UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SSECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 000-27583
EQUORUMNET
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(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
Nevada 88-0431508
------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
301 W. Armour #1000, Kansas City, MO 64111
-----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (877) 603-4382
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
NONE
Securities registered under Section 12(g) of the Exchange Act:
Title of each class
-------------------
Common Stock, $.0001 par value
Check whether the issuer (a) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements of the past 90 days. [ X ] Yes
[ ] No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this for 10-KSB [ ]
State issuer's revenues for its most recent fiscal year.
NONE
The Company's stock is not, and has not, been traded or quoted. Therefore,
there is no way to ascertain a market value for the stock.
.
The number of shares outstanding as of June 30, 2000 was 7,500,000.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
NONE
The following discussion contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and in Item
7, "Management's Discussion and Analysis of Financial Condition."
PART I
Item I DESCRIPTION OF BUSINESS
A. BUSINESS DEVELOPMENT AND SUMMARY
eQuorumNet, hereinafter referred to as "The Company" or eQuorumNet, was
organized by the filing of articles of incorporation with the Secretary of State
of the State of Nevada on July 15, 1999. The Company formed a Missouri LLC,
eQuorumNet, LC, in order to facilitate the private offering. The Company plans
to dissolve the LLC once the Company becomes publicly traded on the OTC Bulletin
Board. The articles of The Company authorized the issuance of fifty million
(50,000,000) shares of Common Stock at a par value of $0.0001 per share.
The Company is a developmental stage company with the principal business
objective to provide network and e-commerce marketing for upscale and mass
market consumer products direct from the manufacturer. It intends to distinguish
itself as "the technology leader" in these fields with quality products, network
marketing compensation plans, marketing materials and support programs, and its
e-commerce site.
The Company intends to identify overseas manufacturers of consumer products
that have a need for a marketing arm in the United States. Management believes
the development of new products such as nutritional aids and electronics in the
Far East is expansive and the need for a specialized marketing company for the
United States market has continued to grow in the last ten years. eQuorumNet
plans to market its network marketing and e-commerce services to these
manufacturers.
During its initial phase of development, the Company is formulating
profitability budgets, and marketing plans with the intention to make
presentations to overseas manufacturing firms to become its marketing company in
the United States. No specific manufacturing companies have signed a contract
with eQuorumNet as yet, and the Company anticipates 6 to 8 months until the
research phase is completed. A manufacturer/client needs to be identified and
contracted with in order to begin phase II, when revenues will be expected.
The Company intends to build a distributor base and attract a new
generation of distributor leadership by providing additional financial
incentives for the core leadership (i.e., short-term income incentives,
recruiting incentives). The Company plans to increase long-term stability by
addressing key distributor structure/compensation areas: 1) create several "base
of tree" distributor lines to foster competition and increase opportunities for
aggressive new leadership 2) implement a compensation plan which fosters
long-term sustainable growth by continuing to highly reward aggressive, serious
business builders, while better rewarding the 95% of part-time
consumer/retailer-type distributor, and better ensuring that new distributor
leaders will have a solid organization under them before "breaking away", so
that they will better be able to qualify for leadership bonuses, and 3)
continually train distributor leadership to focus on building deep and wide with
a solid base of consumers and to nurture their networks.
The Company intends to focus on achieving and maintaining profitability
also ensuring tight financial and systems control by I) being fully prepared for
cyclical sales performance while still providing top quality customer service,
2) focusing on quality, not quantity, of new staff, 3) instituting
financial/accounting software systems to enable much tighter cash flow and
inventory control, and minimizing long-term contractual arrangements with
suppliers and keeping minimum order quantities as low as possible.
<PAGE>
The Company plans to generate revenues through the following sources:
- Percentage of product profit
- Fees from warehousing and shipping of products
- Cyber-advertising on its planned e-commerce site
- Commissions on sales, advertising development, and sales management
B. PRINCIPAL PRODUCTS AND SERVICES AND PRINCIPAL MARKETS
Overview
eQuorumNet has a principal business objective to emerge as a global leader
in the network marketing industry, with millions of distributors around the
world enjoying the full benefits of the secure and enhanced lifestyle that its
products/services/company could bring. The Company's focus will be to develop a
stable, cohesive distributor force to market its targeted products. As a
secondary objective, but equally important, eQuorumNet intends to expand its
marketing capabilities to the Internet via e-commerce and reusable, mass
products.
Strategy
The principal components of the Company's strategy are as follows:
- Provide highly attractive financial incentives needed to attract powerful
new distributor leaders and reward loyal leadership as well as the
key management team
Under development is a Compensation Plan which intends to foster
long-term sustainable growth of its distributors and provide for a
continuous training program of distributors.
- Identify future products and expansions, with profitability and
marketability
- Focus on achieving and maintaining profitability
- Maintain tighter cash flow and inventory control through
financial/accounting software systems
- Minimize long-term contractual arrangements with suppliers
- Identify cyclical sales performances and prepare accordingly
C. DISTRIBUTION METHODS OF THE PRODUCTS OR SERVICES
a) Distribution:
Distribution of products will be carried out through the
following channels:
1) Network Marketing: Distributors will sell products directly
from the manufacturer to the consumer. The Company believes
this will cut out the many levels of wholesalers, distributors
and retailers, and reduces the markup that is placed on the
products at each of these levels. The result is intended to be
larger profits, passed along to the consumer, the distributor and
the Company.
2) e-Commerce. Mass-marketed products such as electronics, and
lifestyle services will be sold via the Internet to the general
public. The Company hopes to achieve a high volume site with
added income from advertising banners and referrals.
b) Advertising and Promotion
The Company's advertising is expected to he through
high-visibility methods, including press releases and targeted print and media
campaigns, as well as Internet sources. Effective tours in key cities to attract
distributors may be implemented, as well as a yearly convention for distributors
and leaders. Product videos, CD-RoMs, DVDs can he developed to attract potential
new distributors. Training kits for each distributor including a continual
training programs intended to motivate and to create loyal distributors can be
designed.
<PAGE>
c) Customer Service
The Company recognizes the need for an effective and responsive
customer service base. To that end, the Company is developing a Customer Service
Plan to include a Distributor Support Plan.
ITEM 2. DESCRIPTION OF PROPERTY
The Company currently pays no rent for its executive offices. Office space is
currently being used at an associate of the President, Richard Hung at no
charge. This office arrangement is considered adequate for current and
short-term operations of the Company.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not presently a party to any litigation, nor to the knowledge of
management is any litigation threatened against the Company, which would
materially affect the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's shares of Common Stock are not registered with the U.S. Securities
and Exchange Commission under the Securities Act of 1933, as amended
(hereinafter referred to as the "Act"), and certain shares issued pursuant to
Regulation D-504, are "restricted securities."
Since its inception July 15, 1999, the Company has not paid cash dividends on
its Common Stock. It is the present policy of the Company not to pay cash
dividends and to retain future earnings to support the Company's growth. Any
payments of cash dividends in the future will be dependent upon, among other
things, the amount of fund available therefore, the Company's earnings,
financial condition, capital requirements, and other factors which the Board of
Directors deem relevant.
As of June 30, 2000 , there were 31 Common Shareholders of record.
The transfer agent for the common stock is Florida Atlantic Stock Transfer, 7130
Nob Hill Road, Tamarac, Florida 33321.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion should be read in conjunction with, and is qualified in
its entirety by the Financial Statements section included below.
With the exception of historical matters, the matters discussed herein are
forward looking statements that involve risks and uncertainties. Forward looking
statements include, but are not limited to, statements concerning anticipated
trends in revenues and net income, the date of introduction or completion of the
Company's products, projections concerning operations and available cash flow.
The Company's actual results could differ materially from the results discussed
in such forward looking statements. The following discussion of the Company's
financial condition and results of operations should be read in conjunction with
the Company's financial statements and the related notes thereto appearing
elsewhere herein.
<PAGE>
A. OVERVIEW
(1) The Company, since raising its initial capital, has concentrated on
researching and developing contacts in the manufacturing community to identify
quality products for its network marketing and e-commerce site. The Company has
specifically targeted new products and services aimed at "securing and enhancing
life" including 1) Direct-from-factory electronics via Internet 2) New
generation security products 3) Lifestyle services (recreation, travel sports
memberships) 4) Nutritional and personal care products e.g., "nourish and
cleanse" Chinese herbal supplements, skin care systems.
During the initial phase of researching and developing contacts, the
Company may need additional capital. The Company is currently preparing an SB-2
Registration towards that end. On July 24, 1999, the Company completed an
offering of 170,000 shares of the Common Stock of the Company to approximately
29 unaffiliated shareholders. This offering was made in reliance upon an
exemption from the registration provisions of Section 4(2) of the Securities Act
of 1933 (the "Act"), as amended, pursuant to Regulation 1), Rule 504 of the Act.
As of the date of this filing, the Company has approximately 7,500,000 shares of
its $00001 par value common voting stock issued and outstanding which are held
by 31 shareholders of record. Management fully anticipates that the proceeds
from the sale will be sufficient to provide for the Company's capital needs for
the next approximately six (6) to twelve (12) months, during its research stage
of development.
In addition, management of the Company believes the needs for
additional capital going forward will be derived somewhat from internal revenues
and earnings generated from the sale of its products and services. If the
Company is unable to begin to generate revenues from its anticipated products,
management believes the Company will need to raise additional funds to meet its
cash requirements.
The Company believes that its initial revenues will be primarily dependent
upon the number of distributors it has, the number of customers it has, and the
profit margins on the products it offers. Realization of significant sales of
the Company's products and services during the fiscal year ending December 31,
2000 is vital to its plan of operations. To that end, realization of developing
a stable organization of distributors is paramount to its plan.
(2) No engineering, management or similar report has been prepared or
provided for external use by the Company in connection with the offer of its
securities to the public.
(3) Management believes that the Company's future growth and success will be
largely dependent on its ability to obtain several overseas manufacturers as
clients, to attract a stable distributor force, its ability to target repeat
sales through reusable products, the marketing efforts for its e-commerce site,
and its choice of profitable products.
The Company has yet to incur any research and development costs from July
15, 1999, to present, and the Company does not expect to incur any significant
research amid development expenses during the fiscal year ending June 30, 2001.
(4) The Company expects to purchase regular office equipment, i.e., desks,
calculators, a computer when revenues warrant such purchases, and a
client/manufacturer has hired the Company to do its marketing. The Company does
not have any facilities or equipment to sell at this time.
(5) Management anticipates that it will hire and add 5 full time employees
over the next twelve (12) months, as well as distributors who will be paid on a
commission-only basis. Employees will not be added during Phase I, the research
period. Employees will be added as revenues permit.
(6) From inception in July, 1999 through present, the Company has devoted a
majority of its time on research and development. The Company has incurred start
up costs of $80,000. Richard Hung, individually, has paid all start up costs.
This cost includes all start up costs of attorneys, filing fees, and
accountants. This $80,000.00 start up costs is borne solely by Richard Hung, and
is part of his contribution to the Company, with no expected payback from the
Company.
<PAGE>
B. SEGMENT DATA
There were no revenues from sales since its inception July 15, 1999. Because
there was no revenue, no table showing percentage breakdown of revenue by
business segment or products/service line is included.
C. RESULTS OF OPERATIONS
There were no revenues from sales up to the date of this filing. Since its
inception, July 15, 1999, the Company has formed the Company's organization to
pursue its business strategy.
a) Pre-Operating Expenses. Pre-Operating expenses were not necessary, as all
costs for the Company's legal organization, legal expenses. and financial audits
are included in the start of costs of $80,000, to be paid in full by Richard
Hung, individually.
b) Revenues. The Company is a development state enterprise as defined in SFAS
#7, and has yet to generate any revenues. The Company is devoting substantially
all of its present efforts to: (1) develop the contacts to attract overseas
manufacturers (2) developing plans of operations (network marketing, customer
service, e-commerce), and (3) obtaining sufficient capital to commence full
operations.
D. LIQUIDITY AND CAPITAL RESOURCES
As of the date of this filing, the Company has $67 on hand or in the bank. Until
such time as the Company sets forth and implements its business plan, there
could be a need for additional capital, even though Richard Hung is contributing
his time and expenses at no cost during this time. The Company has prepared an
SB-2 Registration towards that end, and plans to submit the registration to the
SEC shortly.
The receipt of funds from Private Placement Offerings and loans obtained through
private sources by the Company are a possibility to fund the Company until
revenues can be achieved. Since inception, the Company has financed its cash
flow requirements though issuance of common stock and through contributions from
Richard Hung. As the Company expands its activities, it may continue to
experience net negative cash flows from operations, pending receipt of sales
revenues. Additionally the Company may be required to obtain additional
financing to fund operations through Common Stock offerings and bank borrowings,
to the extent available, or to obtain additional financing to the extent
necessary to augment its working capital.
Over the next twelve months, the Company intends to increase its revenues by
obtaining an overseas manufacturer/client and network marketing its products to
consumers in the United States. However, the Company will continue the research
and development of clients/products and in-depth plans. Consequently, the
Company may seek additional financing in order to sustain operations. There can
be no assurance such additional funds will be available or that, if available,
such additional funds will be on terms acceptable to the Company. In either
case, the financing could have negative impact on the financial conditions of
the Company and its Shareholders.
The Company anticipates that it will incur operating losses in the next twelve
months. The Company's lack of operating history make predictions of future
operating results difficult to ascertain. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets. Such risks for the Company
include, but are not limited to, an evolving and unpredictable business model
and the management of growth. To address these risks, the Company must, among
other things, obtain a customer base, implement and successfully execute its
business and marketing strategy, continue to develop its overseas contacts,
provide superior customer services and order fulfillment, respond to competitive
developments, and attract, retain and motivate qualified personnel. There can be
no assurance that the Company will be successful in addressing such risks, and
the failure to do so can have a material adverse effect on the Company's
business prospects, financial condition and results of operations.
<PAGE>
Initial financing is only to provide funds to prove the business be necessary to
obtain manufacturer/clients. The Company hopes to enter into additional funding
arrangements through strategic partnerships, merger, equity offering or debt
offering. Nothing has been secured as of this time.
E. GOVERNMENTAL APPROVAL, REGULATION AND ENVIRONMENTAL COMPLIANCE
Other than general business licensing requirements, management is unaware
of any governmental approval necessary for the Company's operations in the
marketing industry. In addition, management is unaware of existing or probably
governmental regulations on the marketing industry. Management anticipates no
material costs associated with compliance with either federal, state or local
environmental law.
Export laws for Hong Kong are currently favorable for the United States,
according to management. However, there can be no assurance that this condition
will continue and that new laws or embargos or other hazardous enactments could
adversely affect the Company s plan.
F. RISKS ASSOCIATED WITH OPERATIONS
The Company's long-term success is partially predicated on the strength of
obtaining a favorable alliance with an overseas manufacturer with profitable and
marketable products.
Its principal competition consists of entities within the marketing
industry which are well established. The Company's ability to compete against
these more established and more financially stable companies is premised upon
the Company's ability to provide effective network marketing and e-commerce.
Another uncertainty is the dependence on key personnel familiar with the
control, administration, development, and training of distributors. The loss of
Richard Hung, President, could have an adverse effect on its continued
operations.
Although research in the Company indicates that the Internet will continue
with little, if any regulation, and will continue to become a viable marketing
tool, there can be no assurances that the Internet will prove to be a profitable
outlay for the Company in its business plans.
While the Company's plan is being researched and developed thoroughly,
there is no assurance the plan will be accepted in or by the marketplace, nor,
that if it is accepted, that demand will be sufficient to make the Company
profitable. The Company cannot project with certainty the outcome of its
operations, and there are no assurances that the Company will operate profitably
in either the near or long term.
Local, national, and international economic conditions may have a
substantial adverse affect on the efforts of the Company. The Company cannot
guarantee against the possible eventuality of any potential adverse economic
conditions.
G. COMPETITION
The Company competes with numerous other marketing companies. Many of these
competitors have substantially greater resources than eQuorumNet. The Company
has identified a niche in the market as it relates to network marketing, selling
a manufacturer's product on a one-to-one basis to a consumer.
H. DEVELOPING AND CHANGING MARKET
The market conditions for importing products from overseas is continually
evolving and changing. The Company believes the current conditions will continue
favorably for this type of venture. There can be no assurance that the Company's
assessment of the situation is correct, nor that the products it selects will be
accepted by the consumer.
<PAGE>
I. EMPLOYEES
As of the current date, the Company has no paid employees. The Company is
dependent on Richard Hung, President. Mr. Hung does not plan to spend full time
efforts on the research and development of products, plans, and clients during
the first six to twelve months of operation. Once these plans are formulated,
the Company will need to hire full time operational staff as its operations
commence. Mr. Hung is fully prepared to devote full time efforts at that time,
but there can be no assurance that the current full time employment of Mr. Hung
would not offer a better salary and package to Mr. Hung and Mr. Hung could
abandon the Company. The Company's future success also depends on its ability to
attract and retain other qualified personnel, for which competition is intense.
The loss of Mr. Hung or the Company's inability to attract and retain other
qualified employees could have material adverse affect on the Company.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements follow Item 13 of this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
NONE
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The following table sets forth the names, positions with the Company and ages of
the executive officers and directors of the Company. Directors will be elected
at the Company's annual meeting of shareholders and serve for one year or until
their successors are elected and qualify. Officers are elected by the Board, and
their terms of office are, except to the extent governed by employment contract,
at the discretion of the Board.
Name Age Title
---- --- -----
Richard Hung 48 President, Chairman
Duties, Responsibilities and Experience
Richard Hung, President, Chairman
Richard Hung graduated from the University of Toronto, Toronto,
Ontario, Canada, with a B.A.Sc. (Industrial Engineering) in 1976. In 1978, he
received a Bachelor of Commerce, with a major in organization behavior from the
University of Windsor, Windsor, Ontario, Canada, and a M.B.A. with a major in
finance in 1979. l-Ie has more than 15 years of mass volume manufacturing
experience in the consumable electronics industry, and 6 years of multi-level
marketing operations management He speaks fluent English and Chinese (Cantonese,
Chiu Chow), plus elementary Mandarin.
Mr. Hung is currently Senior Vice President/Operations at Applied
International Holdings Ltd, a Hong Kong company operating in Hong Kong, China,
North America and Europe. Applied International Holdings Ltd has 1500 employees
and is involved in consumer electronics manufacturing, and multi-level network
marketing. As Senior Vice President/Operation since 1994, Mr. Hung reports
directly to the Chairman, manages all manufacturing related function, and is
involved in new product development, budget review, P/L. In 1993, Mr. hung was
Vice President/Operations for one of the company's subsidiaries in the United
States that specialized in multi-level network marketing for consumable
products. In that capacity, he was responsible for the customer service center
with more than 300 staff members, managed order entry, customer service, MIS,
purchasing, quality control and shipping departments. As General Manager of
another company subsidiary in 1992, Mr. Hung was responsible for a manufacturing
center with 3000 employees in China, managed all the manufacturing related
departments, and liased with the overseas subsidiaries on the logistics and
shipments.
<PAGE>
From 1987 to 1992, Mr. Hung was employed by Golden Alpha Electronics Ltd,
an electronic company in the IBM compatible market and old fashioned wood
cassette radios. He managed a manufacturing plant in China, was involved in the
product development, toolings, pilot and mass production, worked with customers
in the development and the production of 80286 and 80385 IBM compatibles.
From 1985 to 1986, Mr. Hung was Operations Manager for Commodore Electronic
Ltd, a USA Personal Home Computer Manufacturer. He managed a 24 hour continuous
mass volume production, 6 days a week with total production employees of 1000 in
the Hong Kong factory. He headed Production Engineering, Plant Engineering,
Production and Process Control Engineering departments.
From 1984 to 1985, Mr. Hong was General Manager of Bondwell Computech Ltd,
a computer electronic company engaged in the home and small business computer
industry. He began as the General Manager of one of the international marketing
companies of the group and then as the General Manager of one of the major
manufacturing subsidiaries within the group. He managed the Hong Kong plant
manufacturing, Purchasing, Material Control, Quality Control, Shipping,
Accounting and Personnel, development, and international marketing.
Mr. Hung is not an officer or director of a publicly traded company at this
time.
Notable achievements during his career include:
* Trimmed down the monthly factory operating expenses from HK$I3mil to
HK$9mil while maintaining the same sales value
* Cost reduction via renegotiations with UPS, Federal Express, Visa,
Tel-e-Check
* Improved ship-out time to within 36 hours of sales order placements
* Project leader who organized network marketing conventions with 12,000
attendants
* Improved quality of packing by applying industrial engineering approaches
* Improved profit margins of marketing materials by renegotiations with USA
local vendors
* Maintained an operating profit before tax to an average of HK$l0mil per
month for 10-consecutive months
* Launched production of 10 new products within a six month period
* Shipment of more than 1 million units per month
Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires executive officers
and directors, and persons who beneficially own more than 10% of any class of
the Registrant's equity securities to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC"). Executive officers, directors and beneficial owners of more than 10% of
any class of the Registrant's equity securities are required by SEC regulations
to furnish the Registrant with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the Registrant
during or with respect to fiscal 1999, and certain written representations from
executive officers and directors, the Registrant is aware that each such
reporting persons inadvertently failed to file a Form 3 at the time the
Registrant became registered under Section 12 of such act (January 17, 2000).
Such forms are now in the process of being prepared and filed.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
Richard Hung has not received, nor is he projected to receive, any compensation
for his services, including his capacities as Chairman and President other than
the issuance of the Company's Common Stock as set forth in Item 4 above.
Should the Company become profitable and produce commensurate cash flows from
operations and/or through the sale of strategic investments, there may be some
level of compensation paid to him. However, this will be subject to approval by
the Company's Board of Directors. It is the responsibility of the Company's
Officers and its Board of Directors to determine the timing of any remuneration
for key personnel. Such determination and timing thereof will be based upon such
factors as positive cash flow to include equity sales, operating cash flows,
capital requirements, and a positive cash flow balance in excess of $12,500 per
month. At the time cash flow reaches this point, and appears to be sustainable,
the Officers and Board of Directors will again readdress the compensation of its
key personnel and set forth a more formal and complete plan for remuneration in
line with operations of the Company. At present, the Company's management cannot
accurately estimate the point when revenues and operating cash flows will be
sufficient enough to implement this compensation plan, nor are they able to
estimate the exact amount of compensation at this time.
There are no annuity, pension, or retirement benefits proposed to be paid of
Officers, Directors, or employees of the Company in the event of retirement at
normal date pursuant to any presently existing plan provided or contributed to
by the Company, or any of its subsidiaries, if any.
KEY OFFICER EMPLOYMENT AGREEMENTS
No employment contracts have been negotiated or signed as yet. However, the
Company plans on having all key employees and officers sign a detailed
employment contract as appropriate.
COMPENSATION OF DIRECTORS
All directors will be reimbursed for expenses incurred in attending Board or
committee meetings.
STOCK OPTION PLAN AND NON-EMPLOYEE DIRECTORS' PLAN
No stock option plan has been set forth, and no non-employee directors' plan has
been instituted. The Company may decide, at a later date, and reserves the right
to, initiate these plans as deemed necessary by the Board.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of June 30, 2000, with
respect to the beneficial ownership of Common Stock by (i) each person who to
the knowledge of the Company, beneficially owned or had the right to acquire
more than 5% of the Outstanding Common Stock, (ii) each director of the Company
and (iii) all executive offices and directors of the Company as a group.
Name of Beneficial Owner (I) Number Percent
of Shares of Class (2)
Richard Hung 7,330,000 98%
301 W. Armour #1000
Kansas City, MO 64111
All Directors & Officers as a Group 7,330,000
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of, a security, or the sole or shared
investment power with respect to a security (i.e., the power to dispose of, or
to direct the disposition of, a security). In addition, for purposes of this
table, a person is deemed, as of any date, top have "beneficial ownership" of
any security that such person has the right to acquire within 60 days after such
date.
<PAGE>
(2) Figures are rounded to the nearest percentage.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Business Consultants. The Company has relied on J. Thomas Howard, LTD as key
business consultants while in its development stage. J. Thomas Howard, LTD has
provided the assistance in preparing the Company to become a reporting company.
For this assistance, the Company has issued 90,000 shares of Common Stock at
$.02 per share to companies under control by J. Thomas Howard, LTD. One of
those companies, Missouri Investor's Trust, LC, transferred 22,500 of those
shares to True Law firm for legal fees incurred on behalf of J. Thomas Howard,
LTD.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
Not applicable.
PART F/S
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
JUNE 30, 2000
WILLIAMS & WEBSTER PS
CERTIFIED PUBLIC ACCOUNTANTS
BANK OF AMERICA FINANCIAL CENTER
W 601 RIVERSIDE, SUITE 1940
SPOKANE, WA 99201
(509) 838-5111
<PAGE>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
JUNE 30, 2000
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity 4
Statement of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6
<PAGE>
Board of Directors
eQuorumNet
301 W. Armour #1000
Kansas City, MO 64111
Independent Auditor's Report
We have audited the accompanying balance sheet of eQuorumNet (a development
stage company) as of June 30, 2000 and the related statements of operations,
cash flows, and stockholder's equity for the period from July 15, 1999
(inception) through 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 eQuorumNet as of June 30, 2000
and the results of its operations and its cash flows for the period from July
15, 1999 (inception) to June 30, 2000, in conformity with generally accepted
accounting principles.
As discussed in Note 2, the Company has been in the development stage since its
inception and has no revenues. Realization of a major portion of the assets is
dependent upon the Company's ability to meet its future financing requirements,
and the success of future operations. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
regarding those matters are described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
August 3, 2000
<PAGE>
<TABLE>
<CAPTION>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JUNE 30, 2000
<S> <C>
A S S E T S
CURRENT ASSETS
Cash $ 67
----------------------
TOTAL CURRENT ASSETS 67
----------------------
TOTAL ASSETS $ 67
======================
L I A B I L I T I E S & S T O C K H O L D E R S ' E Q U I T Y
TOTAL CURRENT LIABILITIES $ -
----------------------
COMMITMENTS AND CONTINGENCIES -
----------------------
STOCKHOLDER'S EQUITY
Common stock, 50,000,000 shares authorized,
$.0001 par value; 7,500,000 shares
issued and outstanding 750
Additional paid-in capital 83,423
Deficit accumulated during development stage (84,106)
----------------------
TOTAL STOCKHOLDERS' EQUITY 67
----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 67
======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FROM JULY 15, 1999 (INCEPTION) TO JUNE 30, 2000
<S> <C>
R E V E N U E S $ -
-------------------------
E X P E N S E S 84,106
-------------------------
TOTAL OPERATING EXPENSES 84,106
-------------------------
LOSS BEFORE INCOME TAXES (84,106)
INCOME TAXES -
-------------------------
NET LOSS $ (84,106)
=========================
Net loss per common share $ (0.01)
=========================
Basic and diluted weighted average number of
common stock shares outstanding 7,500,000
=========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD OF JULY 15, 1999 (INCEPTION) TO JUNE 30, 2000
Common Stock Deficit
------------------- Accumulated Total
Number Additional During Stockholders'
of Shares Amount Paid-in Capital Development Stage Equity
---------- ------- --------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock in July 1999
for cash at an average of $.0006 per share 7,500,000 $ 750 $ 3,423 $ - $ 4,173
Additional capital contributed by the president
of the Company - - 80,000 - 80,000
Loss for the period ending June 30, 2000 - - - (84,106) (84,106)
----------- ------- --------------- ----------------- -------------
Balance at June 30, 2000 7,500,000 $ 750 $ 83,423 $ (84,106) $ 67
=========== ======= =============== ================= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD OF JULY 15, 1999 (INCEPTION) TO JUNE 30, 2000
<S> <C>
Cash flows from operating activities:
Net loss $ (84,106)
--------------------------
Net cash used in operating activities (84,106)
--------------------------
Cash flows from investing activities: -
--------------------------
Cash flows from financing activities:
Cash contributed by president of the Company 80,000
Issuance of stock 4,173
--------------------------
Net cash provided by financing activities 84,173
--------------------------
Net increase in cash 67
Cash, beginning of period -
--------------------------
Cash, end of period $ 67
==========================
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest and income taxes:
Interest $ -
==========================
Income taxes $ -
==========================
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Start-up costs paid by shareholder $ 80,000
==========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
eQuorumNet, (hereinafter "the Company"), was incorporated in July 1999 under the
laws of the State of Nevada primarily for the purpose of internet marketing of
electronics, nutritional and personal care products. At June 30, 2000, the
Company is operating from the residence of a business associate rent free, in
Kansas City, Missouri. In August 1999, the Company formed eQuorumNet, LLC, a
limited liability company, to facilitate the Initial Public Offering (IPO) of
the Company's stock. This limited liability company was dissolved upon
finalization of the Company's IPO.
The Company is in the development stage and as of June 30, 2000 had not realized
any significant revenues from its planned operations.
The Company's year-end is June 30.
NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of eQuorumNet is presented to
assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management which is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Development Stage Activities
------------------------------
The Company has been in the development stage since its formation on July 15,
1999. It is primarily engaged in internet marketing.
Going Concern
--------------
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
As shown in the accompanying financial statements, the Company has incurred a
deficit of $84,106 since inception. The Company, being a developmental stage
enterprise, is currently putting technology in place which will, if successful,
mitigate these factors which raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.
Management has established plans designed to increase the sales of the Company's
products. Management intends to seek new capital from new equity securities
issuances that will provide funds needed to increase liquidity, fund internal
growth and fully implement its business plan.
6
<PAGE>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
----------------------------
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Accounting Method
------------------
The Company's financial statements are prepared using the accrual method of
accounting.
Basic and Diluted Loss per share
-------------------------------------
Basic loss per share was computed by dividing the net loss by the weighted
average number of shares outstanding during the period. The weighted average
number of shares was calculated by taking the number of shares outstanding and
weighting them by the amount of time that they were outstanding. Diluted loss
per share is the same as basic loss per share as there are no common stock
equivalents outstanding.
Income Taxes
-------------
No provision for taxes or tax benefit has been reported in the financial
statements, as there is not a measurable means of assessing future profits or
losses.
Year 2000
----------
Like other companies, eQuorum.Net could be adversely affected if the computer
systems the Company, its suppliers or customers use do not properly process and
calculate date-related information and data from the period surrounding and
including January 1, 2000. This is commonly known as the 'Year 2000' issue.
Additionally, this issue could impact non-computer systems and devices such as
production equipment and elevators, etc. As of June 30, 2000, the Company does
not have any evidence of problems associated with the year 2000 issue.
The Company has not purchased any software or hardware. When the Company does
purchase software and hardware, it will determine at that time if there could be
any adverse effects to the Company's operations regarding Year 2000 issues.
Management also believes that Year 2000 issues should not adversely affect the
ability of its clients and customers to conduct business with the Company. Any
costs associated with Year 2000 compliance will be expensed when incurred.
Fair Value of Financial Instruments
---------------------------------------
Unless otherwise stated, the carrying amounts for the Company's cash, marketable
securities, accounts receivable, accounts payable, notes payable and accrued
liabilities approximate their fair value.
7
<PAGE>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impaired Asset Policy
-----------------------
In March 1995, the Financial Accounting Standards Board issued a statement
titled "Accounting for Impairment of Long-lived Assets." In complying with this
standard, the Company will review its long-lived assets quarterly to determine
if any events or changes in circumstances have transpired which indicate that
the carrying value of its assets may not be recoverable. The Company does not
believe any adjustments are needed to the carrying value of its assets at June
30, 2000.
Use of Estimates
------------------
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
Derivative Instruments
-----------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 122, "Accounting for Derivative
Instruments and Hedging Activities." This standard establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires that an entity recognizes all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
At June 30, 2000, the Company has not engaged in any transactions that would be
considered derivative instruments or hedging activities.
NOTE 3 - PROPERTY AND EQUIPMENT
At June 30, 2000 the Company does not own any property or equipment.
NOTE 4-COMMON STOCK
Upon incorporation, the Company authorized the issuance of 50,000,000 shares of
common stock at a par value of $0.0001 per share of which 7,500,000 shares are
outstanding. Holders of shares of common stock are entitled to one vote for
each share on all matters to be voted on by the stockholders, but have no
cumulative voting rights. Holders of shares of common stock are entitled to
share ratably in dividends, if any, as may be declared by the Board of Directors
in its discretion, from funds legally available therefor. The Company has not
authorized any preferred stock, convertible stock, warrants or options as of
June 30, 2000.
8
<PAGE>
EQUORUMNET
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 5 - CONTRIBUTED CAPITAL
The major stockholder of the Company contributed $80,000 for the payment of
expenses. This amount was recorded as additional paid-in capital.
9
<PAGE>
SIGNATURE PAGE
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EQUORUMNET
By /S/ Richard Hung, President
8/25/00
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /S/ Richard Hung, President, Secretary, Treasurer, Director
8/25/00
<PAGE>
