<PAGE>
As filed with the Securities and Exchange Commission on July 28, 2000
Registration No. 333-36620
==========================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
ENTREPORT CORPORATION
(Name of small business issuer in its charter)
FLORIDA 7379 65-0703923
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
2790 BUSINESS PARK DRIVE, SUITE B
VISTA, CALIFORNIA 92083
760-597-4800
(Address and telephone number of principal executive offices
and principal place of business)
--------------------------------------
WILLIAM A. SHUE
ENTREPORT CORPORATION
2790 BUSINESS PARK DRIVE, SUITE B
VISTA, CALIFORNIA 92083
(760) 597-4800
(Name, address and telephone number of agent for service)
---------------------------
COPIES TO:
DANIEL K. DONAHUE, ESQ.
DANIEL C. BURNHAM, ESQ.
OPPENHEIMER WOLFF & DONNELLY LLP
500 NEWPORT CENTER DRIVE, SUITE 700
NEWPORT BEACH, CA 92660
(949) 823-6000
---------------------------
APPROXIMATE DATE OF PROPOSED SALE TO
THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS
REGISTRATION STATEMENT BECOMES EFFECTIVE.
----------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
----------------------------------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=================================================================================================================
TITLE OF EACH CLASS OF PROPOSED PROPOSED
SECURITIES AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PRICE PER SHARE OFFERING PRICE REGISTRATION FEE
------------------------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 5,841,114 Shares $ 4.44 (1) $ 25,934,546 $ 6,846
------------------------------- ------------------ ------------------ ------------------ ------------------
Common Stock, $.001 par value 250,000 Shares $ 3.00 $ 750,000 $ 198
------------------------------- ------------------ ------------------ ------------------ ------------------
Total 6,091,114 Shares $ 26,684,546 $ 7,044
------------------------------- ------------------ ------------------ ------------------ ------------------
Previously Paid $ 7,139
------------------------------- ------------------ ------------------ ------------------ ------------------
TOTAL DUE 0
===================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933, based
upon the last sale of the Registrant's common stock on May 8, 2000, as reported
in the over-the-counter market.
-----------------------
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 SECTION 8(a), MAY
DETERMINE.
<PAGE>
PROSPECTUS
6,091,114 SHARES
[ENTREPORT logo here]
COMMON STOCK
This prospectus relates to the offer and sale of 5,841,114 shares of
our common stock by the selling stockholders identified in this prospectus and
our offer and sale of up to 250,000 shares of our common stock. The selling
stockholders will determine when they will sell their shares, and in all cases,
will sell their shares at the current market price or at negotiated prices at
the time of the sale. Although we have agreed to pay the expenses related to the
registration of the shares being offered, we will not receive any proceeds from
the sale of the shares by the selling stockholders. We intend to sell our shares
from time to time for cash or noncash consideration, including services
rendered, at a purchase price of $3.00 per share.
Our common stock is currently traded on the American Stock Exchange
under the symbol "ENP." On July 18, 2000, the last reported sale price of the
common stock on the AMEX was $3.00 per share.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 3 TO READ ABOUT CERTAIN
FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus is , 2000
-------------
<PAGE>
TABLE OF CONTENTS
Summary.......................................................................1
Risk Factors..................................................................3
Use of Proceeds...............................................................5
Market for Common Equity and Related
Stockholder Matters..........................................................5
Selling Stockholders..........................................................6
Management's Discussion and Analysis or
Plan of Operation...........................................................10
Business.....................................................................11
Management...................................................................18
Principal Stockholders.......................................................22
Description of Securities....................................................23
Legal Matters................................................................23
Experts......................................................................24
Changes in and Disagreements with
Accountants.................................................................24
Available Information........................................................24
Index to Financial Statements................................................25
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER DESCRIBED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY US. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
UNDER THIS PROSPECTUS SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN OUR AFFAIRS SINCE THE DATE HEREOF OR SINCE THE DATE
OF ANY DOCUMENTS INCORPORATED HEREIN BY REFERENCE. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES, OR AN OFFER OR SOLICITATION IN
ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN EACH STATE.
-ii-
<PAGE>
SUMMARY
YOU SHOULD READ THIS SUMMARY IN CONJUNCTION WITH THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
THIS PROSPECTUS CONTAINS FORMS OF FORWARD-LOOKING STATEMENTS. WHEN USED IN THIS
PROSPECTUS, THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE," "ESTIMATE" AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS
ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS, WHICH ARE
IDENTIFIED AND DESCRIBED IN THE "RISK FACTORS" SECTION, BELOW. SHOULD ONE OR
MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING
ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY FROM THOSE ANTICIPATED,
ESTIMATED, OR PROJECTED AND THE VARIATIONS MAY BE MATERIAL. WE CAUTION YOU NOT
TO PLACE UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS, ALL OF WHICH
SPEAK ONLY AS OF THE DATE MADE.
THE OFFERING
This offering relates to the offer and sale of 5,841,114 shares of our
common stock by the selling stockholders identified in this prospectus. The
selling stockholders will determine when they will sell their shares, and in all
cases, will sell their shares at the current market price or at negotiated
prices at the time of the sale. Although we have agreed to pay the expenses
related to the registration of the shares being offered, we will not receive any
proceeds from the sale of the shares by the selling stockholders.
We are also offering for sale up to 250,000 shares of our common stock
at a price of $3.00 per share. While we may sell some or all of the 250,000
shares for cash, it is our intention to issue the 250,000 shares for noncash
consideration, including services rendered. We have no plans or arrangements at
this time to issue any of the 250,000 common shares and we do not intend to
issue any of the 250,000 common shares for noncash consideration except to
non-affiliates in arms' length transactions.
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below has been derived from
our financial statements. You should read this information in conjunction with
the financial statements and notes thereto, included elsewhere in this
memorandum.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
For the Period
October 4, 1996
Three Months Ended (Inception)
Year Ended December 31, March 31, though March 31,
1999 1998 2000 1999 2000
----------------- ---------------- ---------------- ---------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net revenue $ 11,911 $ -0- $ 5,120 $ -0- $ 17,031
Net loss (1,891,812) 800 (921,352) (376,817) (2,818,989)
</TABLE>
BALANCE SHEET DATA:
December 31, 1999 March 31, 2000
----------------- -----------------
(unaudited)
Cash and cash equivalents $ 1,458,139 $ 7,116,944
Working capital 1,185,869 6,223,218
Total assets 2,433,618 8,244,453
Total liabilities 477,667 919,441
Total stockholders' equity 1,955,951 7,325,012
<PAGE>
OUR OFFICES
Our executive offices are located at 2790 Business Park Drive, Suite B,
Vista, California 92083. Our phone number is (760) 597-4800. Our Internet
address is www.entreport.com. Information contained on our web site shall not be
deemed to be a part of this prospectus.
-2-
<PAGE>
RISK FACTORS
WE ARE A DEVELOPMENT STAGE COMPANY AND HAVE NO SIGNIFICANT OPERATING
HISTORY. We were founded in 1996 and began our current Internet-based business
of developing web sites offering general information, communication tools,
training and other goods and services to members of certain industry specific
Internet communities in March 1999. Our activities to date have included the
market analysis for and development of our initial web sites. In April 2000 we
launched www.isucceed.com, our web site for real estate professionals. As of the
date of this prospectus, however, we have not generated any meaningful revenues
on which you can evaluate our potential for future success.
As a new company, we are subject to all of the risks, expenses, and
uncertainties frequently encountered by companies in the new and rapidly
evolving markets for Internet-related products and services. Any unanticipated
expenses, problems, or technical difficulties may result in material delays both
in the completion of our web sites and in offering our services to the market.
WE HAVE GENERATED VERY LIMITED REVENUES AND WE HAVE GENERATED OPERATING
LOSSES TO DATE. From our inception in October 1996 to March 31, 2000, we
generated aggregate revenues of only $17,031 and incurred a cumulative loss of
$2,818,989. We expect to continue incurring operating losses until we are able
to derive meaningful revenues from our web sites.
WE HAVE LIMITED SOURCES OF FINANCING AND WILL REQUIRE ADDITIONAL
CAPITAL TO SUPPORT OUR GROWTH. We had $6,223,218 of working capital as of March
31, 2000. While we believe that our present working capital is sufficient to
fulfill our needs through December 31, 2000, we believe that we will require
significant additional capital in order to fund the development and launch of
our future web sites. If we are unable to obtain additional financing in
sufficient amounts or on acceptable terms, our operating results and prospects
could be adversely affected.
OUR BUSINESS MODEL IS NEW AND HAS NOT BEEN PROVEN BY US OR ANYONE ELSE.
We have not commenced commercial operations based on our business model and, to
our knowledge, no other business has engaged in operations primarily devoted to
offering information, communication tools, training and other goods and services
to members of industry specific Internet communities. Although we believe that
the uniqueness of our business model offers advantages, it is untried and
unproven so we have no assurances of consumer acceptance or market success.
While there are certain businesses engaged primarily in the business of
developing communities of personalized web sites, these businesses are not as
target specific as we are, thus their success may not be an indicator of our
potential success.
BECAUSE WE HAVE FEW PROPRIETARY RIGHTS, OTHERS CAN PROVIDE PRODUCTS AND
SERVICES SUBSTANTIALLY EQUIVALENT TO OURS. We hold no patents. We believe that
most of the technology used by us in the design and implementation of our web
sites is generally known and available to others. Consequently, others can
design and implement web sites that are substantially equivalent to ours. We
rely on a combination of confidentiality agreements and trade secret law to
protect our confidential information. Additionally, we restrict access to
confidential information on a "need to know" basis. However, there can be no
assurance that we will be able to maintain the confidentiality of our
proprietary information. If our trademark or other proprietary rights are
violated, or if a third party claims that we violate their trademark or other
proprietary rights, we may be required to engage in litigation. Proprietary
rights litigation tends to be costly and time consuming. Bringing or defending
claims related to our proprietary rights may require us to redirect our human
and monetary resources to address those claims.
WE ARE IN A HIGHLY COMPETITIVE BUSINESS WITH LOW BARRIERS TO ENTRY. The
on-line commerce market is new, rapidly evolving and intensely competitive. We
expect competition to intensify in the future because barriers to entry are
minimal and current and new competitors can launch new web sites at a relatively
low cost. To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our on-line products and services.
The Internet and the on-line commerce industry are characterized by rapid
technological change, changes in user and customer requirements and preferences
and frequent product and service introductions. If competitors introduce
products and services embodying new technologies, then our existing web sites
may become obsolete. Our future success will depend on our ability to enhance
our existing services and to develop new services that address the increasingly
sophisticated and varied needs of our prospective subscribers.
-3-
<PAGE>
WE MAY BE SUBJECT TO CLAIMS AS A RESULT OF INFORMATION PUBLISHED ON,
POSTED ON OR ACCESSIBLE FROM OUR INTERNET SITES. We may be subject to claims of
defamation, negligence, copyright or trademark infringement relating to the
information contained on our web sites, whether written by us or third parties.
These types of claims have been brought against on-line services in the past and
can be costly to defend regardless of the merit of the lawsuit. Although recent
federal legislation protects on-line services from some claims when the material
is written by third parties, this protection is limited. Furthermore, the law in
this area remains in flux and varies from state to state. While no claims have
been made against us to date, our business could be seriously harmed if one were
asserted.
OUR FUTURE OPERATING RESULTS ARE UNPREDICTABLE, WHICH MAY CAUSE OUR
STOCK TO BE VOLATILE. Our revenues and operating results may fluctuate
significantly from quarter to quarter, which can lead to significant volatility
in our stock's price and volume. Factors which lead to such fluctuations include
the following, many of which are beyond our control:
o our ability to attract and retain new members and maintain customer
satisfaction;
o new web sites, services and products introduced by us or by our
competitors;
o price competition;
o decreases in the level of growth, use of, or consumer acceptance of,
the Internet and other on-line services for the purchase of products
and services;
o our ability to upgrade and develop our products, services systems and
infrastructure;
o traffic levels on our web sites and our ability to convert that
traffic into subscribers;
o technical difficulties or system downtime affecting the Internet or
on-line services generally, or the operation of our web sites; and
o government regulations related to use of the Internet for commerce or
sales and distribution of products and services.
THERE IS NO ACTIVE TRADING MARKET FOR OUR SHARES. Our common stock is
traded on the American Stock Exchange under the symbol "ENP." Trading activity
in our stock has fluctuated widely and at times has been limited. We cannot
guarantee that a consistently active trading market for our stock will develop
at any time in the future.
-4-
<PAGE>
USE OF PROCEEDS
We are registering 5,841,114 shares for sale by the selling
stockholders and we are offering up to 250,000 shares for sale at a price of
$3.00 per share. We will receive no proceeds from the sale of the selling
stockholders' shares. We intend to sell the 250,000 shares for noncash
consideration, including services rendered and, accordingly, we do not expect to
receive any cash proceeds from the sale of those shares. If, however, we sell
some or all of the shares for cash, we expect to use the proceeds for working
capital. But we retain the right to use such proceeds, if any, for other uses as
we see fit, in our sole discretion.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock has traded on the American Stock Exchange under the
symbol "ENP" since June 16, 2000. Prior to that date, our common stock traded on
the OTC Bulletin Board under the symbol "ERTE." The following table shows the
high and low closing prices for our common stock since the inception of trading
in February 1999 as reported by the OTC Bulletin Board and the American Stock
Exchange. We consider our stock to be "thinly traded" and any reported sale
prices may not be a true marked-based valuation of our stock.
HIGH LOW
1999
First quarter (from February 16, 1999) $ 2.25 $ .06
Second quarter 5.25 1.00
Third quarter 7.75 1.75
Fourth quarter 6.94 1.75
2000
First quarter $ 10.38 $ 4.50
Second quarter 8.63 3.13
Third Quarter (through July 18, 2000) 3.44 3.00
As of the date of this prospectus, we had approximately 149 record holders of
our common stock.
-5-
<PAGE>
SELLING STOCKHOLDERS
This prospectus relates to the offer and sale of 5,841,114 shares of
our common stock by the selling stockholders identified below. With the
exception of Tony Acone and Scott Lucas, none of the selling stockholders are or
have been affiliates of ours. Mr. Acone has served on our board since November
1999 and Mr. Lucas has served on our board since April 2000. Prior to his
appointment to our board, Mr. Acone purchased 25,000 shares and Mr. Lucas
purchased 150,000 shares of our common stock in our private placement offerings.
The selling stockholders will determine when they will sell their
shares, and in all cases, will sell their shares at the current market price or
at negotiated prices at the time of the sale. Although we have agreed to pay the
expenses related to the registration of the shares being offered, we will not
receive any proceeds from the sale of the shares by the selling stockholders.
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of the date of this prospectus by each of the
selling stockholders:
<TABLE>
<CAPTION>
Shares Beneficially Owned
Prior to Offering
-------------------------
Number of Number of Shares Beneficially Owned
Name Shares owned Shares offered After Offering(1)
------------------------------ -------------- -------------- -------------------------
<S> <C> <C> <C>
ABS LLC 50,000 50,000 0
Acone, Tony(2) 175,000 25,000 150,000
Andrews, Calvin P. & Carrie M. 25,000 25,000 0
Bi Coastal Consulting Corp. 75,000 75,000 0
Blomquist, Rick 10,000 10,000 0
Blomquist, William G. 5,000 5,000 0
Bradford, John D. 13,000 13,000 0
Copeland, Alfred T. 5,000 5,000 0
Cutler, Frank 200,000 200,000 0
The Del Mar Consulting
Group, Inc. 500,000 133,334 366,666
Dunlap, Brad C. 1,000 1,000 0
Feshbach, Matthew L. 50,000 50,000 0
Furla, George 137,500 137,500 0
Furla, Leo G. & Angelica L. 12,500 12,500 0
Furla, Peter 25,000 25,000 0
Furla, Spero 25,000 25,000 0
Galanis, Themis G. 25,000 25,000 0
Gilford Financial Corp. 5,000 5,000 0
Jonathan & Nancy Glase
Family Trust dtd. 12/16/98 25,000 25,000 0
Gray, Charles C. 20,000 20,000 0
Green, Robert 25,000 25,000 0
Gunther Family Trust 50,000 50,000 0
The Halo Group, LLC 47,500 47,500 0
Hardy, Thomas 15,000 15,000 0
N. Herrick Irrevocable
Securities Trust 50,000 50,000 0
Hixon, Barry C. 500 500 0
Santa Barbara Bank & Trust
Custodian fbo Jason F. Hughes
Roth IRA 2,500 2,500 0
Hughes, Jason F. 1,500 1,500 0
KAMC Corporation 131,350 131,350 0
IGSB-Karan I, LLC 486,080 486,080 0
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned
Prior to Offering
-------------------------
Number of Number of Shares Beneficially Owned
Name Shares owned Shares offered After Offering(1)
------------------------------ -------------- -------------- -------------------------
<S> <C> <C> <C>
Santa Barbara Bank & Trust
Custodian fbo Steven L.
Karan Roth IRA 9,920 9,920 0
Arthur G. Kaiser Profit Sharing
Trust dtd. 3/8/74 50,000 50,000 0
Kearns, Donald B. & Jean K.
Wickersham 15,000 15,000 0
Kieft, Gerald N. 1,000 1,000 0
Prudential Securities C/F
Elizabeth C. Kennedy IRA 20,000 20,000 0
Knowles Family Trust
dtd. 4/3/96 50,000 50,000 0
Kossoff, Jerome & Maxine 50,000 50,000 0
Liberty View Fund LLC 67,500 67,500 0
Liberty View Funds, L.P. 382,500 382,500 0
The Licklider Living Trust
dtd. 5/2/86 125,000 125,000 0
Marchese, Frank 12,500 12,500 0
Miller, Michael 25,000 25,000 0
Millennium Capital Corporation 25,000 25,000 0
Karen Misasi-Humphreys
Roth IRA 5,000 5,000 0
Bear Stearns Securities Corp.
C/F Steven Mizel Roth IRA 50,000 50,000 0
Montgomery, J.D. 5,000 5,000 0
Pappas, Nicholas C. 12,500 12,500 0
Reichl, George 12,500 12,500 0
Remes, Peter C. 12,500 12,500 0
Richter, Roger 25,000 25,000 0
Romer, Russell & Linda L. 12,500 12,500 0
Roth Capital Partners(3) 377,500 377,500 0
Rothman, Henry 25,000 25,000 0
Schachner, Mark 50,000 50,000 0
Schmid, Jason T. 2,500 2,500 0
Schmid, Jeffrey L. 15,000 15,000 0
Schmid, Lewis R. 22,500 22,500 0
Shapiro, Craig 25,000 25,000 0
Coleman Fine Arts Ltd.
Defined Benefit Pension Plan 25,000 25,000 0
St. Claire Capital
Management, Inc. 12,500 12,500 0
Teal Fund, L.P. 125,000 125,000 0
Tucillo, John 7,000 7,000 0
Walshe, Joseph A. 20,000 20,000 0
WH Partners 75,000 75,000 0
Willey, Frank P. 25,000 25,000 0
Stuart Zimmerman Revocable
Trust dtd. 3/26/97 25,000 25,000 0
Bridge Ventures, Inc. 25,000 25,000 0
Posner, Linda 25,000 25,000 0
Jagid, Bruce 12,500 12,500 0
Lucas, Scott G.(4) 170,000 150,000 20,000
Lava Investments Limited 250,000 250,000 0
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned
Prior to Offering
-------------------------
Number of Number of Shares Beneficially Owned
Name Shares owned Shares offered After Offering(1)
------------------------------ -------------- -------------- -------------------------
<S> <C> <C> <C>
Emmett, Randall 50,000 50,000 0
Trencher, Christopher 10,000 10,000 0
Copeland, Alfred T. 100,000 100,000 0
Wachtel, William B. 50,000 50,000 0
Gail A. Doyle Revocable
Trust dtd. 12/12/94 12,500 12,500 0
Ronald C. Erbetta & Sandra F.
Erbetta Family Trust
dtd. 3/2/88 12,500 12,500 0
Merlino, Frank A. 12,500 12,500 0
Anthony Erbetta Declaration
of Trust 50,000 50,000 0
London, Robert S. 250,000 250,000 0
Primo Capital Growth Fund 75,000 75,000 0
Rosebud Capital Growth
Fund Ltd. 75,000 75,000 0
Stanley Hollander 39,000 39,000 0
John Muradian & Stacey
Muradian, JTWROS 20,000 20,000 0
E&M Family Living Trust
dtd. 11/28/95 12,500 12,500 0
Glenn Lyons and Nancy Gerdt
Trust dtd. 5/27/92 12,500 12,500 0
DiManno, Michael A. 7,500 7,500 0
Jensen, C. James 50,000 50,000 0
Matulich, Jay and Kathy 7,500 7,500 0
Gabbert, Roger D. 17,000 17,000 0
Carpenter, Richard S. 10,000 10,000 0
Lamberson, Jeff 10,000 10,000 0
Hawkins, Michael W. 12,500 12,500 0
Beller, Gary L. 12,500 12,500 0
Wolfley, D. Dennis 2,500 2,500 0
Rothchild, Joseph B. & Sarah J. 50,000 50,000 0
Sandman, Sheila 11,000 11,000 0
Goto, Eric K. 10,000 10,000 0
Serra, Jose E. & Cecilia P. 25,000 25,000 0
Koretz, Allan R. 12,500 12,500 0
Copeland, Thomas G. 25,000 25,000 0
Copeland, Thomas G. 50,000 50,000 0
Knowles, Michael A 25,000 25,000 0
Altavilla, Jr., Anthony D. 15,000 15,000 0
Altavilla, Jr., Anthony D. 10,000 10,000 0
McCarthy, Thomas G. 12,500 12,500 0
Frankson, Carl 10,000 10,000 0
Terry Paranych Group, Ltd. 12,500 12,500 0
Reichl, George 15,000 15,000 0
Reichl, George 27,500 27,500 0
Trencher, Christopher 25,000 25,000 0
Kauser Partners 100,000 100,000 0
Anderson, Carl A. 5,000 5,000 0
Gefsky, H. Arnold 5,000 5,000 0
Intrepid Securities Ltd. 237,430 237,430 0
Jacobs, Alan 7,500 7,500 0
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned
Prior to Offering
-------------------------
Number of Number of Shares Beneficially Owned
Name Shares owned Shares offered After Offering(1)
------------------------------ -------------- -------------- -------------------------
<S> <C> <C> <C>
Jacobs, Michael 7,500 7,500 0
Ingleby, Raymond S. 200,000 200,000 0
Fillet, Stephen W. 12,000 12,000 0
Trinity American Corporation 50,000 50,000 0
Sloan, Paul 25,000 25,000 0
Howe, H. Page 5,000 5,000 0
TOTAL 6,377,780 5,841,114 536,666
</TABLE>
------------
(1) Assumes all of the offered shares are sold.
(2) Includes options granted to Mr. Acone to purchase 150,000 shares of common
stock.
(3) Represents shares issuable under a presently exercisable common stock
purchase warrant.
(4) Includes options granted to Mr. Lucas to purchase 20,000 shares of common
stock.
-9-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
We are a development stage company engaged in developing web sites on
the Internet for purposes of offering information, communication tools and
training to members of certain industry specific Internet communities. We intend
to generate revenue through:
o commissions earned on the sale of products and services at our web
store;
o membership fees charged to subscribers to our web sites;
o advertising income from third party advertisers at our web sites; and
o percentage interests in the income derived by third parties who
provide seminars, training and speeches at our web sites.
Our business activities from inception through approximately April 2000
consisted of market analysis for potential web sites, including in-house beta
testing of several industry specific web sites for which we have received
approximately $11,900 in revenue through March 31, 2000. In addition, through
March 31, 2000 we generated approximately $5,100 in revenues from sponsorship
fees in connection with the marketing seminars we discuss below. In April 2000,
we launched our initial web site devoted to residential real estate agents
located at www.isucceed.com. However, as of the date of this prospectus we have
not received material revenue from operations. Since April 2000, our business
activities have included:
o the marketing of our real estate site at www.isucceed.com, through
the conduct of approximately 25 seminars to promote the site as of
the date of this prospectus;
o the development of certain strategic relationships with third parties
for purposes of procuring content and marketing support;
o continuing market analysis of additional web sites devoted to other
professional and industry groups; and
o expansion of our in-house technology capabilities.
Over the next 12 months, we intend to continue the development and
marketing of our isucceed.com web site and commence development of other
industry specific web sites.
We have financed our activities to date through sales of securities.
From March through May 1999, we conducted a private placement sale of
convertible notes for gross proceeds of $695,000. The principal amount of the
notes were convertible into shares of common stock at rates of $2.00 to $3.00
per share. In June 1999, all $695,000 in principal was converted into a total of
267,500 shares of common stock. During the period from August to January 2000,
we conducted a private placement sale of 1,524,430 shares of common stock at
$2.00 per share for gross proceeds of $3,048,280. During February and March
2000, we conducted a private placement sale of 3,525,000 shares of common stock
at $2.00 per share for gross proceeds of $7,050,000, which resulted in net
proceeds of approximately $5,802,000 after deduction of offering expenses.
As of March 31, 2000, we had working capital of $6,223,218, which we
believe to be sufficient to satisfy our estimated working capital requirements
through December 31, 2000. However, we believe that we will need significant
additional working capital during fiscal 2001. There can be no assurance that we
will be able to obtain sufficient additional capital to fund our working capital
requirements in a timely manner.
As of the date of this prospectus, we have 45 full time employees. We
intend to employ an additional 26 people over the next 90 days.
-10-
<PAGE>
BUSINESS
GENERAL
We are engaged in the business of developing and operating web sites to
provide training, information and services to industry specific groups. In April
2000, we launched our first web site, www.isucceed.com, which is dedicated to
the approximately 1,000,000 residential real estate agents located in the United
States and Canada. As of the date of this prospectus, we have entered into
agreements with over 150 top real estate agents, speakers and trainers to
provide content and training on isucceed.com at very low cost to us. Going
forward, we intend to launch similar web sites for professionals in other
industry segments.
Each of our web sites are intended to provide rich content to specific
industry groups, including a broad array of resources and services such as:
o both live and recorded training o search engines
o e-mail o on-line shopping
o forum o chat rooms
Some resources and services such as e-mail, forums, search engines,
shopping and training will be common to all of our industry sites. However, each
site will also contain resources and services tailored to the needs and
interests of that site's specific industry group. By adopting this approach, we
believe that each site will be of more utility to its targeted users than the
majority of current sites which seek to attract the public at large.
We were incorporated in Florida in 1996, and began our current
Internet-based business in 1999. We are a development stage company.
OUR MARKET
Our market includes those groups of professionals, independent
contractors, sales people and others that are large and cohesive enough to
represent a community of business people with similar business goals and needs.
These groups include nationwide members of industry segments, such as the
approximately 1,000,000 real estate agents in North America, or the employees
and agents of large national and international sales organizations. All of these
industry segments currently spend significant amounts of money on training,
information and other goods and services intended to fulfill or further their
business needs and goals.
Our business plan is based on management's collective experience that
the members of many industry segments are currently underserved in terms of
training and information relating to their industry and job functions. We
believe that the primary problem facing industry segments in need of training
and content is the ability to access the available training and content on a
timely and cost effective basis. Training and content has been traditionally
disseminated by way of live sessions and seminars and through the distribution
of books, audio and videotapes. However, these traditional methods typically
involve relatively high costs to the recipients and fail to ensure the
distribution of information on a timely basis.
Our internal research and analysis suggests that the members of many
industry segments are willing to pay for a service that can deliver meaningful
training and content on a timely and cost effective basis. We believe that the
need within these industry segments and organizations for timely and cost
effective training and content presents a significant market opportunity for
EntrePort. We also believe that the training and information provided on our web
sites will enhance the skills of the subscribers and increase their profit
potential.
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<PAGE>
OUR SOLUTION
Our business model is designed to take advantage of the unique
opportunities offered by the Internet. The increasing use of the Internet as a
commercial medium has been accompanied by a diversification in the type of
commerce that is conducted on the Internet and a proliferation in the types of
products and services available on the Internet. The Internet has created a
dynamic and particularly attractive medium for business, empowering businesses
and consumers to distribute and gather more services and information than is
feasible with traditional commerce systems, to communicate and shop in ways that
can be more convenient for them and to interact with each other in many new
ways. As the Internet has become more accessible and widely used for
transactions, it has emerged as a primary business channel alongside the
telephone, paper-based communication and face-to-face interaction.
We intend to address the need for business training and information
through the consolidation of proprietary training and content in web sites
within industry segments. The Internet offers the opportunity to provide certain
targeted industry segments with training and information that is broader, more
current and more accessible than has previously been available, all at a lower
cost to the recipient. By consolidating content and presenting it in web sites,
we will be able to offer our customers current training and information that is
accessible by them 24 hours a day, seven days a week for a relatively low
monthly membership fee.
OUR STRATEGY
Our objective is to be the premier producer of web sites directed at
industry specific audiences. To this end, we intend to position ourselves as a
membership driven marketing model capable of generating multiple revenue streams
while, at the same time, generating product/services and members at no or little
cost to the company. In this respect, we believe that we have the ability to
offer a financial model unlike the majority of other e-commerce companies. We
launched our initial web site in April 2000, but as of the date of this
prospectus we have not received significant revenues from operations. As a
result, there can be no assurance that our business model will be successful or
that we will be able to generate revenues as planned.
The key to our strategy is our proposed strategic alliances with
industry marketing experts. Many marketing experts derive their revenue from the
sale of proprietary marketing products, typically books, audio and videotapes.
Marketers, therefore, typically sponsor, at their expense, seminars and other
means of paid advertising for purposes of reaching their audience. We will offer
these marketers the opportunity to post content, either by way of text, audio or
video tape, and sponsor seminars at our sites at no cost to them. Additionally,
we will allow the marketers the opportunity to offer their proprietary products
for sale at our web store. At the end of each content posting or training
segment, the marketers' products will be showcased and members will be directed
to our web store where the products will be available for purchase. We do not
intend to warehouse the products but will take orders, process credit cards and
pass along the order to the respective provider for shipments. We intend to
charge the marketer a commission, exclusive of shipping and handling charges,
which we believe to be significantly higher than commissions typically received
by on-line distributors.
To date, we have signed agreements with over 150 of the top real estate
agents, speakers and trainers in North America, each of whom have agreed to
provide us with commissions on all sales of their products through our web
store. In choosing real estate agents to provide content on our site, we target
agents who we believe to be highly successful. We believe that most of our
agents are among the nation's top 10% in terms of annual sales volume, and many
of our agents are among their firm's top ten overall producers. In selecting
speakers and trainers, we have targeted persons who are widely recognized as
experts in the industry, including, for example, Terri Murphy, who is the
Chairman of the National Association of Realtors' Business Technology Forum and
the author of two best selling real estate books, and John Tucillo, who is the
former Chief Economist for the National Association of Realtors and the author
of two best selling real estate books.
In addition to providing content, we believe that our industry
marketing experts will provide access to significant numbers of subscribers at
little or no cost to us. We expect that the marketing experts that post content
and sponsor or participate in seminars will bring to the site the same marketing
audience they have been selling to for years. Our primary marketing objective
will be to bring content to the public via live seminars thereby capitalizing on
each marketer's experience and ability to sign up a predictable amount of
members at the end of each seminar.
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<PAGE>
In summary, we believe that our business model offers the following
potential benefits and advantages:
o Access to leading edge content from recognized marketing experts at
no our little cost to us;
o Access to the clients and followers of the marketing experts, thereby
creating an immediate significant base of potential paying
subscribers at little or no cost to us;
o Allowing members and visitors to develop a relationship with the
marketing experts, thereby increasing loyalty, retention and product
sales; and
o Creation of a deep content library deliverable on demand to members.
OUR PRODUCTS AND SERVICES
We intend to develop web sites that will offer general information,
communication tools, training and other goods and services to members of certain
industry specific Internet communities. These web sites will be accessible by
the general public, however, only established subscribers or registered visitors
will be permitted to use our sites as the case may be.
Our web sites will be accessible by a minimum hardware configuration
consisting of a 486 personal computer with Windows `95 or greater, with 16
megabytes of RAM, 20 megabytes of free hard disk space, a 14,400 modem and an
Internet connection. All services will be provided in a Windows-based menu
driven format with "point and click" interactivity. Persons who wish to use our
web sites will be able to subscribe over the Internet by completing an
application available at the web site, opening an account and making a deposit
with us via credit card. In May 1999, we were approved as a credit card merchant
by Imperial Bank.
Our sites will provide rich content to specific industry groups. Each
site will offer a broad array of resources and services such as e-mail, forums,
search engines, and on-line shopping as well as both live and recorded training.
Some resources and services such as e-mail, forums, search engines, shopping and
training will be common to all sites. However, each site will also contain
resources and services tailored to the needs and interests of the particular
industry group for that site. By adopting this approach, we believe that each
site will be of more utility to its targeted users than are the majority of
current sites which seek to attract the public at large.
Our Real Estate Site. Our first web site is located at www.isucceed.com
and is aimed at real estate professionals in the United States and Canada.
According to the National Association of Realtors there are over 720,000
realtors in the United States alone. The U.S. Census Bureau estimates that in
1998, this industry employed 1,231,471 people and generated over $141 billion in
revenue.
We believe, based on our internal marketing analysis and discussions
with senior executives in the real estate industry, that the real estate
industry is looking to increase operating efficiencies and profits through the
deployment of computer/Internet technologies, particularly in the area of sales
training. We will offer membership based on-line training for real estate
professionals.
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<PAGE>
Our real estate site includes the following content:
o listing for profit o agent referrals
o profiting on "for sale by owners" o zero cost programs
o target marketing systems o customer service
o pre-list packaging o referrals to home buyers
o virtual home tours o continuing education
o pricing strategies
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<PAGE>
We have entered into an exclusive agreement with Dearborn Financial Publishing,
Inc., who is a nationally recognized provider of continuing education programs
in the real estate industry. Under the terms of this agreement, our members will
have access to Dearborn's online continuing real estate education courses. By
clicking on a link on the isucceed.com web page, our members will be taken to a
page maintained by Dearborn but branded with the isucceed.com name. Dearborn has
agreed that it will not grant any other party the right to use its online real
estate continuing education programs. In consideration for the right to access
its programs, we have agreed to pay Dearborn the greater of $2.50 per
isucceed.com subscriber or a minimum fee which gradually increases from $3,750
to $56,250 per month over the course of the next three years. Our contract with
Dearborn initially lasts for three years and is automatically renewable for
additional one year terms unless either party elects not to renew the contract.
FUTURE SITE POSSIBILITIES. We intend to replicate our isucceed.com site
for additional industry specific groups that are large and cohesive enough to
support an Internet community. Some of the industry groups we are currently
considering are insurance, legal and accounting, and we intend to examine other
groups in the future. As of the date of this prospectus, however, we have not
commenced the development of any specific industry sites other than our real
estate site.
We are currently working with a team of marketing experts whose job is
to develop additional sites, including the development of a database of
programming ideas and the retention of recognized industry talent to provide
content and members. Our goal is to become the leading on-line, industry
specific site service.
MARKETING
As noted above, we intend to market our web sites primarily through
proposed strategic alliances with industry marketing experts. We also intend to
market our products and services through a combination of on-line and off-line
advertising, including traditional industry print, targeted direct mail,
telemarketing (phone fax and e-mail) and through the visibility created by the
seminars hosted or sponsored by us.
To date, our marketing efforts have consisted of organizing, sponsoring
and promoting seminars in various locations throughout the United States and
Canada. These seminars feature one or two speakers who are known experts in the
real estate field and are generally attended by approximately 250 members of the
real estate industry. We promote the isucceed.com site during the course of the
seminar and offer attendees the opportunity to subscribe to isucceed.com on the
spot. We market these seminars through a combination of targeted direct mail,
fax and emails and by contacting real estate agents directly. As of the date of
this prospectus, we have conducted approximately 25 such seminars, and we expect
to hold approximately 55 more within the next 8 months.
We have also entered into marketing alliances with Countrywide Home
Loans, Inc., one of the nation's largest providers of home mortgage loans, and
Internet Pictures Corporation, a provider of virtual home tour services to the
real estate industry. Under our agreement with Countrywide, we will each provide
links on our web sites to the section of the other's web site that is dedicated
to real estate professionals. In addition, we and Countrywide will offer
discounted subscriptions and/or services to persons who link to one of our sites
from the other. Under our agreement with Internet Pictures Corp., Internet
Pictures Corp. will promote isucceed.com to the agents and brokers who use its
virtual home tours services and will include isucceed.com in certain of its
print and online advertising and marketing materials. In return, we have agreed
to include Internet Pictures Corp. in certain of our advertising and marketing
materials, provide limited free trials to subscribers who are referred to us by
Internet Pictures Corp., and provide Internet Pictures Corp. with space at our
real estate seminars. In addition, we will each provide links to the other's
site on our respective web sites.
In the future, we intend to develop an in-house staff of sales and
marketing professionals to market and promote our products directly to large
corporations and industry groups in our target markets. We may also pursue
alternative distribution channels such as independent third party sales agents
and resellers who will promote and sell our sites in exchange for commissions.
By using a combination of direct sales techniques, in house sales and marketing
professionals and alternative distribution channels, we believe that we will be
able to more rapidly access markets and increase revenue-producing traffic on
our web sites.
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<PAGE>
COMPETITION
The market for members, visitors and Internet advertising is new and
rapidly evolving, and competition for members, visitors and advertisers is
intense and is expected to increase significantly in the future. Barriers to
entry are relatively insubstantial. We believe that the principal competitive
factors for companies seeking to create communities on the Internet are critical
mass, functionality, brand recognition, member affinity and loyalty, broad
demographic focus and open access to visitors
Direct competitors for our isucceed.com web site include Learning.net,
which offers online real estate, legal and accounting training and Real Estate
University, which offers online real estate training. Other companies with whom
we will compete, although indirectly, are companies who are primarily focused on
creating broader web-based communities such as GeoCities, Tripod/Lycos,
Angelfire, Xoom and theglobe.com. We will likely also face competition in the
future from web directories, search engines, software archives, content sites,
commercial on-line services, sites maintained by ISPs and other entities that
look to establish communities on the Internet by developing their own or
purchasing one of our competitors. In addition, we could face competition in the
future from traditional media companies, a number of which, including Disney,
CBS and NBC, have recently made significant acquisitions of or investments in
Internet companies. Further, there can be no assurance that our competitors and
potential competitors will not develop communities that are equal or superior to
or that achieve greater market acceptance than ours.
We also compete for visitors with many Internet content providers and
Internet service providers, including web directories, search engines, shareware
archives, content sites, commercial on-line services and sites maintained by
ISPs, as well as thousands of Internet sites operated by individuals and
government and educational institutions. These competitors include free
information, search and content sites or services, such as CNET, CNN/Time
Warner, Excite, Infoseek, Lycos, Netscape, Microsoft and Yahoo!.
In addition to online competitors, we face competition from as well as
traditional forms of media such as newspapers, magazines, radio and television,
for advertisers and advertising revenue. We believe that the principal
competitive factors in attracting advertisers include the amount of traffic on
our web site, brand recognition, customer service, the demographics of our
members and viewers, or ability to offer targeted audiences and the overall
cost-effectiveness of the advertising medium offered by us. We believe that the
number of Internet companies relying on web-based advertising revenue will
increase greatly in the future. Accordingly, we will likely face increased
competition, resulting in increased pricing pressures on our advertising rates
which could in turn have a material adverse effect on our business, results of
operations and financial condition.
Virtually all of our existing and potential competitors, including web
directories and search engines and large traditional media companies, have
longer operating histories in the web market, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than us. Such competitors are able to undertake more extensive
marketing campaigns for their brands and services, adopt more aggressive
advertising pricing policies and make more attractive offers to potential
employees, distribution partners, commerce companies, advertisers and third
party content providers. There can be no assurance that Internet content
providers and ISPs, including web directories, search engines, shareware
archives, sites that offer professional editorial content, commercial on-line
services and sites maintained by ISPs will not be perceived by advertisers as
having more desirable web sites for placement of advertisements. In addition,
many of our potential current advertising customers and strategic partners have
established collaborative relationships with certain of our competitors or
potential competitors, and other high-traffic web sites. Accordingly, there can
be no assurance that we will be able to develop and grow our memberships,
traffic levels and advertiser customer base. There can also be no assurance that
we will be able to compete successfully against our current or future
competitors or that competition will not have a material adverse effect on our
business, results of operations and financial condition.
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<PAGE>
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We regard our technology as propriety and attempt to protect it by
relying on trademark, service mark, copyright and trade secret laws and
restrictions on disclosure and transferring title and other methods. We
currently have no patents or patents pending and do not anticipate that patents
will become a significant part of our intellectual property in the foreseeable
future. We generally enter into confidentiality or license agreements with our
employees and consultants, and generally control access to and distribution of
our documentation and other proprietary information. Despite these precautions,
it may be possible for a third party to copy or otherwise obtain and use our
proprietary information without authorization or to develop similar technology
independently. We intend to pursue the registration of our service marks in the
United States and internationally, and have applied for the registration in the
United States for the service mark "EntrePort." Effective trademark, service
mark, copyright and trade secret protection may not be available in every
country in which our services are distributed or made available through the
Internet, and policing unauthorized use of our proprietary information will be
difficult.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving, and no assurance can be given as to the future
viability or value of any proprietary rights of ours or other companies within
this market. There can be no assurance that the steps taken by us will prevent
misappropriation or infringement of our proprietary information. Any such
infringement or misappropriation, should it occur, might have a material adverse
effect on our business results of operations and financial condition. In
addition, litigation may be necessary in the future to enforce our intellectual
property rights, to protect our trade secrets or to determine the validity and
scope of the proprietary rights of others. Such litigation might result in
substantial costs and diversion of resources and management attention and could
have a material adverse effect on our business, results of operations and
financial condition. Furthermore, there can be no assurance that our business
activities will not infringe upon the proprietary rights of others, or that
other parties will not assert infringement claims against us.
TECHNOLOGICAL SUPPORT
We currently have seven employees on our information technology staff.
Typically, we handle ongoing support and maintenance of our web sites in-house,
but we look to outside consultants from time to time for certain web design and
software development tasks.
We intend to provide a high level of customer support to our customer
base. We intend to provide technical and customer service support via our
corporate e-mail, 24 hours a day, seven days a week. In addition to the support
channel, we intend to provide for instant messaging and support chat rooms. To
assist in providing quality and responsive support, we intend to develop or
acquire software programs that record, acknowledge, route, queue, and generate
reports on e-mail.
EMPLOYEES
As of the date of this prospectus, we employ 45 people on a full-time
basis and we intend to employ an additional 26 people over the next 90 days.
None of our employees are covered by an ongoing collective bargaining agreement
with us and we believe that our relationship with our employees is good.
COMPANY LOCATION AND FACILITIES
Our executive offices are located in Vista, California and consist of
approximately 20,000 square feet of office space. We lease this space pursuant
to a three year lease expiring on July 1, 2003, at the rate of $13,512 per month
plus common costs of approximately $3,200 per month.
LITIGATION
We are not a party to any material litigation.
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<PAGE>
MANAGEMENT
Set forth below are the directors and officers of EntrePort.
NAME AGE POSITION
---- --- --------
David J. D'Arcangelo 44 Chairman of the Board
William A. Shue 43 President, Chief Executive Officer,
Chief Financial Officer, Secretary
and Director
Tony Acone 56 Director
Scott Lucas 40 Director
Mr. D'Arcangelo has served as Chairman of our Board of Directors since
February 17, 1999. From February 17, 1999 to March 21, 1999, Mr. D'Arcangelo
also served as our President and Chief Executive Officer. From 1994 to 1999, Mr.
D'Arcangelo served as President of the D'Arcangelo Companies, a business
marketing and training consulting firm. Mr. D'Arcangelo's book, "Wealth Starts
at Home," published by McGraw-Hill, was released in 1997.
Mr. Shue has served as our President, Chief Executive Officer, Chief
Financial Officer, Secretary and as a director since April 17, 1999. From 1994
to 1999, Mr. Shue served as an independent consultant to the seminar production
industry. Mr. Shue was a co-founder of Caribiner International, Inc., a
NYSE-listed business communications company, and served as President of
Caribiner International from 1986 to 1993. Mr. Shue has an MBA in Finance from
the University of Houston.
Mr. Acone has served as a director since November 1999. Mr. Acone was a
co-founder of Prime Ticket Sports Network and served as President of that
company from 1985 to 1989 and Assistant to the Chairman from 1989 to 1994, at
which time Prime Ticket was sold to Fox Sports Television Network. Mr. Acone has
been a private investor since 1994.
Mr. Lucas has served as a director since April 2000. Mr. Lucas has
served as the Chairman and Chief Executive Officer of YourPut.com, a private
information management company, since 1997. From 1995 to 1997, Mr. Lucas was
Chief Equity Officer for AIM Capital Management, Houston, Texas, where he held
senior fiduciary duties for 30 mutual funds containing nearly $90 billion in
assets. Prior to AIM, Mr. Lucas was Vice President at Goldman Sachs & Co., New
York, where he was responsible for marketing and strategy for Equity Derivatives
and Program Trading for the Western U.S. and Canada.
EXECUTIVE COMPENSATION
CASH COMPENSATION OF EXECUTIVE OFFICERS. The following table sets forth
the cash compensation paid to the Chief Executive Officer and to all other
executive officers for services rendered during the fiscal years ended December
31, 1999, 1998 and 1997.
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<PAGE>
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- ------------------------------
NAME AND POSITION YEAR SALARY BONUS OTHER ANNUAL RESTRICTED COMMON SHARES ALL
COMPENSATION STOCK UNDERLYING OTHER
AWARDS ($) OPTIONS GRANTED COMPEN
(# SHARES) -SATION
---------------------- ------ ---------- ------- --------------- ------------ ----------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
David J. D'Arcangelo, 1999 $ 70,833 -0- -0- -0- 50,000 -0-
Chairman 1998 $ 0 -0- -0- -0- -0- -0-
1997 $ 0 -0- -0- -0- -0- -0-
William A. Shue, 1999 $ 62,500 -0- -0- -0- 300,000 -0-
President and CEO 1998 $ 0 -0- -0- -0- -0- -0-
1997 $ 0 -0- -0- -0- -0- -0-
</TABLE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN 1999 FISCAL YEAR
INDIVIDUAL GRANTS
---------------------- ---------------------------------------------------------------------------------------
NAME NUMBER OF % OF TOTAL OPTIONS/SARS EXERCISE OR EXPIRATION DATE
SECURITIES GRANTED TO EMPLOYEES IN BASE PRICE
UNDERLYING FISCAL YEAR ($/SH)
OPTIONS/SARS
GRANTED (#)
---------------------- --------------------- ------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
David J. D'Arcangelo 50,000 3% $ 1.00 April 1, 2004
William Shue 300,000 17% $ 1.00 April 1, 2004
</TABLE>
EMPLOYMENT AGREEMENTS. We have entered into employment agreements with
the Chairman of our Board of Directors, Mr. David D'Arcangelo, and our Chief
Executive Officer, Mr. William Shue. Pursuant to their agreements, Mr.
D'Arcangelo and Mr. Shue are required to devote their entire business time to
the affairs of the company. We currently pay both Mr. D'Arcangelo and Mr. Shue a
salary of $8,333.34 per month. However, the terms of Mr. D'Arcangelo's and Mr.
Shue's employment agreements provide that their salaries will be increased at
such time as we have either raised sufficient capital to do so or our profits so
warrant, as determined by Mr. D'Arcangelo or Mr. Shue, as the case may be, in
their discretion. At such time, their salaries will be increased to levels that
are comparable to executives of equivalent positions in similar public
companies, but with a minimum of $200,000 per year plus car allowance. Mr.
D'Arcangelo's employment agreement expires on April 1, 2002 and Mr. Shue's
employment agreement expires on April 18, 2002. Both agreements are subject to
automatic one year extensions unless either party chooses not to renew within 90
date of the expiration of the current term.
COMPENSATION OF DIRECTORS. All of our directors receive reimbursement
for out-of-pocket expenses for attending Board of Directors meetings. We intend
to appoint additional members to the Board of Directors, including outside or
non-officer members to the board. Any outside directors may receive an
attendance fee for each meeting of the Board of Directors. From time to time we
may engage certain members of the Board of Directors to perform services on
behalf of the Company and compensate such persons for the services which they
perform.
STOCK OPTION PLAN
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<PAGE>
In 1999, we adopted a Stock Option Plan permitting us to grant options
to employees, directors, consultants and independent contractors. The purpose of
the plan is to allow us to attract and retain such persons and to compensate
them in a way that links their financial interests with the interests of our
shareholders. Awards under the plan may take the form of incentive stock options
or non-qualified stock options. A total of 4,000,000 shares may be issued
pursuant to the plan. As of the date of this prospectus, we had granted options
to purchase approximately 1,306,500 shares of our common stock.
Our stock option plan is administered by our a committee appointed by
our board of directors or, in the absence of such a committee, by the entire
board. The committee has, subject to specified limitations, full authority to
grant options and establish the terms and conditions of vesting and exercise.
The exercise price of incentive stock options granted under the plan is required
to be no less than the fair market value of our common stock on the date of
grant (110% in the case of a greater than 10% stockholder).
The committee may grant options for terms of up to 10 years, or 5 years
in the case of incentive stock options granted to greater than 10% stockholders.
No optionee may be granted incentive stock options such that the fair market
value of the options which first become exercisable in any one calendar year
exceeds $100,000. If an optionee ceases to be employed by us or ceases to have a
relationship with us, his or her options will expire one year after termination
by reason of death or permanent disability, thirty days after termination for
cause and three months after termination for any other reason.
Subject to the foregoing, the committee has broad discretion to set the
terms and conditions applicable to options granted under the plan. The committee
may discontinue or suspend option grants under the plan, or amend or terminate
the plan entirely, at any time. With the consent of an optionee, the committee
may also make such modification of the terms and conditions of such optionee's
option as the committee shall deem advisable. However, the committee has no
authority to make any amendment or modification to the plan or any outstanding
option which would:
o increase the maximum number of shares which may be purchased pursuant
to options granted under the stock option plan, either in the
aggregate or by an optionee, except in connection with certain
antidilution adjustments;
o change the designation of the class of employees eligible to receive
qualified options;
o extend the term of the stock option plan or the maximum option period
thereunder;
o decrease the minimum qualified option price or permit reductions of
the price at which shares may be purchased for qualified options
granted under the stock option plan, except in connection with
certain antidilution adjustments; or
o cause qualified stock options issued under the stock option plan to
fail to meet the requirements of incentive stock options under
Section 422 of the Internal Revenue Code.
Any such amendment or modification shall be effective immediately,
subject to stockholder approval thereof within 12 months before or after the
effective date. No option may be granted during any suspension or after
termination of the plan.
RELATED PARTY TRANSACTIONS
In connection with our organization in October 1996, we issued
5,000,000 common shares to our founder, Mr. Eric Littman, at a price of $.001
per share. In February 1999, we hired Mr. David D'Arcangelo, currently our
Chairman of the Board, to develop our current web business. At that time, Mr.
Littman canceled, for no consideration, 4,410,000 shares of common stock and
resigned from all positions with the company.
-20-
<PAGE>
LIMITATION OF LIABILITY OF DIRECTORS AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS
The Florida General Corporation Law provides that corporations may
include a provision in their Articles of Incorporation relieving directors of
monetary liability for breach of their fiduciary duty as directors, provided
that such provision shall not eliminate or limit the liability of a director:
o for any breach of the director's duty of loyalty to the corporation
or its stockholders;
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o for unlawful payment of a dividend or unlawful stock purchase or
redemption; or
o for any transaction from which the director derived an improper
personal benefit.
Our Articles of Incorporation provide that directors are not liable to
EntrePort or its stockholders for monetary damages for breach of their fiduciary
duty as directors to the fullest extent permitted by Florida Law. In addition to
the foregoing, our Bylaws provide that we may indemnify directors, officers,
employees or agents to the fullest extent permitted by law and we have agreed to
provide such indemnification to each of our directors.
The above provisions in our Articles of Incorporation and Bylaws and in
the written indemnity agreements may have the effect of reducing the likelihood
of derivative litigation against directors and may discourage or deter
stockholders or management from bringing a lawsuit against directors for breach
of their fiduciary duty, even though such an action, if successful, might
otherwise have benefited us and our stockholders. However, we believe that the
foregoing provisions are necessary to attract and retain qualified persons as
directors.
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of EntrePort
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 1933 Act and is, therefore,
unenforceable.
-21-
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of the date of this prospectus by:
o each person who is known to be the beneficial owner of more than five
percent (5%) of our issued and outstanding shares of common stock;
o each of our directors and executive officers; and
o all of our directors and executive officers as a group.
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OWNED
--------------------------- ----------------------- --------------------
David J. D'Arcangleo (1)(2) 2,675,334 23.0%
William A. Shue (1)(3) 1,500,000 12.6%
Tony Acone (1)(4) 175,000 1.5%
Scott Lucas(1)(5) 170,000 1.5%
All officers and directors 4,520,334 37.4%
as a group (6)
----------
(1) Address is 2790 Business Park Drive, Suite B, Vista, California
98083.
(2) Includes options granted to Mr. D'Arcangelo to purchase 50,000
shares of common stock.
(3) Includes options granted to Mr. Shue to purchase 300,000 shares of
common stock.
(4) Includes options granted to Mr. Acone to purchase 150,000 shares of
common stock.
(5) Includes options granted to Mr. Lucas to purchase 20,000 shares of
common stock. Does not include options to purchase another 20,000
shares of common stock that are subject to vesting.
(6) Includes options granted to officers and directors to purchase an
aggregate of 520,000 shares of common stock.
-22-
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
EntrePort is authorized to issue 50,000,000 shares of common stock,
$.001 par value, of which, as of the date of this prospectus, 11,581,113 shares
are issued and outstanding. As of the date of this prospectus, there are
outstanding options, warrants and rights which, upon exercise or conversion,
entitle their holders to acquire approximately 1,694,000 shares of common stock.
Holders of shares of common stock are entitled to one vote per share on
all matters to be voted upon by the stockholders generally. The approval of
proposals submitted to stockholders at a meeting other than for the election of
directors requires the favorable vote of a majority of the shares voting.
However, in the case of certain fundamental matters such as certain amendments
to the Articles of Incorporation and certain mergers and reorganizations,
Florida law and EntrePort's Bylaws require the favorable vote of at least a
majority of all outstanding shares. Stockholders are entitled to receive such
dividends as may be declared from time to time by the Board of Directors out of
funds legally available therefor, and in the event of liquidation, dissolution
or winding up, to share ratably in all assets remaining after payment of
liabilities. The holders of shares of common stock have no preemptive,
conversion, subscription or cumulative voting rights.
STOCK OPTION PLAN
During the fiscal year 1999, we adopted a Stock Option Plan permitting
us to grant options to employees, directors, consultants and independent
contractors. An aggregate of 4,000,000 shares of common stock may be issued
pursuant to the plan. As of the date of this prospectus, options to purchase an
aggregate of 1,306,500 shares of common stock have been issued pursuant to the
Plan.
WARRANTS
We issued 10,000 warrants to a party not affiliated with us. The
warrants are exercisable until October 2002 at an exercise price of $1.00 per
share.
In February and March 2000, we conducted a private placement of common
shares. Roth Capital Partners, Inc. acted as placement agent in connection with
that offering. As part of its compensation for acting as placement agent, we
granted to Roth Capital Partners a common stock purchase warrant entitling the
holder to purchase 377,500 shares of our common stock at an exercise price of
$2.00 per share. The warrant is presently exercisable and expires in March 2005.
DIVIDENDS
We do not anticipate the payment of cash dividends on its common stock
in the foreseeable future.
TRANSFER AGENT
The transfer agent for our common stock is American Stock Transfer &
Trust, Inc.
LEGAL MATTERS
Certain legal matters with respect to the shares of common stock
offered hereby will be passed upon for us by Oppenheimer Wolff & Donnelly LLP,
Newport Beach, California.
-23-
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1999 and 1998, and for each of the two years in the
period ended December 31, 1999, and for the period October 4, 1996 (inception)
through December 31, 1999, as set forth in their report. We've included our
financial statements in the registration statement in reliance on Ernst & Young
LLP's report, given their authority as experts in accounting and auditing.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
In July 1999, we dismissed Barry L. Friedman, Certified Public
Accountant, as our independent auditor and appointed Ernst & Young LLP as
independent auditors. Mr. Friedman had previously audited our financial
statements as of and for the fiscal years ended December 31, 1998, 1997 and
1996. The decision to change independent auditors was approved by our Board of
Directors. During the fiscal year ended December 31, 1998 and through July 1999,
there were no disagreements between us and Mr. Friedman on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures which disagreements if not resolved to the satisfaction of
Mr. Friedman would have caused him to make reference to the subject matter of
the disagreement in connection with his reports.
Except for the explanatory paragraph included in Mr. Friedman's report
on our financial statements for the 1998, 1997 and 1996 fiscal years, relating
to substantial doubt existing about our ability to continue as a going concern,
the audit reports of Mr. Friedman on our financial statements as of December 31,
1998, 1997 and 1996 did not contain an adverse opinion or a disclaimer of
opinion, nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, file reports, proxy
statements and other information with the SEC. Our reports, proxy statements and
other information filed pursuant to the Securities Exchange Act of 1934 may be
inspected and copied at the public reference facilities maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
material can also be obtained from the Public Reference Section of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the SEC maintains a web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC. The address of the SEC's web site is
http://www.sec.gov.
We have filed with the SEC a registration statement on Form SB-2 under
the Securities Act of 1933 with respect to the common stock offered hereby. As
permitted by the rules and regulations of the SEC, this prospectus, which is
part of the registration statement, omits certain information, exhibits,
schedules and undertakings set forth in the registration statement. Copies of
the registration statement and the exhibits are on file with the SEC and may be
obtained from the SEC's web site or upon payment of the fee prescribed by the
SEC, or may be examined, without charge, at the offices of the SEC set forth
above. For further information, reference is made to the registration statement
and its exhibits.
-24-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ENTREPORT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Audited Financial Statements:
Report of Ernst & Young LLP, Independent Auditors...................F-1
Balance Sheets at December 31, 1999 and 1998........................F-2
Statements of Operations for the years ended
December 31, 1999, 1998 and for the period
from October 4, 1996 (inception) to December
31, 1999...........................................................F-3
Statements of Changes in Stockholders' Equity
(Deficit) for the years ended December 31,
1999, 1998 and for the period from October 4,
1996 (inception) to December 31, 1999..............................F-4
Statements of Cash Flows for the years ended
December 31, 1999, 1998 and for the period
from October 4, 1996 (inception) to December
31, 1999...........................................................F-5
Notes to Financial Statements......... .............................F-6
Unaudited Financial Statements
Balance Sheets at March 31, 2000 and 1999.. .......................F-13
Statements of Operations for the three months
ended March 31, 2000 and 1999 and for the
period from October 4, 1996 (inception) to
March 31, 1999....................................................F-14
Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 and for the
period from October 4, 1996 (inception)
to March 31, 1999.................................................F-15
Notes to Unaudited Financial Statements............................F-16
-25-
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
EntrePort Corporation
We have audited the accompanying balance sheets of EntrePort Corporation (a
development stage company) as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
years ended December 31, 1999 and 1998, and for the period October 4, 1996
(inception) through December 31, 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 audits provide 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 EntrePort Corporation (a
development stage company) at December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years ended December 31, 1999 and 1998,
and the period October 4, 1996 (inception) through December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
San Diego, California
March 21, 2000
F-1
<PAGE>
EntrePort Corporation
(a development stage company)
Balance Sheets
December 31,
1999 1998
--------------------------------
Assets
Current assets:
Cash and cash equivalents $ 1,458,139 $ -
Other current assets 205,397 -
--------------------------------
Total current assets 1,663,536 -
Investment in Sportsware Technologies, Inc. 399,500 -
Property and equipment at cost, net 97,317 -
Website development costs 181,381 -
Deferred offering costs 85,194 -
Other assets 6,690 -
--------------------------------
$ 2,433,618 $ -
================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 194,268 -
Accrued liabilities 263,399 800
Note payable to officer 20,000 -
--------------------------------
Total current liabilities 477,667 800
Stockholders' equity (deficit):
Common stock, $.001 par value; 50,000,000
shares authorized, 7,834,974 and
5,025,000 issued and outstanding at
December 31, 1999 and 1998, respectively 7,835 5,025
Additional paid-in capital 3,845,753 -
Deficit accumulated during the
development stage (1,897,637) (5,825)
--------------------------------
Total stockholders' equity (deficit) 1,955,951 (800)
--------------------------------
$ 2,433,618 $ -
================================
See accompanying notes.
F-2
<PAGE>
EntrePort Corporation
(a development stage company)
Statements of Operations
<TABLE>
<CAPTION>
For the Period
October 4, 1996
(inception) through
Years ended December 31, December 31,
1999 1998 1999
---------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 11,911 $ - $ 11,911
Operating Expenses:
Research and development 97,579 - 97,579
Marketing, general and administrative 1,796,990 800 1,802,815
---------------------------------------------------------
Total operating expenses 1,894,569 800 1,900,394
---------------------------------------------------------
Loss from operations (1,882,658) (800) (1,888,483)
Interest expense 9,154 - 9,154
---------------------------------------------------------
Net loss $ (1,891,812) $ (800) $ (1,897,637)
=========================================================
Net loss per common share
(basic and diluted) $ (0.31) $ -
=====================================
Weighted average shares used in computing net
loss per common share
(basic and diluted) 6,068,605 5,025,000
=====================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
EntrePort Corporation
(a development stage company)
Statements of Stockholders' Equity
For the years ended December 31, 1999 and 1998, and the period October 4, 1996 (inception) through December 31, 1999
<CAPTION>
Deficit
accumulated Total
Common stock Additional during the stockholders'
------------------------------- paid-in development equity
Shares Amount capital stage (deficit)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock for services at
inception of company 5,025,000 $ 5,025 $ - $ - $ 5,025
Net loss for the period ended December 31,
1997 - - - (5,025) (5,025)
---------------------------------------------------------------------------------
Balance at December 31, 1997 5,025,000 5,025 - (5,025) -
Net loss for the year ended December 31,
1998 - - - (800) (800)
---------------------------------------------------------------------------------
Balance at December 31, 1998 5,025,000 5,025 - (5,825) (800)
Common shares retired for no consideration (4,410,000) (4,410) 4,410 - -
Common shares issued for $1,600 of notes
receivable and $335,900 for services
rendered 5,400,000 5,400 332,100 - 337,500
Issuance of common stock upon conversion of
notes payable in June 1999 at $2.00 to $3.00
per share 267,500 268 694,732 - 695,000
Issuance of common stock for $2.00 per
share in August and December 1999 for
cash, net of issuance costs of $304,185 1,384,140 1,384 2,462,711 - 2,464,095
Issuance of common stock for services
rendered 168,334 168 336,500 - 336,668
Issuance of warrants for services rendered - - 15,300 - 15,300
Net loss for the year ended December 31,
1999 - - - (1,891,812) (1,891,812)
---------------------------------------------------------------------------------
Balance at December 31, 1999 7,834,974 $ 7,835 $ 3,845,753 $ (1,897,637) $ 1,955,951
=================================================================================
</TABLE>
See accompanying notes
F-4
<PAGE>
EntrePort Corporation
(a development stage company)
Statements of Cash Flows
<TABLE>
<CAPTION>
For the Period
October 4, 1996
(inception) through
Years ended December 31, December 31,
1999 1998 1999
-----------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss $ (1,891,812) $ (800) $ (1,897,637)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 17,419 - 17,419
Issuance of common stock and warrants for
services rendered 421,200 - 426,225
Changes in operating assets and liabilities: - - -
Other current assets (205,397) - (205,397)
Accounts payable 194,268 - 194,268
Accrued liabilities and other 262,599 800 263,399
Other assets (6,690) - (6,690)
-----------------------------------------------------------
Net cash flows used in operating activities (1,208,413) - (1,208,413)
Investing activities
Purchases of property and equipment (114,736) - (114,736)
Investment in Sportsware Technologies, Inc. (399,500) - (399,500)
Increases in website development costs (181,381) - (181,381)
-----------------------------------------------------------
Net cash flows used in investing activities (695,617) - (695,617)
Financing activities
Proceeds from issuance of notes payable 1,010,000 - 1,010,000
Payments of notes payable (295,000) - (295,000)
Issuance of common stock for cash, net 2,732,363 - 2,732,363
Increases in deferred offering costs (85,194) - (85,194)
-----------------------------------------------------------
Net cash flows provided by financing activities 3,362,169 - 3,362,169
-----------------------------------------------------------
Increase in cash and cash equivalents 1,458,139 - 1,458,139
Cash and cash equivalents at beginning of period - - -
-----------------------------------------------------------
Cash and cash equivalents at end of period $ 1,458,139 $ - $ 1,458,139
===========================================================
Supplemental disclosure of non cash
financing activities
Conversion of notes payable to common stock $ (695,000) $ - $ (695,000)
===========================================================
Supplemental information
Interest paid $ 5,081 $ - $ 5,081
===========================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
EntrePort Corporation ("the Company") was incorporated in Florida on October 4,
1996. The Company is in the initial stage of operations devoting substantially
all of its efforts to the market analysis for and development of Web portals on
the Internet for purposes of offering general information, communication tools
and training to members of certain targeted Internet communities. As of December
31, 1999, the Company has not completed the development of any of its proposed
Web portals or otherwise commenced significant revenue producing operations.
Accordingly, the Company is considered to be in the development stage.
The Company had no assets or operations from the time of its incorporation until
February 1999, at which time the Company hired its current Chairman of the Board
to develop the Company's Web business. At this time, the Company's founder
canceled, for no consideration, 4,410,000 shares of Common Stock and resigned
from the Company. The Company then issued 3,800,000 shares of Common Stock, as
consideration of marketing and business plans, consulting services and cash.
REVENUE RECOGNITION
The Company recognizes revenue on membership fees ratably over the period in
which the services are performed.
CASH AND CASH EQUIVALENTS
The Company considers all investments with an original maturity of three months
or less when purchased to be cash equivalents. Cash equivalents primarily
represent funds invested in money market funds where cost equals market value.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, and depreciated over the estimated
useful lives of the assets (generally three to five years) using the
straight-line method.
WEBSITE DEVELOPMENT COSTS
Website development costs are capitalized in accordance with an EITF consensus
on Issue 00-02 and amortized over the estimated useful lives of the Internet
website being developed (generally two years) using the straight-line method.
Amortization will begin upon the launch of the web site.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25") and related interpretations
in accounting for its employee stock options because, as discussed in Note 6,
the alternative fair value accounting provided under Financial Accounting
Standards Board Statement of Financial Accounting Standards (SFAS) No. 123,
ACCOUNTING FOR STOCK BASED COMPENSATION, requires the use of option valuation
models that were not developed for use in valuing employee stock options.
Compensation charges for options granted to non-employees has been determined in
accordance with SFAS No. 123 and EITF 96-18 as the fair value of the
consideration received or the fair value of equity instruments issued, whichever
is more reliably measured. Charges for options granted to non-employees are
periodically remeasured as the underlying options vest.
The Company has disclosed the pro forma effect of using the fair value based
method to account for its employee stock-based compensation.
NET LOSS PER SHARE
F-6
<PAGE>
The Company computes net loss per share following SFAS No. 128, EARNINGS PER
SHARE. SFAS 128 requires the presentation of basic and diluted income (loss) per
share amounts. Under the provisions of SFAS No. 128, basic net income (loss) per
share is computed by dividing the net income (loss) available to common
shareholders for the period by the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share is computed
by dividing the net income (loss) for the period by the weighted average number
of common and common equivalent shares outstanding during the period. Common
equivalent shares, composed of incremental common shares issuable upon the
exercise of stock options, are included in diluted net income (loss) per share
to the extent these shares are dilutive. Common equivalent shares are not
included in the computation of diluted net loss per share for the years ended
December 31, 1999 because the effect would be anti-dilutive.
The following table sets forth the computation of basic and diluted loss per
share for the periods presented:
Years ended December 31,
-----------------------------
1999 1998
-----------------------------
Numerator:
Net loss $ (1,891,812) $ (800)
Denominator:
Weighted average shares outstanding for basic
earning per share 6,068,605 5,025,000
-----------------------------
Effects of dilutive securities:
Employee stock options - -
Warrants - -
-----------------------------
Dilutive potential common shares - -
Shares used in computing diluted net income per
common share 6,068,605 5,025,000
=============================
Loss per common share, basic $ (0.31) $ -
=============================
Loss per common share, diluted $ (0.31) $ -
=============================
COMPREHENSIVE LOSS
Comprehensive loss for all periods presented is the same as net loss.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and disclosures made in
the accompanying notes to the financial statements. Actual results could differ
from those estimates.
F-7
<PAGE>
2. SELECTED BALANCE SHEET DETAILS
December 31,
1999 1998
-----------------------------
Other current assets:
Due from investors $ 180,000 $ -
Prepaid expenses 21,731 -
Other current assets 3,666 -
-----------------------------
$ 205,397 $ -
=============================
The amount due from investors was collected in January 2000.
Property and equipment:
Machinery and equipment $ 106,509 $ -
Furniture and fixtures 8,227 -
-----------------------------
114,736 -
Less: accumulated depreciation (17,419) -
-----------------------------
$ 97,317 $ -
=============================
Accrued liabilities:
Officer relocation costs $ 106,600 $ -
Lease termination costs 61,058 -
Accrued settlement 37,500 -
Other accrued liabilities 58,241 800
-----------------------------
$ 263,399 $ 800
=============================
3. EQUITY INVESTMENT
During 1999, the Company acquired a 5% share of Sportsware Technologies, Inc.
("STI") for cash totaling $399,500. The Company accounts for its investment in
STI under the cost method. In conjunction with the purchase, the Company was
granted an option through December 1999 to purchase all of the remaining
outstanding shares of STI for cash and common stock. The option was not
exercised by the Company and expired in December 1999. The Company also granted
stock options to STI to purchase 500,000 shares of the Company's common stock
for $.10 per share, vesting and exercisable only in the event the Company
purchased the remaining 95% of STI stock. These options were canceled in
December 1999 upon expiration of the purchase option.
4. NOTES PAYABLE
Throughout 1999, the Company issued notes payable totaling $315,000 to several
outside parties and one of the Company's officers. The notes bore interest at
rates ranging from 6.0% to 10.0% per annum. Each note was paid off prior to
December 31, 1999 with the exception of one note. The outstanding note of
$20,000 bears a rate of 8.0% and matures in July 2000.
Throughout 1999, the Company conducted a private placement sale of convertible
notes for total proceeds of $695,000. The notes bore interest at the rate of
6.0% per annum. Principal was convertible into shares of the Company's common
stock at rates of $2.00 to $3.00 per share. During 1999, the principal amount of
all notes was converted into 267,500 shares of common stock.
5. LEASE COMMITMENTS
F-8
<PAGE>
The Company leases its corporate headquarters facility under a noncancelable
operating lease expiring on March 31, 2002. The Company also leases an unrelated
property on a month to month basis. Rent expense for these leases was
approximately $45,000, $0 and $45,000 for the years ended December 31, 1999 and
1998, and for the period October 4, 1996 (inception) through December 31, 1999,
respectively.
Future minimum payments required under the operating lease as of December 31,
1999 are as follows:
Operating
Leases
--------------
2000 $ 26,800
2001 33,400
2002 10,000
--------------
Total minimum lease payments $ 70,200
==============
6. STOCKHOLDERS' EQUITY
COMMON STOCK
In February 1999, the Company retired 4,410,000 shares of the Company's stock
from the original founder of the Company, for no consideration. Additionally, in
March 1999 the Company issued 5,400,000 shares of common stock to various
initial investors and key employees for cash and services.
In September 1999, the Company sold 99,710 shares of common stock for cash
proceeds of $199,420 in a private placement. In June 1999, the Company issued
267,500 shares of common stock, as a result of the conversion of convertible
notes. In December 1999, the Company issued 1,284,430 shares in a private
placement for cash proceeds of $2,568,860. The Company incurred $38,185 in
offering costs, and issued 133,334 shares of common stock to a financial
consultant in connection with the private placement (valued at $266,668). These
costs have been charged as a reduction to additional paid-in capital.
In November 1999, the Company issued 25,000 shares of common stock in
consideration for the extension of two notes payable. In December 1999, the
Company also issued 10,000 shares of common stock for Website development
services rendered. The Company expensed the costs of these services.
COMMON STOCK WARRANTS
Periodically, the Company will issue warrants to outside consultants in lieu of
stock options. During the period October 4, 1996 (inception) through December
31, 1999, the Company issued 10,000 warrants at a $1.00 exercise price. The
warrants are exercisable at December 31, 1999 and expire in October 2002. During
the year ended December 31, 1999, the Company recognized $15,300 in compensation
expense for these services.
STOCK OPTIONS
In March 1999, the Company adopted the 1999 Stock Incentive Plan (the "Plan") to
grant options to purchase common stock to eligible officers, employees,
directors, consultants and other independent advisors who provide services to
the Company. The Board has authorized and reserved an aggregate of 4,000,000
shares of common stock for issuance under the Plan. Terms of the stock option
agreements, including vesting requirements, are determined by the Board of
Directors. Options under the Plan cannot exceed a ten year term. The exercise
price of options granted under the Plan is determined by the Board, but cannot
be less than 100% of the fair market value (85% for non-qualified options) of
the common stock on the date of grant.
F-9
<PAGE>
6. STOCKHOLDERS' EQUITY (continued)
The following table summarizes activity under the stock option plan during the
year ended December 31, 1999:
Weighted
Average
Exercise
Shares Price
-----------------------------
Outstanding at December 31, 1998 - $ -
Granted 1,810,000 1.69
Exercised - -
Canceled (500,000) 0.10
---------------
Outstanding at December 31, 1999 1,310,000 $ 2.30
===============
All options outstanding at December 31, 1999 are non-qualified options. The
weighted average grant date fair value of options granted during the year
totaled $1.49.
A further summary of options outstanding and exercisable as of December 31, 1999
follows:
Weighted Weighted Weighted
Exercise Exercise Average Average Average
Options Range Range Exercise Remaining Options Exercise
Outstanding Low High Price Life (years) Exercisable Price
--------------------------------------------------------------------------------
350,000 $1.00 $1.00 $1.00 4.3 350,000 $1.00
450,000 $2.00 $2.50 $2.22 3.8 75,000 $2.00
450,000 $3.00 $3.50 $3.11 4.3 - -
40,000 $4.00 $4.00 $4.00 2.9 - -
20,000 $5.00 $5.00 $5.00 2.8 20,000 $5.00
--------------------------------------------------------------------------------
1,310,000 $1.00 $5.00 $2.30 4.0 445,000 $1.35
================================================================================
Adjusted pro forma information regarding net loss is required by SFAS No. 123,
and has been determined as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The fair value for these
options was estimated at the date of grant using the Black-Scholes method with
the following weighted-average assumptions for 1999: risk-free interest rate of
6.5%, dividend yield of 0%, volatility factor of 100.0%, and an expected option
life of 3 years. Future pro forma results of operations under SFAS No. 123 may
be materially different from actual amounts reported. For purposes of adjusted
pro forma disclosures, the estimated fair value of the options are amortized to
expense over the vesting period.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
F-10
<PAGE>
6. STOCKHOLDERS' EQUITY (continued)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the vesting period of such options. The Company's
pro forma information follows:
For the period
October 4, 1996
(inception)
through
Years ended December 31, December 31,
1999 1998 1999
---------------------------------------------
Pro forma net loss $ (1,984,329) $ (800) $ (1,990,154)
Pro forma net loss
per share, basic and diluted $ (0.33) $ - -
SHARES RESERVED FOR FUTURE ISSUANCE
The following shares of common stock are reserved for future issuance at
December 31, 1999:
Shares
-----------------
Stock options:
Granted and outstanding 1,310,000
Reserved for future grants 2,690,000
Warrants 10,000
-----------------
Total Reserved 4,010,000
=================
7. INCOME TAXES
Significant components of the Company's deferred tax assets as of December 31,
1999 and 1998 are shown below. A valuation allowance of $776,000 has been
recognized at December 31, 1999 to offset the net deferred tax assets as
realization of such assets is uncertain.
December 31,
1999 1998
------------------------------
Deferred tax assets
Net operating loss carryforward $ 760,000 $ -
Research and development credits 11,000 -
Other, net 5,000 -
------------------------------
Total net deferred tax assets 776,000 -
Valuation allowance for deferred tax asset (776,000) -
------------------------------
Net deferred tax assets $ - $ -
==============================
At December 31, 1999, the Company has federal and California net operating loss
carryforwards of approximately $1,865,000 and $1,869,000, respectively. The
federal and California tax loss carryforwards will begin to expire in 2019 and
2007, respectively, unless previously utilized. The Company also has federal and
California research credit carryforwards of approximately $8,700 and $4,800,
respectively, which will begin to expire in 2018 unless previously utilized.
F-11
<PAGE>
7. INCOME TAXES
Pursuant to Section 382 and 383 of the Internal Revenue Code, the annual use of
the Company's net operating loss and credit carryforwards may be limited if
cumulative changes in ownership of more than 50% occur during any three year
period. However, the Company does not believe such limitation will have a
material impact upon the utilization of these carryforwards.
8. LITIGATION
From time to time the Company is involved in legal proceedings, claims and
litigation arising in the ordinary course of business. Management believes,
however, that the ultimate outcome of all pending litigation should not have a
material adverse effect on the Company's financial position or liquidity.
9. SUBSEQUENT EVENT
In March 2000, 3,537,500 shares of common stock were issued at $2.00 per share
to private investors for net proceeds of approximately $6.1 million. In
conjunction with the offering, warrants to purchase 353,750 shares of the
Company's common stock were issued to the placement agent. The exercise price is
$2.00 per share and the warrants expire in March 2005.
F-12
<PAGE>
EntrePort Corporation
(a Development Stage Company)
Condensed Balance Sheets
MARCH 31, DECEMBER 31,
2000 1999
(UNAUDITED) (NOTE)
ASSETS
Current assets:
Cash and cash equivalents $ 7,116,944 $ 1,458,139
Other current assets 25,715 205,397
-----------------------------------
Total current assets 7,142,659 1,663,536
Investment in Sportsware Technologies, Inc. 399,500 399,500
Property and equipment at cost, net 172,807 97,317
Website development costs 508,991 181,381
Other assets 20,496 91,884
-----------------------------------
$ 8,244,453 $ 2,433,618
===================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 652,503 $ 194,268
Accrued liabilities 266,938 263,399
Note payable to officer - 20,000
-----------------------------------
Total current liabilities 919,441 477,667
Stockholders' equity:
Common stock, $.001 par value;
50,000,000 shares authorized,
11,581,113 and 7,834,974 issued
and outstanding at March 31, 2000
and December 31, 1999, respectively 11,581 7,835
Additional paid-in capital 10,426,076 3,845,753
Deferred compensation (293,656) -
Accumulated deficit during the
development stage (2,818,989) (1,897,637)
-----------------------------------
Total stockholders' equity 7,325,012 1,955,951
-----------------------------------
$ 8,244,453 $ 2,433,618
===================================
SEE ACCOMPANYING NOTES.
Note: The Balance Sheet at December 31, 1999 is derived from the audited
financial statements at that date, but does not include all of the disclosures
required by generally accepted accounting principles.
F-13
<PAGE>
EntrePort Corporation
(a development stage company)
Condensed Statements of Operations
(UNAUDITED)
FOR THE PERIOD
OCTOBER 4, 1996
(INCEPTION)
THREE MONTHS ENDED THROUGH MARCH
MARCH 31, 31,
---------------------------------------------
2000 1999 2000
---------------------------------------------
Revenues $ 5,120 $ - $ 17,031
Operating Expenses:
Research and development 47,425 - 145,004
Marketing, general and
administrative 901,202 376,817 2,704,017
---------------------------------------------
Total operating expenses 948,627 376,817 2,849,021
---------------------------------------------
Loss from operations (943,507) (376,817) (2,831,990)
Interest income 22,155 - 13,001
---------------------------------------------
Net loss $ (921,352) $ (376,817) $ (2,818,989)
=============================================
Net loss per common share
(basic and diluted) $ (0.11) $ (0.08)
=============================
Weighted average shares used
in computing net loss per common
share (basic and diluted) 8,034,374 4,955,934
=============================
See accompanying notes.
F-14
<PAGE>
EntrePort Corporation
(a development stage company)
Condensed Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period
October 4, 1996
(inception)
Three months ended through March
March 31, 31,
2000 1999 2000
-----------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss $ (921,352) $ (376,817) $ (2,818,989)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 11,771 - 29,190
Issuance of common stock options for services 133,854 - 133,854
Issuance of common stock and warrants for
services 74,000 335,900 495,200
Changes in operating assets and liabilities 627,650 (18,052) 873,230
-----------------------------------------------------------
Net cash flows used in operating activities (74,077) (58,969) (1,287,515)
Investing activities
Purchases of property and equipment (87,261) (9,588) (201,997)
Investment in Sportsware Technologies, Inc. - - (399,500)
Increases in website development costs (327,610) - (508,991)
-----------------------------------------------------------
Net cash flows used in investing activities (414,871) (9,588) (1,110,488)
Financing activities
Proceeds from issuance of notes payable - 165,000 1,010,000
Re-payments of notes payable (20,000) - (315,000)
Issuance of common stock for cash, net 6,167,753 - 8,819,947
-----------------------------------------------------------
Net cash flows provided by financing activities 6,147,753 165,000 9,514,947
-----------------------------------------------------------
Increase in cash and cash equivalents 5,658,805 96,443 7,116,944
Cash and cash equivalents at beginning of period 1,458,139 - -
-----------------------------------------------------------
Cash and cash equivalents at end of period $ 7,116,944 $ 96,443 $ 7,116,944
===========================================================
Supplemental disclosure of non cash
financing activities
Conversion of notes payable to common stock $ - $ - $ (695,000)
===========================================================
Deferred offering costs in 1999 $ - $ 85,194 $
===========================================================
</TABLE>
See accompanying notes.
F-15
<PAGE>
EntrePort Corporation
(a development stage company)
Notes to Condensed Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and, in the opinion of management, contain all adjustments,
consisting of normal recurring adjustments necessary to present fairly the
financial position as of March 31, 2000 and the results of operations for the
three months ended March 31, 2000 and 1999.
Certain information and footnote disclosures normally included in financial
statements have been omitted or condensed. These condensed financial statements
should be read in conjunction with the financial information immediately precede
the interim financial statements which accompany these notes. The results of
operations for the period ended March 31, 2000 are not necessarily indicative of
the results that may be attained for the entire fiscal year.
Certain adjustments recorded in the December 31, 1999 financial statements
relate to the period ended March 31, 1999. The Company has restated the March
31, 1999 results of operations in the accompanying financial statements to
reflect these adjustments.
2. COMPREHENSIVE LOSS
Comprehensive loss for all periods presented is the same as net loss.
3. NET LOSS PER SHARE
The Company computes net loss per share following SFAS No. 128, Earnings Per
Share. SFAS 128 requires the presentation of basic and diluted income (loss) per
share amounts. Under the provisions of SFAS No. 128, basic net income (loss) per
share is computed by dividing the net income (loss) available to common
shareholders for the period by the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share is computed
by dividing the net income (loss) for the period by the weighted average number
of common and common equivalent shares outstanding during the period. Common
equivalent shares, composed of incremental common shares issuable upon the
exercise of stock options, are included in diluted net income (loss) per share
to the extent these shares are dilutive. Common equivalent shares are not
included in the computation of diluted net loss per share for the three month
periods ended March 31, 2000 and 1999 because the effect would be anti-dilutive.
4. COMMON STOCK
The Company raised approximately $3.0 million as a result of the private
placement offering during the period August 1999 to January 2000, for which the
Company incurred $87,700 in financing costs related to this offering and issued
50,850 shares of common stock to various placement agents in connection with the
private placement (valued at $101,700). These costs have been charged as a
reduction to additional paid-in-capital. In January 2000, the Company issued
140,000 share of common stock at $2.00 to private investors for cash proceeds of
$280,000.
In March 2000, 3,525,000 shares of common stock were issued at $2.00 per share
to private investors for cash proceeds of $7,050,000. The Company incurred
$1,248,019 in transaction costs related to this offering. In conjunction with
the offering, warrants to purchase 377,500 shares of the Company's common stock
at a price of $2.00 were issued to the placement agent. The warrants are fully
exercisable and expire in March 2005.
F-16
<PAGE>
In January 2000, the Company issued 5,000 shares of common stock as
consideration for the extension of a note payable. In March 2000, the Company
issued 25,000 shares of common stock to an employee as a recruiting incentive.
The Company has expensed $60,000 related to these two transactions.
5. STOCK OPTION PLAN
During the three months ended March 31, 2000, the Company has granted 451,000
options to employees, consultants and a board member with various vesting
periods, from immediately to three years, to purchase shares of common stock of
the Company at prices ranging between $2.00 to $4.00 per share. Options to
purchase 425,000 shares of common stock of the Company at prices ranging between
$2.00 to $3.50 per share were cancelled during March 2000.
6. SALE TO METROSPLASH.COM
In March 2000, the Company entered into an agreement to sell to Metrosplash.com
Inc. its ERT1 website in exchange for 100,000 unregistered shares of
Metrosplash.com. The unlaunched ERT1 website was targeted to the African
American professional. The Company will record no gain or loss on the
transaction as the website had no net book value at the time of the sale and the
value of Metrosplash.com shares is not readily determinable.
7. LITIGATION
From time to time the Company is involved in legal proceedings, claims and
litigation arising in the ordinary course of business. Management believes,
however, that the ultimate outcome of all pending litigation should not have a
material adverse effect on the Company's financial position or liquidity.
F-17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Florida Statutes
Articles of Incorporation
Our Articles of Incorporation provides that the directors of the company shall
be protected from personal liability to the fullest extent permitted by law. Our
Articles of Incorporation also provide for the indemnification of our directors
and officers.
Bylaws
Our Bylaws further provide that our officers and directors shall not be liable
to us for any loss or damage suffered by us on account of any action taken by
him as an officer or director of the corporation if he acted in good faith and
in a manner reasonably believed to be in or not opposed to our best interests
and, with respect to a criminal matter, if he had no reasonable cause to believe
that his conduct was unlawful.
Indemnity Agreements
Our Articles of Incorporation provide that we may indemnify our directors and
officers to the fullest extent permitted by law and we have agreed to provide
such indemnification to our officers and directors, pursuant to written
indemnity agreements.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses incurred in
connection with the sale and distribution of the securities being registered.
All of the amounts shown are estimates except the Securities and Exchange
Commission registration fee.
Security and Exchange Commission registration fee...... $ 7,139.62
Printing and engraving expenses........................ $ 5,000.00
Legal fees and expenses................................ $ 10,000.00
Accounting fees and expenses........................... $ 10,000.00
Miscellaneous expenses................................. $ 2,500.00
Total.......................................... $ 34,639.62
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the last three years the Company sold unregistered shares of its
Common Stock in the following transactions:
(A) In October 1996, the Company issued 5,000,000 shares of Common
Stock to the founder of the Company, at a price of $.001 per share of which
4,410,000 were retired in March 1999. There was no underwriter involved in this
issuance. The issuance was conducted pursuant to Section 4(2) under the
Securities Act of 1933 ("1933 Act").
(B) In October 1996, the Company conducted a private placement of
25,000 shares of Common Stock to 25 parties, at a price of $.001 per share.
There was no underwriter involved in the placement. The placement was conducted
pursuant to Section 4(2) of the 1933 Act.
(C) In March 1999, the Company issued an aggregate of 2,800,000 shares
of Common Stock to three parties, including 2,533,334 shares to Mr. David J.
D'Arcangelo, the Company's Chairman of the Board, and 133,333 shares of Common
Stock each to two consultants to the Company, in consideration of marketing and
business plans and consulting services rendered. There was no underwriter
involved in the issuances. The issuances were conducted pursuant to Section 4(2)
of the 1933 Act.
-26-
<PAGE>
(D) In February 1999, the Company conducted a private placement of
1,000,000 shares of Common Stock to four individuals, at a price of $.001 per
share. There was no underwriter involved in the placement. The placement was
conducted pursuant to Rule 504 under the 1933 Act.
(E) During March through May 1999, the Company conducted a private
placement sale of convertible notes to six parties for the gross proceeds of
$695,000. The notes were in the aggregate principal amount of $695,000 and bore
interest on the principal amount at the rate of 6% to 10% per annum. The
principal amount of the notes were convertible into shares of Common Stock at
the rate of $2.00 to $3.00 per share. In June 1999, the holders of the notes
converted the entire principal amount into 267,500 shares of Common Stock. There
was no underwriter involved in the placement. The placement was conducted
pursuant to Section 4(2) of the 1933 Act.
(F) During the first and second quarters of 1999, the Company issued an
aggregate of 1,600,000 shares of Common Stock and options to purchase an
aggregate of 950,000 to five officers and directors of the Company. There was no
underwriter involved in the issuances. The issuances were conducted pursuant to
Section 4(2) of the 1933 Act.
(G) During the period August to January 2000, we conducted a private
placement of 1,524,430 shares of Common Stock to approximately 43 parties, at a
price of $2.00 per share. There was no underwriter involved in the placement.
The placement was conducted pursuant to Section 4(2) of the 1933 Act and Rule
506 thereunder.
(H) In November 1999, the Company issued 143,334 shares of Common Stock
to a consultant of the company in consideration of corporate finance, investor
communities and public relations consulting services. There was no underwriter
involved in the issuance. The issuance was conducted pursuant to Section 4(2) of
the 1933 Act.
(I) In February and March 2000, the Company conducted a private
placement of 3,525,000 shares of Common Stock to approximately 70 parties at a
price of $2.00 per share. Roth Capital Partners, Inc. acted as placement agent.
As part of its compensation for acting as placement agent, we granted to Roth
Capital Partners a common stock purchase warrant entitling the holder to
purchase 377,500 shares of common stock at an exercise price of $2.00 per share.
This offering was conducted pursuant to Section 4(2) of the 1933 Act and Rule
506 thereunder.
With respect to each of the foregoing offerings, prior to investing,
each subscriber was provided with or had access to all of the information
regarding the Company that would be included in a registration statement on Form
SB-2. With regards to the sales made in reliance on Section 4(2) of the 1933 Act
or Rule 506 thereunder, the Company had reasonable grounds to believe, prior to
accepting the subscription of each subscriber, based in part on the subscription
agreements or investment letters executed by the subscribers, that each of the
subscribers (i) was sophisticated enough to evaluate the merits of an investment
in the securities and did not need the benefits of registration under the 1933
Act, (ii) had a prior substantive relationship with the officers of the Company
or the selling broker dealer and (iii) was purchasing with investment intent and
not with a view to distribution. In addition, each subscriber referred to in
paragraphs A and C-I above was reasonably believed by the Company to be an
accredited investor within the meaning of Rule 501(a) of the 1933 Act.
-27-
<PAGE>
ITEM 27. EXHIBITS
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation (1)
3.2 Articles of Amendment to Articles of Incorporation dated March 24,
1999 (1)
3.3 Amended and Restated Bylaws(3)
4.1 Specimen of Common Stock Certificate (1)
5.1 Opinion of Oppenheimer Wolff & Donnelly LLP(3)
10.1 EntrePort Corporation 1999 Stock Option Plan (1)
10.2 Securities Purchase Agreement with MetroSplash.com, Inc. (2)
10.3 Registration Rights Agreement (2)
10.4 Employment Agreement dated March 17, 1999 with David D'Arcangelo(3)
10.5 Employment Agreement dated March 19, 1999 with William Shue(3)
16.1 Letter of change in Accountants(2)
23.1 Consent of Ernst & Young LLP
23.2 Consent of Oppenheimer Wolff & Donnelly LLP (included as part of
Exhibit 5.1)
21.1 List of Subsidiaries(2)
27.1 Financial Data Schedule(2)
-----------
(1) Filed as exhibit to Registrant's Form 10-SB Registration Statement 1999
(File No. 0-26941) and incorporated herein by reference.
(2) Filed as exhibit to Registrant's 1999 Annual Report on Form 10-KSB (File No.
0-26941) and incorporated herein by reference.
(3) Filed as exhibit to Registrant's Registration Statement on Form SB-2 (File
No 333-36620) and incorporated herein by reference.
ITEM 28. UNDERTAKING.
(a) The undersigned Company hereby undertakes:
(1) To file, during any period which offers or sales are being
made, a post-effective amendment to this registration statements:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts of events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Insofar as indemnification for the liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described herein, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange such indemnification is against public policy as expressed in the
opinion of the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by director, officers or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
-28-
<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 the filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on July 28, 2000.
ENTREPORT CORPORATION
By: /S/ William A. Shue
-------------------------------------
William A. Shue
President, Chief Executive Officer
and Chief Financial Officer
By: /S/ Ronald D. Suokko
-------------------------------------
Ronald D. Suokko
Chief Accounting Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ David J. D'Arcangelo Chairman of the Board July 28, 2000
-------------------------
David J. D'Arcangelo
/s/ William A. Shue Director July 28, 2000
-------------------------
William A. Shue
/s/ Tony Acone Director July 28, 2000
-------------------------
Tony Acone
/s/ Scott Lucas Director July 28, 2000
-------------------------
Scott Lucas
-29-
