstanding will be returned to us for cancellation upon consummation of the
merger.
WHERE CAN YOU FIND MORE INFORMATION?
We are a reporting company, and are subject to the reporting
requirements of the Exchange Act. We voluntarily filed a Form 10-SB on September
3, 1999. We have filed a registration statement with the SEC on form SB-2 to
register the offer and sale of the shares. This prospectus is part of that
registration statement, and, as permitted by the SEC's rules, does not contain
all of the information in the registration statement. For further information
about us and the shares offered under this prospectus, you may refer to the
registration statement and to the exhibits and schedules filed as a part of the
registration statement. You can review the registration statement and its
exhibits and schedules at the public reference facility maintained by the SEC at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the SEC at 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. The registration statement is also
available electronically on the World Wide Web at http://www.sec.gov.
You can also call or write us at any time with any questions you may
have. We'd be pleased to speak with you about any aspect of our business and
this offering.
REPORTS TO STOCKHOLDERS
We intend to furnish our stockholders with annual reports containing
audited financial statements as soon as practicable at the end of each fiscal
year. RRUN's fiscal year ends on December 31st.
-39-
<PAGE>
LEGAL MATTERS
The validity of the shares offered under this prospectus is being
passed upon for us by Evers & Hendrickson LLP of San Francisco, California.
EXPERTS
Our financial statements as of the period ended June 30, 2000, and
included in this prospectus and in the registration statement, have been so
included in reliance upon the reports of Cordovano & Harvey, P.C., independent
certified public accountants, included in this prospectus, and upon the
authority of said firm as experts in accounting and auditing.
RRUN's financial statements as of the period ended November 15, 2000,
and included in this prospectus and in the registration statement, have been so
included in reliance upon the reports of Morgan & Company, chartered
accountants, independent accountants, included in this prospectus, and upon the
authority of said firm as experts in accounting and auditing.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article XII of the Articles of Incorporation and Article VI of our
Bylaws, as amended, set forth certain indemnification rights. Our Bylaws provide
that we will possess and may exercise all powers of indemnification of officers,
directors, employees, agents and other persons and all incidental powers and
authority. Our Board of Directors is authorized and empowered to exercise all of
our powers of indemnification, without shareholder action. Our assets could be
used or attached to satisfy any liabilities subject to indemnification. See
Exhibit 3.1 hereto.
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
The Nevada Revised Statutes, as amended, authorize us to indemnify any
director or officer under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceedings, whether civil, criminal, administrative or investigative, to which
the person is a party by reason of being a director or officer if it is
determined that the person acted in accordance with the applicable standard of
conduct set forth in the statutory provisions. Our Articles of Incorporation
provides for the indemnification of directors and officers to the full extent
permitted by Nevada law.
We may also purchase and maintain insurance for the benefit of any
director or officer that may cover claims for situations where we could not
provide indemnification.
Although indemnification for liabilities arising under the `33 Act may
be permitted to officers, directors or persons controlling us under Nevada law,
we have been informed that in the opinion of the U.S. Securities and Exchange
Commission, this form of indemnification is against public policy as expressed
in the `33 Act, and is therefore unenforceable.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
In January, 2000, we appointed Cordovano & Harvey, P.C. to replace
Kish, Leake & Associates, P.C. as our principal accountants. The report of Kish,
Leake & Associates, P.C. on our financial statements did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles. We had no disagreements with
them on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure. We did not consult with Cordovano &
Harvey, P.C. on any accounting or financial reporting matters in the periods
prior to their appointment. The change in accountants was approved by the Board
of Directors. We filed a Form 8-K with the Commission (File No. 000-27233) on
January 24, 2000.
-40-
<PAGE>
FINANCIAL STATEMENTS
UNITED MANAGEMENT, INC.
The following financial statements are attached to this report and
filed as a part of this Registration Statement.
Table of Contents - June 30, 2000 Financial Statements.......................F-1
Independent Auditor's Report...............................................F-2-3
Balance Sheet as of June 30, 2000............................................F-4
Statement of Operations as of June 30, 2000..................................F-5
Statement of Cash Flows as of June 30, 2000..................................F-6
Statement of Shareholders' Equity as of June 30,2000.........................F-7
Notes to Financial Statements as of June 30, 2000............................F-8
Balance Sheet as of September 30, 2000......................................F-14
Statement of Operations and Deficit as of September 30, 2000................F-15
Statement of Cash Flows as of September 30, 2000............................F-16
Statement of Shareholders' Equity as of September 30, 2000..................F-17
Notes to Financial Statements as of September 30, 2000......................F-18
FINANCIAL STATEMENTS
RRUN VENTURES, INC.
The following financial statements are attached to this report and
filed as a part of this Registration Statement.
Independent Auditor's Report................................................F-20
Consolidated Balance Sheet as of November 15, 2000..........................F-21
Consolidated Statement of Operations as of November 15, 2000................F-22
Consolidated Statement of Cash Flows as of November 15, 2000................F-23
Consolidated Statement of Stockholders' Equity as of November 15,2000.......F-24
Notes to Consolidated Financial Statements as of November 15, 2000..........F-25
UNAUDITED PRO FORMA FINANCIAL DATA
Introduction to Pro Forma Consolidated Financial Statements.................F-28
Pro Forma Consolidated Balance Sheet........................................F-29
Pro Forma Consolidated Statement of Operations as of June 30, 2000..........F-30
Pro Forma Consolidated Statement of Operations as of November 15, 2000......F-31
Notes to Pro Forma Consolidated Financial Statements........................F-32
F-i
<PAGE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
Index to Financial Statements
Page
Independent auditors' reports................................................F-2
Balance sheet at June 30, 2000...............................................F-4
Statements of operations for the years ended
June 30, 2000 and 1999 and for the period from
January 30, 1997 (inception) through June 30, 2000(unaudited)...........F-5
Statements of cash flows for the years ended
June 30, 2000 and 1999 and for the period from
January 30, 1997 (inception) through June 30, 2000 (unaudited)..........F-6
Statement of shareholders' equity (deficit), from January 30, 1997
(inception) through June 30, 2000.......................................F-7
Notes to financial statements................................................F-8
F-1
<PAGE>
To the Board of Directors and Shareholders
United Management, Inc.
Independent Auditors' Report
We have audited the balance sheet of United Management, Inc. (a development
stage company) as of June 30, 2000 and the related statements of operations,
shareholders' equity and cash flows for the year ended June 30, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United Management, Inc. as of
June 30, 2000, and the related statements of operations and cash flows for the
year ended June 30, 2000 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note A to the financial
statements, the Company has a substantial dependence on the success of its
development stage activities, significant losses since inception, lack of
liquidity, and a working capital deficiency at June 30, 2000. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding those matters are also described in Note
A. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Cordovano and Harvey, P.C
Denver, Colorado
July 17, 2000
F-2
<PAGE>
Independent Auditors' Report
We have audited the accompanying balance sheet of United Management, Inc. (a
development stage company) as of June 30, 1999 (not separately included herein)
and the related statements of income, shareholders' deficit, and cash flows for
the fiscal year ended June 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United Management, Inc. at June
30, 1999, and the results of its operations and cash flows for the fiscal year
ended June 30, 1999 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 5 (not separately
included herein), the Company is in the development stage and has no operations
as of June 30, 1999. The deficiency in working capital as of June 30, 1999
raises substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are described in Note 5 (not
separately included herein). The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Kish, Leake, and Associates, P.C.
Certified Public Accountants
Englewood, Colorado
August 24, 1999
F-3
<PAGE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
BALANCE SHEET
June 30, 2000
ASSETS
TOTAL ASSETS $ -
===========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
LIABILITIES
Accounts payable and accrued liagilities....................... $ 3,235
-----------
TOTAL LIABILITIES 3,235
-----------
SHAREHOLDERS' (DEFICIT)
Common stock, $.0001 par value, 100,000,000 shares
authorized, 500,000 shares issued and outstanding............ 50
Additional paid-in capital..................................... 15,670
Deficit accumulated during the development stage............... (18,955)
-----------
TOTAL SHAREHOLDERS' (DEFICIT) (3,235)
-----------
$ -
===========
See accompanying notes to financial statements
F-4
<PAGE>
<TABLE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<CAPTION>
January 29, 1997
(inception)
Year Ended Through
June 30, June 30, June 30,
2000 1999 2000
-------------- -------------- --------------
(unaudited)
COSTS AND EXPENSES
<S> <C> <C> <C>
Legal fees........................................ $ 8,421 $ - $ 8,421
Accounting fees................................... 2,233 1,623 3,856
Licenses and fees................................. 253 350 603
Printing costs.................................... 6,025 - 6,025
Stock-based compensation for
organizational costs (Note B)................. - - 50
-------------- -------------- --------------
LOSS FROM OPERATIONS (16,932) (1,973) (18,955)
-------------- -------------- --------------
INCOME TAX BENEFIT (EXPENSE) (NOTE C)
Current tax benefit............................... 3,223 .376 3,609
Deferred tax expense.............................. (3,223) .(376) (3,609)
-------------- -------------- --------------
NET LOSS $ (16,932) $ (1,973) $ (18,955)
============== ============== ==============
BASIC AND DILUTED
LOSS PER COMMON SHARE.......................... $ ($.03) * $ (0.04)
============== ============== ==============
BASIC AND DILUTED WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING...................... 500,000 500,000 500,000
============== ============== ==============
* Less than .01 per share
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
<TABLE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
January 29, 1997
(inception)
Year Ended Through
June 30, June 30, June 30,
2000 1999 2000
(unaudited)
--------- --------- ------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss..................................................$ (16,932) $ (1,973) $ (18,955)
Non-cash transactions:
Stock-based compensation for
organizational costs (Note B)...................... - - 50
Third party expenses paid by affiliate on
behalf of the company, recorded as
additional-paid-in capital.............................. 15,670 - 15,670
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities............... 1,262 1,973 3,235
--------- --------- ------------------
NET CASH (USED IN)
OPERATING ACTIVITIES $ - $ - $ -
--------- --------- ------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES - - -
--------- --------- ------------------
NET CHANGE IN CASH - - -
Cash, beginning of period................................. - - -
--------- --------- ------------------
CASH, END OF PERIOD $ - $ - $ -
========= ========= ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.............................................$ - $ - $ -
========= ========= ==================
Income taxes.........................................$ - $ - $ -
========= ========= ==================
Non-cash financing activities:
500,000 shares common stock
issued for services..............................$ - $ - $ 50
========= ========= ==================
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
<TABLE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
January 29, 1997 (inception) through June 30, 2000
<CAPTION>
Deficit
Accumulated
Additional During
Preferred Stock Common Stock Paid-In Development
Shares Amount Shares Amount Capital Stage Total
-------- -------- -------- -------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning balance, January 29, 1997.......... - $ - - $ - $ - $ - $ -
Common stock issued in exchange
for organization costs................... - - 500,000 50 - - 50
Net loss for the period ended March 31, 1997. - - - - - (50) (50)
-------- -------- -------- -------- ---------- ------------- --------
BALANCE, JUNE 30, 1997 - - 500,000 50 - (50) -
Net loss for year ended June 30, 1998........ - - - - - - -
-------- -------- -------- -------- ---------- ------------- --------
BALANCE, JUNE 30, 1998 - - 500,000 50 - (50) -
Net loss for year ended June 30, 1999........ - - - - - (1,973) (1,973)
-------- -------- -------- -------- ---------- ------------- --------
BALANCE, JUNE 30, 1999 - - 500,000 50 - (2,023) (1,973)
Third party expenses paid by an affiliate
on behalf of the Company................. - - - - 15,670 - 15,670
Net loss for year ended June 30, 2000........ - - - - (16,932) (16,932)
-------- -------- -------- -------- ---------- ------------- --------
BALANCE, JUNE 30, 2000 - $ - 500,000 $ 50 $ 15,670 $ (18,955) $(3,235)
======== ======== ======== ======== ========== ============= ========
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies
Organization
------------
United Management, Inc. (the "Company") was incorporated under the laws of
Nevada on January 29, 1997 to engage in any lawful corporate undertaking,
including, but not limited to, selected mergers and acquisitions. The Company is
a development stage enterprise in accordance with Statement of Financial
Accounting Standard (SFAS) No. 7.
The Company has been in the development stage since inception and has no
operations to date.
The accompanying 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. As shown in the accompanying
financial statements, the Company is a development stage company with no revenue
as of June 30, 2000 and has incurred losses of $(16,932), $(1,973) and $(18,955)
for the years ended June 30, 2000 and 1999 and for the period January 29, 1997
(inception) through June 30, 2000, respectively. The Company has no operating
history or revenue, no assets, and continuing losses which the Company expects
will continue for the foreseeable future. These factors among others may
indicate that the Company will be unable to continue as a going concern for a
reasonable period of time. An affiliate of the Company plans to continue
advancing funds on an as needed basis and in the longer term, revenues from the
operations of a merger candidate, if found. The Company's continuation as a
going concern is dependent upon continuing capital advances from an affiliate
and commencing operations or locating and consummating a business combination
with an operating company. There is no assurance that the affiliate will
continue to provide capital to the Company or that the Company can commence
operations or identify such a target company and consummate such a business
combination. These factors, among others, raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Summary of significant accounting policies
------------------------------------------
Cash equivalents
----------------
The Company's financial instruments consist of accounts payable and accrued
liabilities. For financial accounting purposes and the statement of cash flows,
cash equivalents include all highly liquid debt instruments purchased with an
original maturity of three months or less.
F-8
<PAGE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, continued
Use of estimates
----------------
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
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. Accordingly, actual results could differ from those estimates.
Income Taxes
------------
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the financial
statements. Deferred tax amounts are determined by using the tax rates expected
to be in effect when the taxes will actually be paid or refunds received, as
provided under currently enacted law. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts expected to be
realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in the
deferred tax assets and liabilities.
Loss per common share
---------------------
The Company has adopted Statement of Financial Accounting Standards No. 128
("SFAS 128") which requires the disclosure of basic and diluted earnings per
share. Basic earnings per share is calculated using income available to common
shareowners divided by the weighted average of common shares outstanding during
the year. Diluted earnings per share is similar to basic earnings per share
except that the weighted average of common shares outstanding is increased to
include the number of additional common shares that would have been outstanding
if the dilutive potential common shares, such as options, had been issued. The
Company has a simple capital structure and no outstanding options at June 30,
2000. Therefore, dilutive earnings per share are not applicable and accordingly
have not been presented
Fiscal year
-----------
The Company operates on a fiscal year ending on June 30.
F-9
<PAGE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, continued
Stock based compensation
------------------------
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in October
1995. This accounting standard permits the use of either a fair value based
method or the method defined in Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") to account for stock-based
compensation arrangements. Companies that elect to use the method provided in
APB 25 are required to disclose pro forma net income and earnings per share that
would have resulted from the use of the fair value based method. The Company has
elected to continue to determine the value of stock-based compensation
arrangements under the provisions of APB 25. For stock issued to officers the
fair value approximates the intrinsic value. Therefore, no pro forma disclosures
are presented.
Fair value of financial instruments
-----------------------------------
SFAS 107, "Disclosure About Fair Value of Financial Instruments," requires
certain disclosures regarding the fair value of financial instruments. The
Company has determined, based in available market information and appropriate
valuation methodologies, the fair value of its financial instruments
approximates carrying value. The carrying amounts of cash, accounts payable, and
other accrued liabilities approximate fair value due to the short-term maturity
of the instruments.
Recently issued accounting pronouncements
-----------------------------------------
The Company has adopted the following new accounting pronouncements for the year
ended June 30, 2000. There was no effect on the financial statements presented
from the adoption of the new pronouncements.
Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting
Comprehensive Income," requires the reporting and display of total comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is based on the "management" approach for reporting segments. The
management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the Company's reportable segments. SFAS No. 131 also requires
disclosure about the Company's products, the geographic areas in which it earns
revenue and holds long-lived assets, and its major customers.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-retirement
Benefits," which requires additional disclosures about pension and other
post-retirement benefit plans, but does not change the measurement or
recognition of those plans.
F-10
<PAGE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, concluded
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
This statement is not expected to affect the Company as the Company currently
does not have any derivative instruments or hedging activities.
In June 1999, the FASB issued SFAS No. 137, which amended the implementation
date for SFAS No. 133 to be effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000.
Statement of Position ("SOP") 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This SOP requires that
entities capitalize certain internal-use software costs once certain criteria
are met.
SOP 98-5, "Reporting on the Costs of Start-Up Activities." Sop 98-5 provides,
among other things, guidance on the reporting of start-up costs and organization
costs. It requires costs of start-up activities and organization costs to be
expensed as incurred.
The Company will continue to review these new accounting pronouncements over
time to determine if any additional disclosures are necessary based on evolving
circumstances.
Note B: Related party transactions
The Company maintains a mailing address at an affiliate's address. This address
is Suite 106, 1456 St. Paul Street, Kelowna, B.C., Canada, V1Y 2E6. At this time
the Company has no need for an office.
The Company has issued an officer 500,000 shares of common stock in exchange for
services related to management and organization costs of $50.00. The officer
will provide administrative and marketing services as needed. The officer may,
from time to time, advance to the Company any additional funds that the Company
needs for costs in connection with searching for or completing an acquisition or
merger.
The Company does not maintain a checking account and all expenses incurred by
the Company have historically been paid by an affiliate. Since inception the
Company incurred $18,995 in expenses of which $15,670 were paid by an affiliate.
The affiliate does not expect to be repaid for the expenses it pays on behalf of
the Company. Accordingly, as the expenses are paid, they are classified as
additional-paid-in capital.
F-11
<PAGE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
Note C: Income taxes
(a)
(b) A reconciliation of U.S. statutory federal income
tax rate to the effective rate for the period from January 30,
1997
<TABLE>
<CAPTION>
January 30,
1997
(inception)
Year Ended Year Ended Through
June 30, June 30, June 30,
2000 1999 2000
------------------ ------------------- -------------------
<S> <C> <C> <C>
U.S. statutory federal rate..................... 15.00% 15.00% 15.00%
State income tax rate, net of federal benefit... 4.04% 4.04% 4.04%
Net operating loss (NOL) for which no tax
benefit is currently available.............. -19.04% -19.04% -19.04%
------------------ ------------------- -------------------
0.00% 0.00% 0.00%
================== =================== ===================
</TABLE>
(inception) through June 30, 2000 is as follows:
The valuation allowance offsets the net deferred tax asset for which there is no
assurance of recovery. The change in the valuation allowance for the years ended
June 30, 2000 and 1999 was $2,848 and $366, respectively. The change in the
valuation allowance for the period from January 29, 1997 (inception) through
June 30, 2000 was $3,609. NOL carryforwards at June 30, 2000 will begin to
expire in 2012. The valuation allowance will be evaluated at the end of each
year, considering positive and negative evidence about whether the asset will be
realized. At that time, the allowance will either be increased or reduced;
reduction could result in the complete elimination of the allowance if positive
evidence indicates that the value of the deferred tax asset is no longer
impaired and the allowance is no longer required.
Should the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of those losses.
Note D: Shareholders' equity
F-12
<PAGE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
Common Stock
------------
The Company initially authorized 25,000 shares of $1.00 par value common stock.
On January 29, 1997 the Board of Directors approved an increase in authorized
shares to 100,000,000 and changed the par value to $.0001. On January 29, 1997
the Company issued 500,000 shares of common stock for services valued at $.0001
per share. The shares were valued nominally at $50 as there was no market price
for the Company's common stock as of the date of issuance.
Note D: Shareholders' equity, concluded
On June 25, 1999 the Company filed amended articles with the state of Nevada to
change the authorized shares of common stock originally approved by the Board of
Directors on January 29, 1997 from 25,000, no par value to 100,000,000, $.0001
par. Nevada Revised Statutes Section 78.385 (c) treats this amendment as if it
was filed on January 29, 1997, therefore, giving the Company enough shares for
the original issuance of 500,000 shares of common stock.
F-13
<PAGE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Stated in U.S. Dollars)
<TABLE>
BALANCE SHEET
(Stated in U.S. Dollars)
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30 JUNE 30
2000 2000
--------------------------------------------------------------------------------------------------------------------
ASSETS $ - $ -
====================================================================================================================
LIABILITIES
Current
<S> <C> <C>
Accounts payable and accrued liabilities $ 1,699 $ 3,235
Loans payable 10,790 -
----------------------------------
12,489 3,235
----------------------------------
SHAREHOLDERS' DEFICIENCY
Share Capital
Authorized:
100,000,000 common shares, par value $0.0001 per
share
Issued and outstanding:
500,000 common shares 50 50
Additional paid in capital 15,670 15,670
Deficit (28,209) (18,955)
----------------------------------
(12,489) (3,235)
----------------------------------
$ - $ -
=====================================================================================================================
</TABLE>
F-14
<PAGE>
<TABLE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND DEFICIT
(Stated in U.S. Dollars)
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
INCEPTION
JANUARY 29
THREE MONTHS ENDED 1997 TO
SEPTEMBER 30 SEPTEMBER 30
2000 1999 2000
--------------------------------------------------------------------------------------------------------------------
Expenses
<S> <C> <C> <C>
Office and sundry $ 2,127 $ 2,415 $ 8,755
Professional fees 7,127 3,487 19,404
Stock based compensation for organizational costs
- - 50
---------------------------------------------------
Net Loss For The Period 9,254 5,902 $ 28,209
=================
Deficit, Beginning Of Period 18,955 50
---------------------------------
Deficit, End Of Period $ 28,209 $ 5,952
==================================================================================================
Net Loss Per Share $ (0.02) $ (0.01)
==================================================================================================
Weighted Average Number Of Shares
Outstanding
500,000 500,000
==================================================================================================
</TABLE>
F-15
<PAGE>
<TABLE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Stated in U.S. Dollars)
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
INCEPTION
JANUARY 29
THREE MONTHS ENDED 1997 TO
SEPTEMBER 30 SEPTEMBER 30
2000 1999 2000
--------------------------------------------------------------------------------------------------------------------
Cash Flow From Operating Activities
<S> <C> <C> <C>
Net loss for the period $ (9,254) $ (5,902) $ (28,209)
Non-cash transactions:
Stock-based compensation for
organizational costs
- - 50
Third party expenses paid by affiliate on
behalf of the Company, recorded as
additional paid-in capital
- - 15,670
Adjustments To Reconcile Net Loss To Net
Cash Used By Operating Activities
Accounts payable and accrued liabilities (1,536) 4,214 1,699
Loans payable 10,790 1,688 10,790
--------------------------------------------------
- - -
--------------------------------------------------
Change In Cash - - -
Cash, Beginning Of Period - - -
--------------------------------------------------
Cash, End Of Period $ - $ - $ -
====================================================================================================================
</TABLE>
F-16
<PAGE>
<TABLE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS EQUITY
SEPTEMBER 30, 2000
(Stated in U.S. Dollars)
<CAPTION>
ADDITIONAL
PAID-IN
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares Issued For Cash At
$0.0001 500,000 $ 50 $ - $ (50) $ -
---------------------------------------------------------------------------
Balance, June 30, 1997 And
1998 500,000 50 - (50) -
Loss For The Year - - - (1,973) (1,973)
---------------------------------------------------------------------------
Balance, June 30, 1999 500,000 50 - (2,023) (1,973)
Third Party Expenses Paid
By Affiliate On Behalf Of
The Company, Recorded As
Additional Paid-In Capital - - 15,670 - 15,670
Loss For The Year - - - (16,932) (16,932)
---------------------------------------------------------------------------
Balance, June 30, 2000 500,000 50 15,670 (18,955) (3,235)
Loss For The Period - - - (9,254) (9,254)
---------------------------------------------------------------------------
Balance, September 30, 2000 500,000 $ 50 $ 15,670 $ (28,209) $ (12,489)
===========================================================================
</TABLE>
F-17
<PAGE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Stated in U.S. Dollars)
1. BASIS OF PRESENTATION
The unaudited financial statements as of September 30, 2000 included herein
have been prepared without audit pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with United States generally accepted principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. It is
suggested that these financial statements be read in conjunction with the
June 30, 2000 audited financial statements and notes thereto.
2. NATURE OF OPERATIONS
a) Organization
The Company was incorporated in the State of Nevada, U.S.A. on January 29,
1997.
b) Development Stage Activities
The Company has been in the development stage since inception and has no
operations to date.
3. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance
with generally accepted accounting principles in the United States. Because
a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period
necessarily involves the use of estimates which have been made using
careful judgement.
The financial statements have, in management's opinion, been properly
prepared within reasonable limits of materiality and within the framework
of the significant accounting policies summarized below:
a) Development Stage Company
The Company is a developed stage company as defined in the Statements
of Financial Accounting Standards No. 7. The Company is devoting
substantially all of its present efforts to establish a new business
and none of its planned principal operations have commenced. All losses
accumulated since inception have been considered as part of the
Company's development stage activities.
F-18
<PAGE>
UNITED MANAGEMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Stated in U.S. Dollars)
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
b) Income Taxes
The Company has adopted Statement of Financial Accounting Standards No.
109 - "Accounting for Income Taxes" (SFAS 109). This standard requires
the use of an asset and liability approach for financial accounting and
reporting on income taxes. If it is more likely than not that some
portion or all if a deferred tax asset will not be realized, a
valuation allowance is recognized.
c) Financial Instruments
The Company's financial instruments consist of accounts payable.
Unless otherwise noted, it is management's opinion that this Company is
not exposed to significant interest or credit risks arising from these
financial instruments. The fair value of these financial instruments
approximate their carrying values, unless otherwise noted.
d) Net Loss Per Share
Net loss per share is based on the weighted average number of common
shares outstanding during the period plus common share equivalents,
such as options, warrants and certain convertible securities. This
method requires primary earnings per share to be computed as if the
common share equivalents were exercised at the beginning of the period
or at the date of issue and as if the funds obtained thereby were used
to purchase common shares of the Company at its average market value
during the period.
4. NEW ACCOUNTING STANDARDS
a) Effective December 15, 1995, Statement of Financial Accounting
Standards No. 123 ("SFAS-123") "Accounting for Stock-based
Compensation" was adopted for United States GAAP purposes. SFAS-123
enables a company to elect to adopt a fair value methodology for
accounting for stock based compensation. The Company has determined
that the fair value of stock options is similar to the issue price at
the time of granting. The Company does not expect to elect to adopt the
fair value methodology, although the pro forma results of operations
and earnings per share determined as if the fair value methodology had
been applied will be disclosed as required under SFAS-123 in future
years.
b) In March, 1995, Statement of Financial Accounting Standards No. 121
(SFAS-121) "Accounting for Impairment of long-lived assets and for
long-lived assets to be disposed of" was issued. Certain long-lived
assets held by the Company must be reviewed for impairment whenever
events or changes in circumstances indicate the carrying amount of an
asset may not be recoverable. Accordingly, the impairment loss is
recognized in the period it is determined. The Company has adopted
these standards. There was no material effect on its financial position
or results of operations of the Company from its adoption.
F-19
<PAGE>
RRUN VENTURES INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 15, 2000
(Stated in U.S. Dollars)
AUDITORS' REPORT
To the Directors
RRUN Ventures Inc.
We have audited the consolidated balance sheet of RRUN Ventures Inc. (A
Development Stage Company) as at November 15, 2000 and the consolidated
statements of operations and deficit, cash flows, and stockholders' equity for
the period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with United States and Canadian generally
accepted auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at November 15, 2000
and the results of its operations and cash flows for the period then ended in
accordance with United States generally accepted accounting principles.
Vancouver, B.C. "Morgan & Company"
November 24, 2000 Chartered Accountants
COMMENTS BY INDEPENDENT AUDITORS FOR U.S. READERS
ON CANADA-U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by significant uncertainties such as those described in
Note 1(b) of the financial statements. Our report to the shareholders, dated
November 24, 2000, is expressed in accordance with Canadian reporting standards
which do not permit a reference to such an uncertainty in the Auditors' Report
when the uncertainty is adequately disclosed in the financial statements.
Vancouver, B.C. "Morgan & Company"
November 24, 2000 Chartered Accountants
F-20
<PAGE>
RRUN VENTURES INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
NOVEMBER 15, 2000
(Stated in U.S. Dollars)
---------------------------------------------------------------------------
ASSETS
Current
Cash $ 12,020
Intangible Assets (Note 4) 209,315
Investment (Note 5) 40,000
-------------
$ 261,335
===========================================================================
LIABILITIES
Current
Accrued liability $ 3,000
Loans and advances payable (Note 6(a)) 26,572
-------------
29,572
Minority Interest 67,359
-------------
96,931
-------------
STOCKHOLDERS' EQUITY
Share Capital
Authorized:
25,000,000 common shares, par value $0.001 per share
Issued and outstanding:
6,108,780 common shares 6,109
Additional paid in capital 175,847
Deficit (17,552)
-------------
164,404
-------------
$ 261,335
===========================================================================
Approved by the Board of Directors:
----------------------------------- ---------------------------------------
F-21
<PAGE>
RRUN VENTURES INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FROM INCEPTION ON OCTOBER 12, 2000 TO NOVEMBER 15, 2000
(Stated in U.S. Dollars)
---------------------------------------------------------------------------
Expenses
Office and sundry $ 2,197
Professional fees 3,000
-------------
Net Loss For The Period 5,197
Deficit, Beginning Of Period -
-------------
5,197
Net Asset Deficiency of Legal Parent
At Date of Reverse Take-over Transaction 12,355
-------------
Deficit, End Of Period $ 17,552
===========================================================================
Net Loss Per Share $ 0.01
===========================================================================
Weighted Average Number Of Common Shares Outstanding 5,720,901
===========================================================================
F-22
<PAGE>
RRUN VENTURES INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FROM INCEPTION ON OCTOBER 12, 2000 TO NOVEMBER 15, 2000
(Stated in U.S. Dollars)
--------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net loss for the period $ (5,197)
Adjustments To Reconcile Net Loss To Net Cash
Used By Operating Activities
Accrued liability 3,000
Loans and advances payable 26,572
-------------
24,375
-------------
Cash Flows From Investing Activity
Net asset deficiency of legal parent at date of
reverse take-over transaction (12,355)
-------------
Increase In Cash 12,020
Cash, Beginning Of Period -
-------------
Cash, End Of Period $ 12,020
===========================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES
During the period, the Company issued 4,200,000 common shares at an ascribed
value of $209,315 to acquire technology.
During the period, the Company acquired 67% of the issued and outstanding shares
of RAHX Inc. by issuing 2,814, 000 common shares at an ascribed value of $Nil.
During the period, the Company acquired 15% of the issued and outstanding shares
of Kaph Data Engineering Inc. by issuing 400,000 common shares at an ascribed
value of $40,000.
F-23
<PAGE>
<TABLE>
RRUN VENTURES INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
NOVEMBER 15, 2000
(Stated in U.S. Dollars)
<CAPTION>
ADDITIONAL
PAID-IN
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares Issued For Cash And
Services 4,200,000 $ 4,200 $ 205,115 $ - $ 209,315
Adjustment To Number Of Shares
Issued And Outstanding As A
Result Of The Acquisition Of
RAHX, Inc.
RAHX, Inc. (4,200,000) (4,200) - - (4,200)
RRUN Ventures Inc. 5,708,780 5,709 (1,509) - 4,200
Adjustment To Stated Value Of
Stockholders' Equity To Reflect
Minority Interest In The Net
Assets Of RAHX, Inc. At The
Acquisition Date - - (67,359) - (67,359)
Net Asset Deficiency Of Legal
Parent At Date Of Reverse Take-
Over Transaction - - - (12,355) (12,355)
Shares Issued To Acquire
Investment In Kaph Data
Engineering Inc. 400,000 400 39,600 - 40,000
Loss For The Period - - - (5,197) (5,197)
---------------------------------------------------------------------------
Balance, November 15, 2000 6,108,780 $ 6,109 $ 175,847 $ (17,552) $ 164,404
===========================================================================
</TABLE>
F-24
<PAGE>
RRUN VENTURES INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 15, 2000
(Stated in U.S. Dollars)
1. NATURE OF OPERATIONS
a) Organization
The Company was incorporated in the State of Nevada, U.S.A. on October 12,
2000.
b) Development Stage Activities
The Company was organized to develop innovative technology based ventures
with a current emphasis on building new technologies for the entertainment
and content industry. The Company's initial venture is RAHX, a business
concept focused on the growing Peer-To-Peer (P2P) file exchange industry.
The first branded RAHX product is Rahxware, a platform that uses P2P
technologies to enable and enhance the distribution of digital media over
the internet.
The Company is in the development stage, therefore, recovery of assets is
dependent upon future events, the outcome of which is indeterminable. In
addition, successful completion of the Company's development program and
its transition, ultimately to the attainment of profitable operations, is
dependent upon obtaining adequate financing to fulfil its development
activities and achieve a level of sales to support its cost structure.
Management is of the opinion that sufficient short term funding will be
obtained and that current negotiations with potential users of its products
will be successful.
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the United
States. Because a precise determination of many assets and liabilities is
dependent upon future events, the preparation of consolidated financial
statements for a period necessarily involves the use of estimates which
have been made using careful judgement.
The consolidated financial statements have, in management's opinion, been
properly prepared within reasonable limits of materiality and within the
framework of the significant accounting policies summarized below:
a) Consolidation
These consolidated financial statements include the accounts of the Company
and its 67% owned subsidiary, RAHX, Inc.
F-25
<PAGE>
RRUN VENTURES INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 15, 2000
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
b) Development Stage Company
The Company is a developed stage company as defined in the Statements of
Financial Accounting Standards No. 7. The Company is devoting substantially
all of its present efforts to establish a new business and none of its
planned principal operations have commenced. All losses accumulated since
inception have been considered as part of the Company's development stage
activities.
c) Intangible Assets
Intangible assets are recorded at cost to be amortized on a straight-line
basis over three years.
Management reviews intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amounts may not be
recoverable.
d) Investments
Investments in companies owned less than 20% are recorded at the lower of
cost or fair market value.
e) Income Taxes
The Company has adopted Statement of Financial Accounting Standards No. 109
- "Accounting for Income Taxes" (SFAS 109). This standard requires the use
of an asset and liability approach for financial accounting and reporting
on income taxes. If it is more likely than not that some portion or all if
a deferred tax asset will not be realized, a valuation allowance is
recognized.
f) Financial Instruments
The Company's financial instruments consist of cash and accounts payable.
Unless otherwise noted, it is management's opinion that this Company is not
exposed to significant interest or credit risks arising from these
financial instruments. The fair value of these financial instruments
approximate their carrying values, unless otherwise noted.
F-26
<PAGE>
RRUN VENTURES INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 15, 2000
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
g) Net Loss Per Share
Net loss per share is based on the weighted average number of common shares
outstanding during the period plus common share equivalents, such as
options, warrants and certain convertible securities. This method requires
primary earnings per share to be computed as if the common share
equivalents were exercised at the beginning of the period or at the date of
issue and as if the funds obtained thereby were used to purchase common
shares of the Company at its average market value during the period.
3. ACQUISITION OF SUBSIDIARY
Effective November 13, 2000, RRUN Ventures Inc. acquired 67% of the issued
and outstanding shares of RAHX, Inc. by issuing 2,814,000 common shares.
Since the transaction resulted in the former shareholders of RAHX, Inc.
owning the majority of the issued shares of RRUN Ventures Inc., the
transaction, which is referred to as a "reverse take-over", has been
treated for accounting purposes as an acquisition by RAHX, Inc. of the net
assets and liabilities of RRUN Ventures Inc. Under this purchase method of
accounting, the results of operations of RRUN Ventures Inc. are included in
these consolidated financial statements from November 13, 2000.
RRUN Ventures Inc. had a net asset deficiency at the acquisition date,
therefore, the 2,814,000 common shares issued on acquisition were issued at
an ascribed value of $Nil with the net asset deficiency of $12,355 charged
to deficit. RAHX, Inc. is deemed to be the purchaser for accounting
purposes. Accordingly, its net assets are included in the consolidated
balance sheet at their previously recorded amounts.
The acquisition is summarized as follows:
Current Assets $ 11,357
Current Liabilities 23,712
-----------
Net Asset Deficiency $ (12,355)
===========
4. INTANGIBLE ASSETS
Technology, at cost $ 209,315
============
The Company issued a total of 4,200,000 common shares in connection with
the acquisition of its technology assets.
5. INVESTMENT
Kaph Data Engineering Inc. - 159 common shares representing 15% of the
Company's issued and outstanding common share capital
$ 40,000
============
6. RELATED PARTY TRANSACTIONS
a) During the period, the Company issued 4,200,000 at an ascribed value of
$209,315 to founding shareholders, and to a company controlled by
certain founding shareholders, in connection with the acquisition of
its technology asset.
b) Loans and advances payable are due to related parties, are interest
free, and have no specific terms of repayment.
F-27
<PAGE>
UNITED MANAGEMENT INC.
(A Development Stage Company)
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 15, 2000
(Stated in U.S. Dollars)
INTRODUCTION TO PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
AS AT NOVEMBER 15, 2000, AND FOR THE YEAR ENDED JUNE 30, 2000
AND FOR THE PERIOD FROM JULY 1, 2000 TO NOVEMBER 15, 2000
(Stated in U.S. Dollars)
The following unaudited pro-forma consolidated balance sheet, pro-forma
consolidated statements of operations and explanatory notes give effect to the
acquisition of RRUN Ventures Inc. by United Management Inc. Since the
transaction resulted in the former shareholders of RRUN Ventures Inc. owning the
majority of the issued shares of United Management Inc., the transaction, which
is referred to as a "reverse take-over", has been treated for accounting
purposes as an acquisition by RRUN Ventures Inc. of the net assets and
liabilities of United Management Inc.
The pro-forma consolidated balance sheet, pro-forma consolidated statements of
operations and explanatory notes are based on the estimates and assumptions set
forth in the explanatory notes. This pro-forma consolidated balance sheet and
the pro-forma consolidated statements of operations have been prepared utilizing
the historical financial statements of United Management Inc. and RRUN Ventures
Inc. and should be read in conjunction with the historical financial statements
and notes thereto included elsewhere in this filing.
The pro-forma consolidated statements of operations have been prepared as if the
acquisition had been consummated on July 1, 1999 under the purchase method of
accounting and carried through to November 15, 2000. The pro-forma consolidated
balance sheet has been prepared as if the acquisition was consummated on
November 15, 2000.
This pro-forma consolidated financial data is provided for comparative purposes
only, and does not purport to be indicative of the actual financial position or
results of operations had the acquisition occurred at the beginning of the
fiscal period presented, nor are they necessarily indicative of the results of
future operations.
F-28
<PAGE>
<TABLE>
UNITED MANAGEMENT INC.
(A Development Stage Company)
PRO-FORMA CONSOLIDATED BALANCE SHEET
NOVEMBER 15, 2000
(Stated in U.S. Dollars)
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
UNITED RRUN
MANAGEMENT VENTURES
INC. INC. ADJUSTMENTS PRO-FORMA
---------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C>
Current
Cash $ - $ 12,020 $ (b) 115,368 $ 127,388
Intangible Assets - 209,315 - 209,315
Investment - 40,000 - 40,000
---------------------------------------------------------------------------
$ - $ 261,335 - $ 376,703
=====================================================================================================================
LIABILITIES
Current
Accounts payable $ 1,699 $ 3,000 $ - $ 4,699
Loans payable 10,790 26,572 - 37,362
---------------------------------------------------------------------------
12,489 29,572 - 42,061
Minority Interest - 67,359 - 67,359
---------------------------------------------------------------------------
12,489 96,931 - 109,420
---------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share Capital 50 6,109 (a) (50) 6,138
(b) 29
Additional Paid In Capital 15,670 175,847 (a) 50 291,186
(b) 115,339
(c) (15,720)
Deficit (28,209) (17,552) (c) 18,955 (30,041)
(c) (3,235)
---------------------------------------------------------------------------
(12,489) (164,404) - 267,283
---------------------------------------------------------------------------
$ - $ 261,335 - $ 376,703
===================================================================================================================
</TABLE>
F-29
<PAGE>
<TABLE>
UNITED MANAGEMENT INC.
(A Development Stage Company)
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2000
(Stated in U.S. Dollars)
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
UNITED RRUN
MANAGEMENT VENTURES
INC. INC. ADJUSTMENTS PRO-FORMA
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ - $ - - $ -
Expenses 16,932 - - 16,932
----------------------------------------------------------------------
Net Loss $ 16,932 $ - - $ 16,932
====================================================================================================================
Net Loss Per Share $ 0.03
====================================================================================================================
Weighted Average Number Of
Common Shares Outstanding 593,859
====================================================================================================================
</TABLE>
F-30
<PAGE>
<TABLE>
UNITED MANAGEMENT INC.
(A Development Stage Company)
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD ENDED JULY 1, 2000 TO NOVEMBER 15, 2000
(Stated in U.S. Dollars)
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
UNITED RRUN
MANAGEMENT VENTURES
INC. INC. ADJUSTMENTS PRO-FORMA
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ - $ - - $ -
Expenses 9,254 5,197 - 14,451
----------------------------------------------------------------------
Net Loss $ 9,254 $ 5,197 - $ 14,451
====================================================================================================================
Net Loss Per Share $ 0.02
====================================================================================================================
Weighted Average Number Of
Common Shares Outstanding 593,859
====================================================================================================================
</TABLE>
F-31
<PAGE>
UNITED MANAGEMENT INC.
(A Development Stage Company)
NOTES AND ASSUMPTIONS TO THE UNAUDITED CONSOLIDATED PRO-FORMA
BALANCE SHEET AND PRO-FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2000
AND FOR THE PERIOD FROM JULY 1, 2000 T0 NOVEMBER 15, 2000
(Stated in U.S. Dollars)
1. ORGANIZATION AND BASIS OF PRESENTATION
The unaudited pro-forma consolidated balance sheet and consolidated
statements of operations have been prepared based on historical financial
information, using U.S. generally accepted accounting principles of United
Management Inc. for the year ended June 30, 2000, and for the three months
ended September 30, 2000, and of RRUN Ventures Inc. for the period from
inception on October 12, 2000 to November 15, 2000 considering the effects
of the reverse take-over transaction as if the transaction was completed
effective July 1, 1999 in the case of the pro-forma consolidated statements
of operations, and effective November 15, 2000 in the case of the pro-forma
consolidated balance sheet.
2. ASSUMPTION
The number of common shares used in the calculation of the pro-forma net
loss per share data is based on the weighted average number of common
shares outstanding during the period adjusted to give effect to shares
assumed to be issued, had the transaction referred to above been
consummated July 1, 1999.
3. PRO-FORMA ADJUSTMENTS
(a) Record the cancellation of 500,000 common shares of United Management
Inc.
(b) Record the issue of 288,420 common shares of United Management Inc.
for cash consideration of $115,368
(c) Record the reverse take-over transaction
F-32
<PAGE>
---------------------------------------------
You should rely only on the information contained
in this prospectus. We have not authorized anyone
to provide you with information different from
that contained in this prospectus. We are offering 288,420 Shares
to sell, and seeking offers to buy, shares of common stock
common stock only in jurisdictions where offers
and sales are permitted. The information contained
in this prospectus is accurate only as of the date
of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of our
common stock. In this prospectus, the words "we,"
"us" and "our" refer to United Management, Inc.
(unless the context indicates otherwise).
--------------------------------------------- UNITED MANAGEMENT, INC.
TABLE OF CONTENTS
OFFERING INFORMATION........................1
PROSPECTUS SUMMARY..........................3
RISK FACTORS................................7
YOUR RIGHTS AND SUBSTANTIVE
PROTECTION UNDER RULE 419
DEPOSIT OF OFFERING PROCEEDS ___________________
AND SECURITIES.............................14
MERGER.....................................16
DILUTION...................................18 PROSPECTUS
USE OF PROCEEDS............................18
CAPITALIZATION.............................19
PLAN OF OPERATION..........................20 ___________________
DESCRIPTION OF BUSINESS....................22
PRINCIPAL SHAREHOLDERS.....................32
MANAGEMENT.................................34 December 18, 2000
EXECUTIVE COMPENSATION.....................35
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS.......................36
LEGAL PROCEEDINGS..........................36
MARKET FOR OUR COMMON STOCK................36
DESCRIPTION OF SECURITIES..................38
SHARES ELIGIBLE FOR FUTURE
RESALE.....................................38
WHERE CAN YOU FIND MORE
INFORMATION?...............................39
REPORTS TO STOCKHOLDERS....................39
LEGAL MATTERS..............................40
EXPERTS....................................40
INDEMNIFICATION OF OFFICERS
AND DIRECTORS..............................40
CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL
DISCLOSURE.................................40
FINANCIAL STATEMENTS......................F-1
---------------------------------------------
<PAGE>
Part II. Information Not Required In Prospectus
Item 24. Indemnification of officers and directors
The information required by this Item is incorporated by reference to
"Indemnification of Officers and Directors" in the Prospectus.
Item 25. Other Expenses of Issuance and Distribution
Our estimated expenses in connection with the issuance and distribution
of the securities being registered are estimated to be as follows:
Securities and Exchange Commission filing fee $ 53.00
Blue Sky filing fees 500.00
Legal fees and expenses 10,000.00
Printing 1,500.00
Marketing expenses 1,000.00
Miscellaneous 500.00
---------
Total $ 13,553.00
==========
Management will bear all expenses shown above, except legal fees estimated at
$10,000.
Item 26. Recent Sales of Unregistered Securities
There have been no sales of unregistered securities by the Company in
the past three years.
Item 27. Exhibits
2.1 Merger Agreement
3.1* Articles of Incorporation
3.2* Amendment to Articles of Incorporation
3.3* Bylaws
4.1* Specimen Informational Statement
5.1*** Opinion of Evers & Hendrickson LLP with respect
to the legality of the shares being registered
23.1.1 Consent of Kish, Leake & Associates, P.C.
23.1.2 Consent of Cordovano & Harvey, P.C.
23.1.3** Consent of Morgan & Company
23.2 Consent of Evers & Hendrickson LLP (included in Exhibit 5.1)
27.1*** Financial Data Schedule
99.1 Escrow Agreement
* Incorporated by reference to Form 10-SB, File No. 000-27233,
filed September 3, 1999.
** To be added in an amendment.
*** Previously filed.
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<PAGE>
Item 28. Undertakings
We undertake that we will:
1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
(iii) Include any additional or changed material information on
the plan of distribution.
2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that
time to be the bona fide offering.
3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
We undertake to provide to the underwriters at the closing specified in
the underwriting agreement certificates in such denominations and registered in
such names as the underwriter requires to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement on Form SB-2 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Kelowna, Province of British Columbia, Canada,
on December 18, 2000.
UNITED MANAGEMENT, INC.
/s/ Christine M. Cerisse
--------------------------------
President
Signature Title Date
/s/ Christine M. Cerisse President December 18, 2000
------------------------
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