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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3 TO FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
iNetvisionz.com, Inc.
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(Name of Small Business Issuer in its charter)
Delaware 33-0285179
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(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
6033 West Century Blvd., Suite 500, Los Angeles, CA 90045
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(Address of principal executive offices) (Zip Code)
(310) 338-9822
(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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None None
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Securities to be registered pursuant to section 12(g) of the Act:
Common Stock, par value $.001
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(Title of Class)
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PART I
ITEM 1: DESCRIPTION OF BUSINESS
The letters and numbers set forth in Item 1 of this Amendment No. 1
to Form 10-SB correspond to each of the letters and numbers set forth in Item
101 of Regulation S-K.
(a) GENERAL DEVELOPMENT OF THE BUSINESS
(1) ORGANIZATION AND MATERIAL TRANSACTIONS.
iNetvisionz.com., Inc. (unless otherwise indicated, all references to
the "Company" and iNet include iNetvisionz. com, Inc., a Delaware corporation,
and its wholly owned subsidiary iNetversity, Inc., a California corporation)
was first incorporated as Martinique Ventures Corporation, a Delaware
corporation on February 18, 1988. On August 13, 1997, it filed an amendment to
its articles of incorporation changing its name to Zebulon Enterprises, Inc.
On April 21, 1998, a subsequent amendment to its articles of incorporation was
filed changing Zebulon Enterprises, Inc. to Tao Partners Inc. In September,
1998 the Company acquired certain assets from NovaQuest InfoSystems, Inc., in
exchange for $500,000 and 520,000 of Tao Partners shares of common stock.
These assets were eventually transferred to the Company's wholly owned
subsidiary iNetversity, Inc. These assets constituted less than 1% of the
aggregate assets of NovaQuest at the time of the acquisition. NovaQuest did
not separately account for the revenues and expenses associated with the
operations of these assets and there was no separate subsidiary or division
through which these assets were operated while controlled by NovaQuest.
Finally, on April 30, 1999, Tao Partners Inc. filed an amendment to its
articles of incorporation changing its name to Inetvisionz.com, Inc. (the
"Company" or "iNet"). iNet presently trades on the over-the-counter market as
"INVZ". The Company has not had any bankruptcies, receiverships or similar
proceedings. As set forth below, the Company commenced the implementation of a
new business plan on October 1, 1999.
(2) BUSINESS OF ISSUER
The Company is in the business of providing Education
Services and Consulting and Placement Services. The Company intends to expand
its services as an internet incubator but there is no guarantee that the
Company will be able to implement this business plan. Many factors may prevent
the implementation of the Company's business plan. These factors include
substantial financial commitments, the need to develop effective internal
process and systems, the ability to attract and retain high-quality employees,
changes in overall technology, changes in the law and the mix of product and
services offered in the Company's target markets.
(1) ITEM 101(a)(2)(B)(1) IS NOT APPLICABLE IN THAT THE
SUBJECT FILING IS NOT AN S-1.
(2) MATERIAL PRODUCTS AND RESEARCH AND DEVELOPMENT.
Since October 1, 1999 the Company attempts to continuously monitor
developments on the Internet (through information provided by iNetproz
(defined below) corporate clients and through its iNetcommerce (defined below)
internet site development and then adjusts the course offerings of iNetversity
according to the provided information. While these divisions are currently at
an extremely early stage, since their inception on October 1, 1999 these
divisions have provided information to iNetversity which iNetversity has begun
to incorporate into its course offerings.
The Company estimates that at any given time the equivalent of two
employees (representing approximately 300 to 400 hours per month) are devoted
to its research and development activities. These activities focus upon
technical developments in internet and computer technologies. These
development activities are typically not paid directly by our customers;
however, the Company believes that the quality of its work product and
services will result in future revenue opportunities through these development
efforts.
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(3) MATERIAL ACQUISITION OF PLANT AND EQUIPMENT.
As noted below, during the month of December 1999, the Company
completed a debt offering of $250,000. The Company used approximately 60% of
these funds to acquire additional computer equipment and hardware and software
required to access the internet (collectively, "Hardware and Software").
(4) NUMBER OF EMPLOYEES.
As noted below, prior to June 30, 1999 the Company was in the
exclusive business of providing Education Services (defined below). As of
August 31, 2000, the Company had 67 employees divided as follows: 14 in
general administration, 24 providing Education Services through iNetversity,
14 providing Consulting and Placement Services through iNetproz and 15
developing Internal and External Business Plans through iNetcommerce. All of
the Company's employees work on a full-time basis.
On or about October 1, 1999 the Company elected to divide its
operations into three separate divisions: (a) iNetversity; (b) iNetproz; and
(c) iNetcommerce. The business plan for each of these divisions is set forth
below under (C) Description of Business. Only iNetversity is operated as a
separate corporation, the other two divisions operate within the Company. The
Company intends to provide all of the divisions' services to minority
communities through its Out-of-the-Box solutions tradename. At this time, no
revenues have been generated through the Out-of-the-Box tradename or business
plan. The Company anticipates that during calendar 2000 it shall add an
average of one employee during each month to iNetversity, three employees each
month to iNetproz and two employees each month to iNetcommerce. There is no
assurance that the Company will grow at the rate set forth above; further, in
the event the Company is unsuccessful in raising outside capital it may be
forced to curtail the growth set forth above.
(5) OTHER BUSINESS PECULIARITIES
In the opinion of management, the key to understanding the Company is
to understand the strategic information provided by each of the divisions to
the other divisions. For example, if a number of iNetproz corporate customers
began demanding a certain type of programming expertise, iNetproz would advise
iNetversity to adjust its course composition accordingly. In summary, the
Company is not a "dot com" firm, relying upon an Internet site to provide its
primary source of revenues. Instead it is a Company which trains, educates,
consults and develops primarily for other companies, utilizing computer
software/hardware and/or internet based assistance.
(B) FINANCIAL INFORMATION.
During 1999, the Company's revenue and expenses were generated
primarily through providing Education Services. (See MD&A and financial
statements attached hereto.) As a result of the uncertainties arising from
operating in the Internet industry it is difficult to project the amount and
areas of growth that the Company will experience during the year 2000. In this
regard, while there is no assurance, the Company anticipates that the
Consulting and Placement Services provided by the iNetproz division will
experience the greatest degree of growth. The Company bases this conclusion
upon the following: (a) the increasing demand for software programmers capable
and experienced in operating internet based programs and sites; and (b)
iNetversity's "graduates" which will provide a ready source of talent for both
consulting and placement services.
(C) DESCRIPTION OF THE BUSINESS.
(i) and (ii) PRINCIPAL PRODUCTS AND SERVICES
iNet's business during most of 1999 consisted of the provision of
classroom based education. These classes primarily taught either computer
software programming or training of a customer's employees in the utilization
of the customer's computer system ("Education Services") and the provision of
consulting services in connection with the operation of a customer's computer
system and the permanent and temporary placement of iNet's students as
employees of its customers ("Consulting and Placement Services").
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In October 1999, the Company began the implementation of a business
plan pursuant to which the Company would operate through three separate
divisions: (a) iNetversity; (b) iNetproz; and (c) iNetcommerce (only
iNetversity is formed as a separate corporation, iNetproz and iNetcommerce
operate as part of the Company, but constitute unincorporated divisions within
the Company). A graphical overview of this business plan may be reviewed at
www.inetvisionz.com. While the Company currently intends to implement the
business plan set forth below, there is no assurance that the Company will be
successful in implementing this plan. Further, Company management may
materially revise this plan based upon the business environment, market
conditions and capital requirements.
iNetversity currently intends to continue to provide Education
Services and has developed a series of Internet based education programs
allowing students to move at their own pace by accessing information over the
Internet which is based upon iNet's classroom programs. While some of these
Internet based programs have been deployed, as of December 1, 1999, the
Company has not generated material revenues through the utilization of these
internet programs. The offline courses offered by iNet have been offered in
connection with: (a) retraining laid-off employees generally from the
aerospace industry and Fortune 500 companies; (b) providing on the job
training for iNetproz and iNetcommerce employees (discussed below) and (c)
participating internship programs for disadvantaged individuals (for example,
the Company was recently awarded a $488,000 grant by the state of California's
Employment Training Program to provide scholarships for disadvantaged
individuals to take the Company's courses). The Company anticipates that it
will add an average of one employee per month during the remainder of the year
2000 to iNetversity's operations. The Company also utilizes independent
contractors to teach courses outside the scope of iNetversity's expertise.
iNetversity is a wholly owned subsidiary of the Company. The Company estimates
that 20% of its aggregate services are provided by independent contractors.
Virtually all of its independent contractors are teachers operating through
the Inetversity division providing specialized education services in classroom
settings. Independent contractors are selected by a number of methods,
including referrals, demonstrable ability and unsolicited inquiries. The
identity and number of independent contractors utilized by the Company
fluctuates according to the demands of the market place and the availability
of instructors.
The Company primarily utilizes independent contractors as instructors
in certain advanced level technical education and training programs. Each
independent contractor is required to execute an Independent Contractor
Agreement which contains, in summary, the following material terms: (a) the
contractor's activities are not exclusive as to the Company; (b) either party
may terminate the agreement with 5 days notice; (c) the contractor is acting
as an independent contractor; and (d) the contractor agrees to maintain the
confidentiality of any of the Company's trade secrets and to not circumvent
the Company by directly contacting the Company's contracts, customers and
investors. While the Company believes the Company's independent contractors
are properly classified according to IRS guidelines, the Company would be
liable for back withholding taxes, social security and worker's compensation
should the IRS make a determination that its independent contractors should
have been classified as employees at the time the independent contractors were
paid by the Company.
iNetProz currently intends to expand the Consulting and Placement
Services initially provided by the Company during the third quarter of 1999.
These services are primarily comprised of the following: (a) consulting
services, typically billed on an hourly basis, for technical aspects
associated with internal computer network (sometimes referred to as an
intranet) and internet operations; (b) temporary placement of technical
personnel, in exchange for a percentage of their hourly wage; and (c)
permanent placement of technical personnel with the Company's customers. The
Company anticipates that it will add approximately two employees to this
division each month during the remainder of the calendar year 2000. These
employees will be divided almost equally between sales and marketing employees
(who will present the iNetproz's program to potential customers) and technical
employees (who will do the actual consulting and temporary and permanent
placement). iNetproz is a tradename of the Company, but it is not a separate
corporation.
The Company's Education Consulting and Placement Services customers
include Xerox Corporation, Boeing North America, Inc., Honda R&D North
America, Inc., Transamerica, Ernst & Young, Mobil Oil, Lexus Motor
Corporation, Toyota Motor Sales and UCLA Medical Center which collectively
accounted for approximately 15% of revenues in 1999. Approximately 23% and 19%
of the Company's revenues in calendar year 1999 and 1998 respectively were
generated through the South Bay Private Industry Council.
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iNetcommerce is what is increasingly characterized in the internet
industry as an "internet incubator". This division will implement primarily
internet based business plans developed either internally by the Company
("Internal Business Plans") or by third parties ("External Business Plans").
While the Company is considering a number of Internal Business Plans, it does
not anticipate implementing any Internal Business Plan during calendar year
2000. In October, 1999 the Company entered into three separate agreements with
RxAlternative.com. In summary, these agreements provided for the development
of a test website (Beta Website Development Agreement) and if this test
website proved successful, then the Company would develop two additional
websites (Permanent Website Development Agreement) and a website maintenance
agreement (Website Maintenance Agreement). The initial website was
successfully deployed and the Company received $27,000 in cash and a nominal
number of shares in RxAlternative pursuant to the Beta Website Development
Agreement. The Permanent Website Development Agreement provides that the
Company shall develop two websites for RxAlternative in exchange for a 4.17%
nondilutive interest in RxAlternative (this percentage shall be not be diluted
unless and until RxAlternative completes a public offering) The agreement to
develop two new web sites provides for iNetVisionz to construct two new
websites. In the event of a material breach, the agreement is terminable by
the non-breaching party if the breaching party is not able to cure the breach
in ten days. Neither party may unilaterally terminate the contract absent a
material breach. If the agreement is terminated for any reason before
iNetVisionz has completed the work, iNetVisionz is entitled to retain the
number of shares necessary to compensate it at the rate of $125 per "man hour"
at a share price of $1.25 per share.
The Website Maintenance Agreement provides that the Company shall be
paid $10,000 per month for its initial 40 hours of monthly maintenance
services and $150 per hour for all services provided over this initial 40
hours. iNetcommerce is operated as a separate unincorporated division within
the Company. In the event of a material breach, the Website Maintenance
Agreement is terminable by the non-breaching party if the breaching party is
not able to cure the breach in ten days. Absent a breach, this agreement is
terminable by either party with sixty days notice.
During the fourth quarter of 1999, the Company secured a 50% interest
in Liquidationbid.com. While development of LiquidationBid's website has not
yet commenced, Liquidation Bid is currently intended to be an internet based
company which provides on-line auctions for excess merchandise in a variety of
industries. There is no assurance that the Company will complete development
of LiquidationBid's website or that is such website is completed, that
LiquidationBid will successfully implement its business plan.
The Company intends to provide the Company's core services to the
minority community through its Out-of-the-Box Solutions tradename. The Company
has focused on historically black colleges located throughout the United
States as an avenue to provide technology, education and training. At this
time, no revenues have been generated through this tradename or business plan.
(iii) SOURCES OF RAW MATERIALS.
While this section is not applicable to the Company, clearly the
Company will have a continuous need during the foreseeable future for computer
equipment and hardware and software which facilitate internet access.
(iv) EFFECT OF PATENTS AND TRADEMARKS.
Currently, the Company does not hold patents on any of its products
or processes under development. The Company does, however, treat its technical
data as confidential and relies on internal nondisclosure safeguards, as well
as on laws protecting trade secrets, to protect its proprietary information.
There can be no assurance that these measures will adequately protect the
confidentiality of the Company's proprietary information or that others will
not independently develop products or technology that are equivalent or
superior to those of the Company. The Company may receive, in the future,
communications from third parties asserting that the Company's products
infringe the proprietary rights of third parties. There can be no assurance
that any such claims would not result in protracted and costly litigation.
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The Company has filed the following trademarks with the United States
Patent and Trademark Office on the following dates: "Business Visioneer" was
filed by the company on November 1, 1999; "Synergistic Minds @ Work" was filed
on September 9, 1999; "Out of the Box Solutions" was filed on January 20,
2000; "Breaking the Barriers, Creating Opportunities, Filling the Need" was
filed on September 9, 1999 and, "The Job You Want, The Education You Need, The
Career You Earn" was filed on September 9, 1999.
In the Company's experience it takes anywhere from three to six
months to receive even an acknowledgement of the receipt of a trademark
application from the United States Patent and Trademark Office. the actual
process of registering an accepted mark can take well over a year. The Company
does not expect any response from the United States Patent and Trademark
Office until the fourth quarter of this calendar year at the earliest.
The Company currently utilizes many of these slogans in its marketing
materials summarizing the education and training programs offered by the
Company. Company management believes that these slogans focus upon the
Company's business plan of not just functioning as a technical education
center, but in fact providing on the job training for its students and
eventual permanent placement.
(v) SEASONALITY OF THE BUSINESS
The Company has only provided Education Services for a little over
one year. The iNetproz and iNetcommerce divisions were launched on October 1,
1999. As a result it is difficult to predict whether the Company's revenues
will materially fluctuate during its calendar year. Company management is not
aware of any factor that might give rise to such a fluctuation.
(vi) WORKING CAPITAL ITEMS
The Company is a service company and as a result it does not have any
trade inventory that it carries. In the event an iNetversity student is
dissatisfied with his/her class, she/he is provided with a one-time
opportunity to take the class again. The Company's providing of Consulting and
Placement Services is at a very early stage. As of the date of this filing the
Company has not provided any warranty or guarantee associated with its
Consulting or Placement Services.
(vii) DEPENDENCE UPON LARGE CUSTOMERS
The Company is not currently dependent upon any one customer, as of
the date of this filing. As noted above, the Company does provide Education
and Consulting and Placement Services to a number of large corporations;
however, none of these customers provided in excess of 10% of the Company's
gross revenues. Under the JTPA currently one customer, South Bay Private
Industry Council, accounted for approximately 23% and 19% during the years
ending December 31, 1999 and 1998, respectively. The iNetcommerce division is
currently dependent upon the RxAlternative transaction to generate
approximately 45% of its revenues through the second quarter of 2000. In the
event RxAlternative were to cease performing under its Agreement with
iNetvisionz, iNetvisionz would redeploy the iNetcommerce personnel into: (a)
other iNetproz consulting projects; (b) other internally or exteriorly
generated business plans developed through its iNetcommerce division or (c)
outsource such individuals on a temporary or permanent basis through its
iNetproz division.
On October 25, 1999, the Company entered into two agreements with
RxAlternative: (1) a web site maintenance agreement, and (2) an agreement to
develop two new web sites.
The web site maintenance agreement provides that iNetVisionz will
maintain RxAlternative.com's web site at http://www.rxalternative.com for
$10,000 a month. In addition to the $10,000 per month, iNetVisionz is entitled
to $150 per hour for all work performed in excess of 40 hours each month. In
the event of a material breach, the agreement is terminable by the
non-breaching party if the breaching party is not able to cure the breach in
ten days. Absent a breach, this agreement is terminable by either party with
sixty days notice.
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The agreement to develop two new web sites provides for iNetVisionz
to construct two new web sites for RxAlternative. In return for developing the
web sites, iNetVisionz will receive 750,000 shares of RxAlternative stock,
representing a 4.17% ownership interest in RxAlternative that is non-dilutable
for the sooner to occur of five years or until an initial public offering by
RxAlternative of at least 10 million shares or resulting in a market
capitalization of at least 100 million dollars. In the event of a material
breach, the agreement is terminable by the non-breaching party if the
breaching party is not able to cure the breach in ten days. Neither party may
unilaterally terminate the contract absent a material breach. If the agreement
is terminated for any reason before iNetVisionz has completed the work,
iNetVisionz is entitled to retain the number of shares necessary to compensate
it at the rate of $125 per "man hour" at the share price of $1.25 per share.
(viii) BACKLOG ORDERS
The Company's "backlog" is not comprised of what would traditionally
be characterized as a backlog of orders by a manufacturing company. The
Company does believe that the combination of its agreements with RxAlternative
(discussed above) and its agreement with ETP (discussed below) provide the
Company with contractual commitments for certain revenues through 2000.
(ix) GOVERNMENT CONTRACTS
The Company participates in both state and federal government
programs providing financing for technical training and education primarily
through its iNetversity subsidiary. Most of these programs require that
students qualify under Title III of the federally promulgated Job Training
Placement Act. These requirements provide that a student must be eligible for
or has exhausted his/her unemployment benefits through the state of California.
The Company currently has nine contracts with various organizations
throughout Southern California which are financed by the federally financed
Job Training Placement Act ("JTPA"). The following is a list of these
organizations: Los Angeles City Private Industry Counsel; Los Angeles County
PIC; South Bay PIC; Beach Cities One-Stop; Career Partners, Inc.; Anaheim PIC;
Carson/Lomita/Torrance PIC; Orange County PIC; and San Ana PIC (the "Local
Referring Agencies"). Each of the Company's contracts with these organizations
are for a one year term and terminate on June 30, 2000. These Local Referring
Agencies provide the Company with recently unemployed individuals interested
in securing technical Education Services. Upon the Company accepting a
student, his/her tuition is provided by JTPA. In the event the Company's
contracts with these various Local Referring Agencies were not renewed, the
Company would attempt to secure alternative sources of financing for its
students. This would result in a substantial material delay in the Company
obtaining tuition revenues. In the event the Company were unable to secure a
source of funding as an alternative to JTPA, the Company's financial prospects
would be materially and adversely effected.
The Company has also entered into an Agreement with the state of
California financed Employment Training Panel ("ETP") to provide financing for
iNetversity students. This contract is in an amount up to $488,000 and is
terminable in the event the Company fails to meet ETP's performance criteria
or misapplies the applicable FUNDING. In order to qualify for funding: (a) a
student must be unemployed or prove that he will lose his employment unless he
receives new technical skills provided by the Company and (b) the Company must
place the student and the student must remain employed for 91 consecutive days
following such placement. As of December 13, 1999, the Company has enrolled 13
students in the ETP program. It is currently the Company's intention to enroll
an additional 29 students through the end of January, 2000. Under the ETP
contract the Company is paid approximately $8,500 per student, with 20%
payable upon commencement of Education Services by the Company and 80% payable
upon the student completing 90 days of employment. The Company anticipates
submitting at least three ETP applications during the year 2000, with its
second ETP application submitted in March 2000. In the event the Company is
unable to secure ETP financing, it will continue to consider other state and
federal government programs providing financing for technical training and
education. If the Company is unable to secure additional ETP funding or is
unable to successfully apply for other government funded contracts, the
Company's future operations may be materially and adversely effected.
The Company only recognizes income when all contractual terms have
been completed in accordance with the agreement and the Company has the right
to retain progress payments. Please note that the Balance Sheet of the Company
at June 30, 2000, contains a current liability for deferred tuition revenues
in the amount of $27,000. This
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amount reflects payments that have been received by the Company, for which it
has not yet recognized revenues (because there are certain contingencies that
require completion.)
(x) COMPETITIVE CONDITIONS.
The Company believes that the business plan which it commenced
implementing in October, 1999 places it in the following markets:
(1) TECHNICAL EDUCATION. According to Forrester Research, a
leading market research firm, the market for corporate on-line recruiting is
growing. Over the next four years, the market is expected to grow almost 60%
annually moving up to an estimated $1.7 billion in 2003 from $245 million in
1999. The Company's competitors include 7th Street.Com which provides
interactive on-line technical training and Pinnacle Multimedia which provides
training and education for companies' management and technical teams. The
Company will provide instruction in developing software and installing
hardware and on the job training primarily, although not always, associated
with internet applications ("Technical Applications") through its iNetversity
subsidiary. While the Company's historical focus has been upon the traditional
classroom setting, it is now deploying a series of internet based classes
(which the Company calls "courseware) allowing students to work at their own
pace, but still assimilate the same information as if attending traditional
classroom settings. There are thousands of companies, junior colleges and
universities throughout the United States which provide Technical Application
education to their students.
The Company is a certified solutions provider for Microsoft, Novell
and Lotus. Virtually, all competitors of the Company in Education Services
have one or all of these certifications. These certifications identify that
the Company offers all classes necessary to be a Microsoft/Novell/Lotus
solutions provider. The number and complexity of the classes required for such
certifications is determined by the certifying company. The significance of
such certification is primarily two-fold: (a) it provides potential employers
with a readily recognized level of education which prospective employees have
obtained and (b) it provides individuals with such certifications the
background to take more advanced classes in the various applications in which
they are certified (many of which are offered by the Company).
(2) TECHNICAL PLACEMENT. During the second quarter of 2000, the
Company formed Corporate Search Network as a wholly owned subsidiary.
Corporate Search Network identifies permanent and temporary employment
opportunities for InetVersity students as well as other individuals trained
primarily in technical areas. In the event that Corporate Search Network, Inc.
successfully places a candidate, then the fees are deemed payable 30 days
thereafter. If the employer is dissatisfied with the performance of the
candidate during his/her initial 30 days of employment, then Corporate Search
Network is obligated to replace the candidate, if and only if the employer has
paid his/her fees. The Company believes that there are thousands of companies
throughout the United States providing temporary and permanent employment
placement for individuals skilled in Internet Applications.
(3) TECHNICAL CONSULTING. The Company will consult with
primarily large corporations in connection with a number of their Technical
Applications through its iNetproz division. A December 20, 1999 Los Angeles
Times article reports that IDC (an internet data tracking firm) projects that
the market for Internet consulting and developing online businesses is
expected to grow from $4.6 billion in 1998 to $43.7 billion in 2002. The
Technical Applications provided by the Company have included a broad range,
from a simple "help desk" to answer basic questions to the design and
development of a company-wide "intranet". The Company believes that it has
thousands of competitors in this industry. The largest competitors in this
field include: Chicago based Whitman-Hart, Inc., which recently announced that
it is acquiring USWEB/CKS Corp. in a six billion dollar transaction to create
the largest Internet professional services firm in the world and IXL
Enterprises, headquartered in Atlanta, has over 2000 employees providing
internet consulting and support services.
(4) INTERNET COMMERCE. The Company's iNetcommerce division
implements Internal Business Plans (developed primarily by the Company) and
External Business Plans (developed primarily by third parties). As the scope
of iNetcommerce's mission is very broad, it is difficult to define its
competitors other than to state that its competition is immense. Virtually
every company on the internet is a potential customer of the iNetcommerce
division. RxAlternative, the initial External Business Plan project
implemented by iNetcommerce (discussed above)
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is deploying into the healthcare sector of the internet which has major
competitors such as Healtheon, Inc. and Dr.Koop.com.
Prior to October, 1999 virtually all of the Company's revenues were
generated through the providing of Education Services through its iNetversity
subsidiary. The Company has designed a series of career tracks defined by the
classes an individual should take in order to achieve a particular career
objective. The Company's Education Services focus primarily upon advanced
Technical Applications and most entrance level classes providing for the first
tier of Microsoft, Lotus and Novel certification are offered by other
competitor's programs. The Company is currently developing a series of classes
providing for Internet development utilizing the Linux platform. While the
Company believes that it has a number of better financed and larger
competitors in the field of Education Services, the Company has not identified
a competitor which primarily focuses upon advanced level classes with the
objective of achieving a specifically defined career objective.
As noted previously, the Company only commenced its iNetproz and
iNetcommerce divisions in October, 1999 thus virtually all of its competitors
are better financed and more advanced in the implementation of their business
plan. As noted above, industries associated with the providing of Technical
Placement and Consulting contain literally thousands of competitors, ranging
from small one man operations to multi-billion dollar conglomerates
specializing in support for their proprietary products. The iNetcommerce
division's potential competitors are contingent upon the eventual business
plan it elects to commence. Clearly, its initial project, RxAlternative has
many potential offline and online competitors.
The Company believes that the principal methods of competition in all
three of iNet's divisions involve: (a) the ability to provide advanced
technology; (b) identifying at an early stage technological trends and (c)
customer satisfaction.
The Company's ability to compete in applying these methods may be
divided into negative and positive factors:
(1) NEGATIVE COMPETITIVE FACTORS. The Company believes that
virtually all of its major competitors are better financed and have a longer
operating history. Further, many of these competitors have readily
recognizable industry trade names thereby causing it to be more difficult for
the Company to penetrate the marketplace. Finally, the primary negative
competitive factor is that there is tremendous international economic activity
in connection with virtually all facets of the Internet and as a result, not
only will the Company be faced with better financed competitors, but the
Company believes that just in the United States the number of competitors will
be in the thousands.
(2) POSITIVE COMPETITIVE FACTORS. Since its inception during the
fourth quarter of 1998, the Company has focused upon providing advanced level
Education Services for Technical Applications (addressing factor (a) under
principal methods of competition above). This has provided a "pool" of
technologically advanced individuals to eventually staff the iNetproz and
iNetcommerce divisions. Thus, rather than be forced to hire people with which
the Company has no history, it has increasingly looked to iNetversity's
students to fill its other divisions. Further, iNetproz and iNetcommerce
provide: (a) on the job training for iNetversity students (something most
technical education schools cannot provide); and, (b) information to
iNetversity regarding technological trends, thus allowing iNetversity to
accordingly adjust its course offerings. These last two items address the
second factor set forth above under principal methods of competition: early
identification of technological trends. The Company believes that if it is to
be successful and provide a high level of customer satisfaction (the third
principal method of competition set forth above) then there must be a
continuous flow of information between its various divisions. For example,
iNetcommerce and iNetproz must identify employment needs in the marketplace
and iNetversity must then educate and train to address these needs.
(xi) RESEARCH AND DEVELOPMENT.
Since October 1, 1999 the Company has attempted to
continuously monitor developments on the Internet (through information
provided by it iNetproz (defined below) corporate clients and through its
iNetcommerce (defined below) internet site development) and then adjusts the
course offerings of iNetversity according to the provided information. While
these divisions are currently at an extremely early juncture, since their
8
<PAGE>
inception on October 1, 1999 these divisions have provided information to
iNetversity which iNetversity has begun to incorporate into its course
offerings. The Company estimates that at any given time the equivalent of two
employees (representing approximately 300 to 400 hours per month) are devoted
to its research and development activities. These activities focus upon
technical developments in internet and computer technologies. These
development activities are typically not paid directly by our customers;
however, the Company believes that the quality of its work product and
services and as a result the amount of revenues it may generate from these
products and services will result in future revenue opportunities through
these development efforts.
(xii) ENVIRONMENTAL LAWS.
The Company's operations do not give rise to any material issues
arising from state or federal environmental laws.
(xiii) EMPLOYEES.
As noted below, prior to June 30, 1999 the Company was in the
exclusive business of providing Education Services (defined below). As of
August 31, 2000, the Company had 67 employees divided as follows: 14 in
general administration, 24 providing Education Services through iNetversity,
14 providing Consulting and Placement Services through iNetProz and 15
developing Internal and External Business Plans through iNetcommerce. All of
the Company's employees work on a full-time basis.
On or about October 1, 1999 the Company elected to divide its
operations into three separate divisions: (a) iNetversity; (b) iNetproz; and
(c) iNetcommerce. The business plan for each of these divisions is set forth
under (C) Description of Business. Only iNetversity is operated as a separate
corporation, the other two divisions operate within the Company. The Company
intends to provide all of the divisions' services to minority communities
through its Out-of-the-Box solutions tradename. At this time, no revenues have
been generated through the Out-of-the-Box tradename or business plan. The
Company anticipates that during the remainder of calendar 2000 it shall add an
average of one employee during each month to iNetversity (approximately 90% of
which shall be instructors and 10% of which shall assist in classroom set up
and administration). The Company also anticipates that it will add 5 to 10
general accountancy and administrative employees during the remainder of
calendar year 2000, three employees each month to iNetproz (approximately
divided 33% to temporary and permanent placement and 66% to technical
application consulting) and two employees each month to iNetcommerce
(approximately 50% of which shall assist in the development of internal
business plans and 50% of which shall assist in the development of outside
business plans). There is no assurance that the Company will grow at the rate
set forth above; further, in the event the Company is unsuccessful in raising
outside capital it may be forced to curtail the growth set forth above.
(D) GEOGRAPHIC AREA FINANCIAL INFORMATION.
As noted below, 100% of the Company's revenues are generated either
through its Torrance, Los Angles, or Irvine, California facilities. As these
facilities are within 40 miles of each other, there is no material distinction
between the two operations arising from geographical location. Further, the
Company currently has not operations outside the United States.
(E) AVAILABLE INFORMATION.
The Company has filed its first two Form 10-QSB for the first and
second quarter of the calendar year 2000. The public may read and copy
materials filed by the Company at the Security Exchange Commission's Public
Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. The public may
obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. Once the Company commences filing under the
Exchange Act it will file electronic reports, proxy and information statements
that maybe accessed at http:\\www.sec.gov. The primary internet address of the
Company is www.iNetvisionz.com.
9
<PAGE>
(F) REPORTS TO SECURITY HOLDERS.
The Company became a reporting company 60 days after the filing of
its 10SB. The Company's initial Exchange Act filing was its Form 10-QSB for
the first quarter of 2000. The Company is not required to, and does not intend
to file a Form 10K-SB for the year 1999 nor shall it file a related Annual
Report to Shareholders. The Company shall comply with all proxy, quarterly and
annual reporting requirements thereafter. The quarterly reports shall contain
financial statements reviewed by an independent certified public accountant
and the annual report shall contain financial statements audited by an
independent certified public accountant.
10
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of the
Company's financial condition and results of operations. Detailed information
is contained in the financials included in this document. This section
contains forward-looking statements that involve risks and uncertainties, such
as statements of the Company's plans, objectives, expectations and intentions.
The cautionary statements made in this document should be read as being
applicable to all related forward-looking statements wherever they appear in
this document. This discussion should be read in conjunction with the
Description of Business discussion set forth earlier in this Form 10. As
indicated in this Form 10, the Company commenced implementation of a new
business plan in October, 1999. The Company believes that the early stage
development of this business plan would render it speculative to predict the
eventual financial impact of this new business plan. As a result, the
following "Management's Discussion and Analysis of Financial Information and
Results of Operations" primarily focuses upon the historical results of
operations of the Company. The Company has attached as Exhibits to this Form
10 and incorporates herein the information contained in these documents the
first and second quarter 10-QSBs filed by the Company.
Since its inception through March 31, 2000, the Company had not
generated income from operations. As a result, the Company's independent
accountants issued a going concern opinion on the December 31, 1999 financial
statements. In order to implement its business plan, the Company believes that
it will need to raise a minimum of $1 million in equity capital during
calendar year 2000. In excess of 50% of this amount would be expended to
acquire new computer hardware and software. The balance of such capital would
be utilized as working capital, primarily to finance the Inetcommerce
division. This is not based upon a formal set of projections, but rather
estimates calculated by the Company's management based upon expenditures
during the last quarter of 1999 and the first two quarters of 2000. If the
Company is unable to raise such capital, it is the intention of the Company to
reduce, delay, eliminate or sell all or a portion of the Inetcommerce
division, as the revenues generated by this division, the Company believes,
will require a longer marketing and development cycle, relative to the more
established Inetversity (Education Services) and Inetproz (computer consulting
and employment placement) divisions. The Company believes that its current
cash flow would be sufficient to support such a reduced or delayed
implementation of the business plan. However, there is no guarantee that the
curtailment of the Inetcommerce division's business plan would be sufficient
to permit the company to continue as a going concern.
During the fourth quarter of 1999, the Company acquired computer
equipment, hardware and software for use in its daily operations in the amount
of approximately $150,000. These assets were acquired using cash proceeds from
operations and from issuance of debt and equity securities during November and
December 1999, which are as follows: (i) The Company entered into a
Subscription Agreement with a Floyd Horwitz, father of Lawrence W. Horwitz, to
sell 200,000 shares under Rule 506 of Regulation D of the Securities Act of
1933 at the price of $0.25 per share. The total cash proceeds of $50,000 went
to the Company; (ii) The Company commenced an offering of up to $500,000 in
Units. The price of each Unit was $25,000 and each Unit was comprised of one
promissory note with a six month term at 8% interest and a five-year warrant
with an exercise price of $0.80 per share. As of the date of this filing, the
Company has raised $250,000 from this offering of Units.
During March 2000, the Company received $250,000 from
Winthrop Venture Fund, Ltd., an accredited investor, from the issuance of two
securities in exchange for this investment, which are as follows: (i)
Promissory note payable, bears interest at 9% per annum, unsecured and all
interest and principal due by March 2001 (ii) 75,000 warrants were also
granted with an exercise price of $0.80 per share, which expire in three years
from the date of grant. Pursuant to this agreement, in the event the Company
completes a registration statement under the Securities Act of 1933, the
Company shall be obligated to register the shares underlying the warrants.
Finally, the Company is currently delinquent in the payment
of its payroll taxes. Revenues generated from operations and financing
activities have not been sufficient to pay this debt. The Company has entered
into negotiations with the IRS to pay the outstanding obligations. The Company
paid the full amount of the delinquency in August 2000.
11
<PAGE>
The following information was derived from the Company's
historical financials statements incorporated herein.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1999
(audited) (audited)
--------- ---------
<S> <C> <C>
Statement of Operations Data
Revenues $1,016,633 $2,280,489
(Net Loss) (1,455,100) (1,746,041)
(Net Loss) per share, basic and diluted (0.40) (0.23)
Balance Sheet Data
Current Assets 571,432 515,816
Total Property and Equipment, net 400,839 402,396
Total Assets 1,513,817 1,356,508
Total Current Liabilities 658,203 1,604,923
Accumulated Deficit (1,565,791) (3,311,832)
Stockholders' Equity(deficiency) 514,139 (248,415)
</TABLE>
YEAR ENDED DECEMBER 31, 1999 AS COMPARED TO YEAR ENDED DECEMBER 31, 1998
REVENUES. The Company generated $2,280,489 in revenues during the
year ended December 31, 1999, derived primarily from training revenues at its
iNetVersity subsidiary level, as compared to $1,016,633 in revenues for the
year ended December 31, 1998. Revenues during 1998 reflected four months of
revenues of the training subsidiary, as the Company had only acquired the
assets of the training division that were transferred to iNetversity on
September 1, 1998.
GENERAL, ADMINISTRATIVE, AND SELLING EXPENSES. The Company had
$2,927,540 in general, administrative and selling expenses for the year ended
December 31, 1999, as compared to $2,013,718 of such expenses for the same
period in 1998. As substantially all expenses are incurred by the Company's
subsidiary, the 45% increase was significantly attributable to the
subsidiary's expenses, which included rent expense from two training
locations, increase in number of employees and key personnel to accommodate
the growing needs of the Company, depreciation and amortization of property,
equipment and intangible assets, and increase in professional fees. The
amounts at December 31, 1999 include twelve months of expenses of the
subsidiary, as compared to only four months of expenses at December 31, 1998.
During the years ended December 31, 1999 and 1998, the Company wrote off
approximately $105,000 and $42,000, respectively, as bad debt expense as the
amounts were deemed not collectible by management. Also included in the
December 31, 1998 expenses is a $754,000 charge to compensation for stock
issued in exchange for services during the start-up stages of the Company as
compared to
12
<PAGE>
$148,000 during the year ended December 31, 1999. A breakdown of the
components of the general, administrative and/or selling expenses for the
years ended December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Advertising and marketing $ 177,645 $ 76,346
Bad debt expense 201,618 104,644
Depreciation and amortization 92,798 293,611
General operation expenses 69,274 318,840
Office expenses 42,416 27,121
Payroll expense 1,267,267 1,439,777
Professional fees 47,418 211,000
Rent 77,205 259,800
Telephone and Utilities 37,077 96,401
------------ ------------
$ 2,013,718 $ 2,927,540
============ ============
</TABLE>
ITEM 3: PROPERTIES AND YEAR 2000 COMPLIANCE.
The Company currently operates out of three facilities: It leases
approximately 11,561 square feet of space at 19950 Mariner Avenue, Torrance,
CA 90503 and approximately 6000 square feet at 19772 MacArthur Blvd., Irvine,
California 92615. The Company's primary administrative operations have been
conducted at the Torrance facility. The Irvine facility is primarily composed
of additional classrooms to provide Education Services. The Torrance facility
is subleased from NovaQuest Info Systems, Inc. Under the terms of the
sublease, the monthly rent is $11,395.80. The sublease expires December 31,
2000. The Irvine lease requires monthly payments of $8,236.20 and expires in
September, 2000.
Commencing April 15, 2000, the Company entered into a sublease to
lease approximately 16,339 square feet at 6033 West Century Blvd., Suite 500,
Los Angeles, CA 90045. These facilities shall serve as the Company's new
headquarters. Under the terms of the sublease, the annual rent is $235,281.
The sublease expires September, 2002.
The Company has developed and acquired its computer systems with an
objective to be Year 2000 compliant. To date, the Company has not suffered any
consequences arising out of the Year 2000 compliance issues. The Company does
not believe it will suffer any material adverse consequences from Year 2000
issues.
13
<PAGE>
ITEM 4: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of June 30, 2000: (i) each
stockholder known by the Company to be the beneficial owner of more than five
percent of the outstanding Common Stock; (ii) each director of the Company;
and (iii) all directors and officers as a group.
<TABLE>
<CAPTION>
TITLE OF CLASS(4) NAME AND ADDRESS(6) AMOUNT AND NATURE OF OWNERSHIP PERCENT(7)
----------------- ------------------- ------------------------------ ----------
<S> <C> <C> <C>
Common Stock Ramsey Hakim, Director 378,000(1) 3.04%
Common Stock Noreen Khan, President, 1,761,435(2) 14.18%
Director
Common Stock Lawrence W. Horwitz 1,055,000(3) 8.49%
Secretary, Director
Common Stock Tariq Khan 3,201,667(4) 25.77%
Total Shares held by officers, directors and 5% shareholders: 6,396,102 51.49%
</TABLE>
-------------------------------------------------
(1) This amount includes 13,000 and 15,000 options exercisable at $1.00 per
share, issued to Mr. Hakim on January 1, 1999 and January 1, 2000.
(2) This amount includes 199,000 and 195,000 options to purchase common stock
exercisable at $1.00 per share granted to Mr. Khan on January 1, 1999 and
January 1, 2000 respectively.
(3) This amount includes up to 300,000 options exercisable at $1.75; 200,000
shares acquired by Floyd Horwitz, the father of Lawrence W. Horwitz;
options to purchase 15,000 shares of common stock at $1.00 per share
granted to Mr. Horwitz on January 1, 2000; and the conversion of a
$150,000 secured promissory note in May, 2000 pursuant to the terms of a
Settlement and Conversion Agreement by and between Mr. Horwitz and the
Company wherein Mr. Horwitz received 500,000 shares of common stock of
the Company.
(4) This amount includes 13,000 options exercisable at $1.00 per share and
options to purchase 15,000 shares of common stock at $1.00 per share
granted on January 1, 1999 and 2000 respectively. This amount also
includes shares held beneficially by Mr. Khan as a principal of
Knightrider Investments. Tariq Khan is the son of Noreen Khan, the
president of the Company.
(5) Except as otherwise indicated, the Company believes that the beneficial
owners of Common Stock listed above, based on information furnished by
such owners, have sole investment and voting power with respect to such
shares, subject to community property laws where applicable. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of Common Stock subject to options or
warrants currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage of the person holding
such options or warrants, but are not deemed outstanding for purposes of
computing the percentage of any other person.
(6) c/o Company's address: 6033 West Century Blvd., Suite 500, Los Angeles, CA
90045.
(7) The percentage calculation is based on 12,421,626 shares on a fully
diluted basis which included 11,207,626 shares issued and outstanding as
of June 30, 2000 and 1,214,000 options to purchase common stock issued as
of June 30, 2000.
14
<PAGE>
ITEM 5: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
------------- --- ---------------------
<S> <C> <C>
Noreen Khan 52 President, Treasurer, Director
Ramsey Hakim 36 Chairman of the Board
Lawrence W. Horwitz 40 Director, Secretary, General Counsel
</TABLE>
NOREEN KHAN, President and CEO of the Company since May of 1998 and a
member of the Board of Directors since October of 1998. Ms. Khan was employed
by Tansa Group as a business consultant from May, 1993 through August, 1996.
From September, 1996 through April, 1998 Ms. Khan was the financial officer of
United Golf Properties, Inc., a privately held real estate investment trust
specializing in the acquisition and operation of golf course properties. Ms.
Khan is responsible for the business development, financial management and
overall strategic planning and expansion of the Company.
RAMSEY HAKIM, Chairman of the Board since May of 1998. For the past 13
years, Mr. Hakim has held management positions in the Telecommunication and
Information Technology Industry. He is currently the General Manager for AT&T
Solutions Outsourcing where he is responsible for managing the annual budget
for client engagements and service delivery.
LAWRENCE W. HORWITZ, Director since November 1999. Mr. Horwitz was a
founding shareholder of the Irvine, California law firm of Horwitz & Beam in
1992. During the second quarter of 1999, Mr. Horwitz sold his interest in
Horwitz & Beam to Mr. Beam and, as a result, Mr. Horwitz is no longer an
officer, director or shareholder of Horwitz & Beam. Mr. Horwitz remains a
Senior Attorney with Horwitz & Beam and spends approximately 60% of his
working time practicing law with Horwitz & Beam. He specializes in the
securities law aspects of private and public offerings. He is currently a
member of the Board of Directors of Beta Oil and Gas, Inc. (NASDAQ Small Cap:
BETA) and was involved in that company's initial public offering in 1999. The
balance of Mr. Horwitz' time is spent working for Strawberry Canyon Capital,
Inc., of which he is the sole shareholder, officer and director. Strawberry
Canyon functions as a venture capital fund, making early stage investments,
primarily the general partner of two bridge loan funds: Westport Capital
Partners, Ltd. and Laguna Pacific Partners, Ltd. These bridge loan funds
provide early stage financing for primarily technology oriented companies
positioning to complete a private or public offering of securities. He is a
graduate of the University of California, Berkeley Haas School of Business
(B.S.) and the Boalt Hall School of Law (J.D.)
There is no director or executive officer of the Company which serves on
a board of, or occupies a position in a company that would cause a conflict of
interest.
15
<PAGE>
ITEM 6: EXECUTIVE COMPENSATION
Set forth below is a summary of compensation for the Company's officers
for fiscal years 1999. There are no annuity, pension or retirement benefits
proposed to be paid to officers, directors or employees of the Company in the
event of retirement at normal retirement date pursuant to any presently
existing plan provided or contributed to by the Company or its subsidiary.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
=====================================================================================================
ANNUAL COMPENSATION
Name and
Principal Position Year Salary Stock Options
<S> <C> <C> <C>
Noreen Khan 1999 $66,000 199,000
CEO, President,
Secretary & CFO
Meenaz Hudani 1999 $60,000 30,000
CIO
Ralph Hutchinson 1999 $60,000 -0-
VP, Marketing
Linda Ruby 1999 $54,000 50,000
VP, Professional
Placement
=====================================================================================================
</TABLE>
All of the foregoing options are at an exercise price of $1.00.
The Company's By-laws state that Directors of the Company shall not
receive any stated salary for their services, but, by resolution of the Board
of Directors, a fixed sum and expense of attendance, if any, may be allowed
for attendance at each regular and special meeting of the Board of Directors.
The Company maintains directors and officers liability insurance. To date, the
Company has not paid any fixed sum for expenses to board members for
attendance at Board of Director meetings or in discharging their obligations
as Board members.
ITEM 7: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is in the development stage of the new business plan it
launched in October 1999. Further, the Company has never conducted profitable
operations until the quarter ended June 30, 2000. Based upon the foregoing,
the Company believes that it has had difficulty in attracting substantial
investment capital, outside its present management team and principal
shareholders. As a result, the Company believes that each of the transactions
set forth in this section were on terms that were as favorable as those that
could have been obtained from unaffiliated parties, in that the Company has
attracted limited capital from unaffiliated parties as of the date of this
filing, and those transactions were conducted on terms similar or identical to
the terms set forth below.
Noreen Khan, the president of the Company, has entered into the following
transactions with the Company:
(1) In May, 1998 she entered into a Subscription Agreement pursuant
to which she provided $53,487 in debt financing which was
converted into equity during the fourth quarter of 1999 at the
rate of $.20 per share, in accordance with the original terms
of the Subscription Agreement;
16
<PAGE>
(2) In April, 1998 she acquired 100,000 shares of the Company under
Rule 504 of Regulation D at the price of $.15 per share;
(3) In July, 1998 she acquired 200,000 shares of the Company under
Rule 506 of Regulation D at the price of $.15 per share;
(4) During calendar year 1999 Ms. Khan received 800,000 shares as
additional compensation for services rendered to the Company.
(5) On January 1, 1999, Ms. Khan was issued options to purchase
199,000 shares of common stock of the Company at $1.00 per
share.
(6) On January 1, 2000, Ms. Khan was issued options to purchase
195,000 shares of common stock of the Company at $1.00 per
share.
Tariq Khan, the son of the President of the Company, has entered into the
following transactions with the Company:
(1) In May, 1998, he entered into a Subscription Agreement pursuant
to which he provided $640,000 in debt financing which was
converted into equity during the fourth quarter of 1999 at the
price of $0.20 per share, in accordance with the original terms
of the Subscription Agreement;
(2) In November, 1998, Manhattan West, Inc., a corporation
controlled by Mr. Khan entered into a Consulting Agreement with
the Company for marketing, general business and public
relations services for a one year period. Manhattan West was
paid $30,000 in stock at the price of $.45 per share (66,667
shares in the aggregate) for these services;
(3) During 1998 Mr. Khan received 500,000 shares for consulting
services provided to the Company. These services included
strategic planning of the business plan which commenced
implementation in October, 1999, identification of key
personnel to implement this business plan, budgeting and
capitalization planning and general business consulting and
advice; and
(4) On January 1, 1999 the Company issued Mr. Khan 13,000 options
exercisable at $1.00 per share in accordance with the Company's
annual issuance of options to key employees, consultants,
officer and directors of the company;
(5) On January 1, 2000 the Company issued Mr. Khan 15,000 options
exercisable at $1.00 per share in accordance with the Company's
annual issuance of options to key employees, consultants,
officer and directors of the Company.
Ramsey Hakim, the Chairman of the Board of the Company entered into the
following transactions with the Company:
(1) In November, 1998 the Company entered into a one year
Consulting Agreement with Mr. Hakim pursuant to which he was to
be paid $3,750 per month. The aggregate amount due under this
Consulting Agreement ($45,000) was converted into restricted
shares of stock during the fourth quarter of 1999 at the price
of .45 per share (100,000 shares in the aggregate);
(2) During 1998, Mr. Hakim received 250,000 shares for services
provided as the Chairman of the Board of the Company;
(3) On January 1, 1999 the Company issued Mr. Hakim 13,000 options
exercisable at $1.00 per share in accordance with the Company's
annual issuance of options to key employees, consultants,
officer and directors of the Company; and
17
<PAGE>
(4) On January 1, 2000 the Company issued Mr. Hakim 15,000 options
exercisable at $1.00 per share in accordance with the Company's
annual issuance of options to key employees, consultants,
officer and directors of the Company.
Lawrence W. Horwitz, a member of the Board of the Directors of the Company
and its General Counsel and Secretary and his father Floyd Horwitz entered into
the following transactions with the Company:
(1) In November 1999, Mr. Horwitz received 300,000 options
exercisable at $1.75 per share;
(2) In December 1999, Floyd Horwitz, the father of Lawrence
Horwitz, acquired 200,000 shares of the Company at the price
of $0.25 per share;
(3) In December 1999, Laguna Pacific Partners, LLP and
Knight-Rider Investments, Inc. provided $150,000 and $100,000
respectively through a secured promissory note financing. In
May, 2000, the Company determined that it would be unable to
pay back these sums and as a result, the Company decided to
convert these investments shares of common stock of the
Company. Strawberry Canyon Capital, Inc. paid the amount owed
to Laguna Pacific Partners, LLP and accordingly the notes were
converted into 475,000 shares to Strawberry Canyon Capital,
Inc., 25,000 to Laguna Pacific and 333,333 shares to
KnightRider (at the conversion rate of $0.33 per share).
Lawrence W. Horwitz, Director, is the sole shareholder of
Strawberry Canyon Capital, Inc., one of the general partners
of Laguna Pacific Partners, LLP; and,
(4) On January 1, 2000 the Company issued Mr. Horwitz 15,000
options exercisable at $1.00 per share in accordance with the
Company's annual issuance of options to key employees,
consultants, officer and directors of the company.
ITEM 8: LEGAL PROCEEDINGS
The Company is not a plaintiff or a defendant in any legal proceedings.
However, on or about March 22, 2000, the Company reached a verbal
agreement with Revenue Officer John Graham of the Internal Revenue Service's
Long Beach office. This agreement related to unpaid withholding taxes for the
fourth quarter of 1998 and the four quarters of 1999. At or about the time of
this agreement, the Company paid $200,000, leaving a balance of $253,366 (this
amount did not include 1999 fourth quarter interest and penalties, as the IRS
had not yet posted these amounts; however an estimate was accrued at December
31, 1999.) The Company agreed that it would pay $15,000 per month until the
outstanding past balance is paid in full. In August 2000, the Company paid this
obligation to the IRS in full.
18
<PAGE>
ITEM 9: MARKET PRICE OF COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
A. MARKET INFORMATION
The Company's Common Stock is currently quoted on the Over-The-Counter
Market under the Symbol "INVZ". Set forth below is the trading history of the
Company's Common Stock without retail mark up, mark-down or commissions
provided by the quotation in system displayed by Financial Web at
www.financialweb.com:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
HIGH ASK LOW BID
-------- -------
1999
----
<S> <C> <C>
January 1 - January 31 2.06 1.25
February 1 - February 28 2.06 1.31
March 1 - March 31 2.25 1.37
April 1 - April 30 5.37 1.75
May 1 - May 31 5.00 1.50
June 1 - June 30 3.31 1.43
July 1 - July 31 1.87 1.03
August 1 - August 31 1.56 0.69
September 1 - September 30 1.25 0.69
October 1 - October 31 1.25 0.72
November 1 - November 30 1.06 0.69
December 1 - December 31 1.03 0.69
2000
----
January 1 - January 31 1.31 0.75
February 1 - February 28 1.22 0.69
March 1 - March 31 1.19 0.66
April 1 - April 30 0.56 0.46
May 1 - May 31 0.53 0.48
June 1 - June 30 0.44 0.39
July 1 - July 31 0.76 0.57
August 1 - August 31 0.45 0.20
---------------------------------------------------------------------------------
</TABLE>
On August 31, 2000, the closing bid price for the Company's common
stock was $.45.
The above quotations are inter-dealer quotations, and the actual
retail transactions may involve dealer retail mark ups, mark downs, or
commissions for market makers of the Company's stock.
Except for 3,305,357 free trading shares, all shares issued by the
Company are "restricted securities" within the meaning of Rule 144 under the
1933 Act. Ordinarily, under Rule 144, a person holding restricted securities
for a period of one year may, every three months, sell in ordinary brokerage
transactions or in transactions directly with a market maker an amount equal
to the greater of one percent of the Company's then-outstanding Common Stock
or the average weekly trading volume during the four calendar weeks prior to
such sale. Future sales of such shares and sales of shares purchased by
holders of options or warrants could have an adverse effect on the market
price of the Common Stock.
In the absence of a security being quoted on the Nasdaq stock market,
or the Company having $2,000,000 in net tangible assets, trading in the
Company would be covered by Rule 15c2-6 of the Exchange Act for non-Nasdaq and
non-exchange listed securities. Under such rule, broker/dealers who recommend
such securities to persons other than established customers and accredited
investors (generally institutions with assets in excess of $5,000,000 or
individuals with a new worth in excess of $1,000,000 or an annual income
exceeding $200,000 or $300,000, jointly with their spouse) must make a special
written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities are
also exempt from this rule if the market price is at least $5.00 per share.
19
<PAGE>
The Securities Enforcement and Penny Stock Reform Act of 1990
requires additional disclosure related to the market for penny stocks and for
trades in any stock defined as a penny stock. Under SEC rules, "penny stock"
is any security that has a market price or exercise price of less than $5.00
per share. In addition, unless exempt, the rules require the broker/dealer to
deliver, prior to any transaction involving a penny stock, a disclosure
schedule explaining important concepts involving the penny stock market, the
nature of such market, terms used in such market, the broker/dealer's duties
to the customer, a toll-free telephone number for inquiries about the
broker/dealer's disciplinary history, and the customer's rights and remedies
in case of fraud or abuse in the sale. The broker/dealer must disclose
commissions payable to both the broker/dealer and the registered
representative, current quotations for the securities, and if the
broker/dealer is the sole market-maker. Finally, monthly statements have to be
sent disclosing recent price information for a penny stock held in the account
and information on the limited market in penny stocks.
These rules have a substantial effect on the liquidation of the
Company's common stock.
B. HOLDERS
As of June 30, 2000, there were approximately 48 registered holders
of the Company's restricted Common Stock, as reported by the Company's
transfer agent. These registered holders include both individuals, as well as
corporations. This figure does not include shares that have been placed into
street name through the Depository Trust Company system.
C. DIVIDENDS
The Company has not paid any dividends on its Common Stock. The
Company currently intends to retain any earnings for use in its business, and
therefore does not anticipate paying cash dividends in the foreseeable future.
D. OPTIONS
On January 1, 1999 the Company authorized 500,000 options to
purchase common stock of the Company at an exercise price of $1.00 per share
and issued 424,000 options exercisable at $1.00 per share. These options have
a three year term, and a percentage of which is exercisable on a quarterly
basis commencing April 1, 1999. These options were issued to various
employees, consultants and board of director members of the Company.
Also, in November, 1999 the Company issued 300,000 options to
Lawrence W. Horwitz at an exercise price of $1.75. These options are entitled
to S-8 registration rights in the event the Company becomes a Reporting
Company within the meaning of the Securities Exchange Act of 1934.
On January 1, 2000, the Company issued options to purchase 792,000
shares of common stock of the Company at the price of $1.00 per share to key
employees, officers and directors of the Company. Of these options 602,000
options vest quarterly over a three year period commencing on January 1, 2000.
E. TRANSFER AGENT
The Company's transfer agent is Alpha Tech Stock Transfer, 929 East
Spiers Lane, Drapers, Utah, 84020, the agent's telephone number is (801)
571-5118.
ITEM 10: RECENT SALES OF UNREGISTERED SECURITIES
The Company has offered securities to investors who have a previous business
relationship with either an officer, director or greater than 5% shareholder
of the Company. There has been no solicitation of accredited or non-accredited
investors who do not meet this standard.
On April 3, 1998, the Company (which was then known as Zebulon Enterprises)
had 1,142,857 shares issued and outstanding, all of which were free-trading.
These shares were issued for nominal consideration in a private placement that
was conducted in 1990.
20
<PAGE>
Simultaneous with the closing of the Zebulon acquisition, the Company sold
1,114,000 shares of common stock to six accredited investors at $.085 per
share. The aggregate proceeds raised was $94,690. Each of these investors
completed a subscription agreement with the Company wherein they asserted
facts demonstrating that they met the definition of accredited investor as
that term is used in Regulation D of the Securities Act 1933. In issuing these
shares, the Company relied on an exemption available under Rule 504 of
Regulation D.
In May 1998, the Company entered into two Subscription Agreements with
accredited investors providing for up to $850,000 in debt convertible into
common stock at the price of $0.20. One of these investors was the President
of the Company. The other investor was Tariq Khan, son of the President, and
consultant to the Company. In April 2000, the Company converted all of the
debt ($693,487 in the aggregate) into 3,467,435 shares of restricted common
stock. The shares were issued pursuant to an exemption from registration
available under 4(2). Both Mr. and Ms. Khan are accredited investors and
affiliates of the Company. See Item 7 "Certain Relationships and Related Party
Transactions" for additional information regarding these transactions.
During 1998, the Company issued 800,000, 500,000 and 250,000 shares to Noreen
Khan (President of the Company), Tariq Khan (Noreen Khan's son and
marketing/public relations consultant), and Ramsey Hakim (Chairman of the
Board of the Company), respectively and the Company recorded compensation
expense in the amount of $737,000 during the year ended December 31, 1998.
Each of these investors are accredited investors with a pre-existing business
relationship with the Company. See Item 7 "Certain Relationships and Related
Party Transactions" for additional information regarding these transactions.
During May to July 1998, the Company sold 1,400,000 shares of restricted
common stock under Rule 506 at the price of $0.15 per share. There were 13
accredited investors in this transaction and 100% of the proceeds, $210,000,
was provided directly to the Company. All offers and sales were made only to
accredited investors. Each of these investors completed a subscription
agreement with the Company wherein they asserted facts demonstrating that they
met the definition of accredited investor as that term is used in Regulation D
of the Securities Act 1933. In issuing these shares, the Company relied on an
exemption available under Rule 506 of Regulation D.
In September 1998, the Company issued 520,000 shares of its common stock in
connection with the acquisition of certain assets from NovaQuest Infosystems,
Inc. ("NovaQuest".) Of these shares, 200,000 were issued to NovaQuest and
320,000 were issued directly to five employees of NovaQuest. These individuals
are: Greg Goeser, 29,133 shares; Asif Hudani, 76,160 shares; Zeb Bhatti,
150,707 shares; Dr. Nasir Khaja, 54,400 shares; and, Sheila Johns, 9,600
shares. NovaQuest and the NovaQuest employees were sophisticated investors
who, by virtue of the due diligence performed in connection with the asset
purchase, had sufficient access to the information necessary to make an
investment decision in the Company. The shares were issued pursuant to an
exemption from registration available under 4(2) of the Act.
During September 1998, the Company sold 180,000 shares of common stock at
$1.00 per share to five accredited investors and 100% of the proceeds were
provided directly to the Company. All offers and sales were made only to
accredited investors. Each of these investors completed a subscription
agreement with the Company wherein they asserted facts demonstrating that they
met the definition of accredited investor as that term is used in Regulation D
of the Securities Act 1933. In issuing these shares, the Company relied on an
exemption available under Rule 506 of Regulation D.
During November 1998, the Company entered into three Consulting Agreements
providing for marketing, general business and public relations services. These
agreements were with Ramsey Hakim, a member of the Company's board of
directors ($3,750 per month), Manhattan West, Inc. ($2,500 per month) and
Winthrop Venture Management, Ltd. ($2,500 per month). These Consulting
Agreements provided that all amounts due could be converted into common stock
shares at the rate of $0.45 per share. On November 12, 1999, all such amounts
due were collectively converted into a total of 233,334 shares of which
100,000 shares were issued to Mr. Hakim; 66,667 shares to Manhattan West; and,
66,667 shares to Winthrop Ventures Fund, Ltd. The shares were issued in
reliance on an exemption from registration available under section 4(2) of the
Act.
21
<PAGE>
In December 1998, the Company received $250,000 from a single accredited
investor at the price of $0.625 per share. This investment was part of a
transaction wherein the investor loaned $250,000 to the Company. The loan,
evidenced by a secured promissory note was secured by 400,000 shares of common
stock of the Company. These collateral shares were released to the investor in
December, 1998 when the Company determined that it would be unable to pay the
loan on the due date resulting in a conversion of the debt at the rate of
$.625 per share. This investor completed a subscription agreement with the
Company wherein it asserted facts that demonstrate that it meets the
definition of accredited investor as that term is used in Regulation D of the
Securities Act of 1933. In issuing these shares, the Company relied on an
exemption from registration available under 4(2).
Effective January 1, 1999, the Company authorized 500,000 options to purchase
common stock of the Company at an exercise price of $1.00 per share and issued
424,000 options exercisable at $1.00 per share to certain key employees,
directors, officers and consultants.
In March 1999, the Company granted an option to World Trade Group at $.25 per
share for 500,000 shares of common stock of the Company. World Trade Group
exercised the option as to 300,000 shares paying $75,000 to the Company. World
Trade Group is an accredited investor and the Company relied on an exemption
from registration available under Rule 504 of Regulation D of the Act in
issuing the shares purchased pursuant to this option.
On November 12, 1999, the Company entered into two Agreements: (a) a stock
option agreement with Lawrence W. Horwitz, a member of the Company's legal
firm, to acquire up to 300,000 shares of stock at $1.75 per share and (b) a
Subscription Agreement with a Floyd Horwitz, father of Lawrence W. Horwitz, to
sell 200,000 shares under Rule 506 at the price of $.25 per share. See Item 7
"Certain Relationships and Related Party Transactions" for additional
information regarding this transaction.
In December 1999, Laguna Pacific Partners, LLP and Knightrider Investments,
Inc. provided $150,000 and $100,000 respectively through a secured promissory
note financing. On May 3, 2000, the Company determined that it would be
unable to pay back these sums and as a result, the Company decided to convert
each of these investments into 475,000 shares to Strawberry Canyon Capital,
Inc., 25,000 to Laguna Pacific Partners, LLP and 333,333 shares to
Knightrider Investments, Inc. Strawberry Canyon Capital, Inc. paid to Laguna
Pacific Partners, LLP the amount owed by the Company to Laguna Pacific
Partners, LLP under this bridge facility. Lawrence W. Horwitz, Director, is
the sole shareholder of Strawberry Canyon Capital, Inc., one of the general
partners of Laguna Pacific Partners, LLP. Laguna Pacific Partners and
Knightrider Investments, Inc. are accredited investors. The Company relied
upon an exemption from registration available under Section 4(2) of the Act
when issuing these securities to these investors.
In January 2000, the Company issued options to purchase 792,000 shares of
common stock of the Company at the price of $1.00 per share to key employees,
officers and directors of the Company. Of these options 602,000 options vest
quarterly over a three year period commencing on January 1, 2000.
In March 2000, the Company received $250,000 from a single accredited
investor in exchange for a promissory note due March 1, 2001, bearing interest
at the rate of 9% per annum and warrants to purchase 75,000 shares of commons
tock at the price of $.80 per share. This investor entered into subscription
and warrant agreement with the Company wherein the investor asserted facts
demonstrating that it was an accredited investor. This investor has had a long
term investment history with the Company. This note was sold based on an
exemption from registration available under 4(2) of the Act.
ITEM 11: DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Company's Articles of Incorporation authorize the issuance of
71,428,572 shares of Common Stock, $.001 par value per share, of which
11,207,626 shares were issued and outstanding as of June 30, 2000.
Holders of Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of the stockholders. Holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. In the
event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after
payment of liabilities. Holders of Common Stock have no right to convert their
Common Stock into any other
22
<PAGE>
securities. The Common Stock has no preemptive or other subscription rights.
There are no redemption or sinking fund provisions applicable to the Common
Stock. All outstanding shares of Common Stock are duly authorized, validly
issued, fully paid and nonassessable.
ITEM 12: INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has adopted provisions in its Articles of Incorporation
and bylaws that limit the liability of its directors and provide for
indemnification of its directors and officers to the full extent permitted
under the Delaware General Corporation Law. Under the Company's Articles of
Incorporation, and as permitted under the Delaware General Corporation Law,
directors are not liable to the Company or its stockholders for monetary
damages arising from a breach of their fiduciary duty of care as directors.
Such provisions do not, however, relieve liability for breach of a director's
duty of loyalty to the Company or its stockholders, liability for acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, liability for transactions in which the director derived as
improper personal benefit or liability for the payment of a dividend in
violation of Delaware law. Further, the provisions do not relieve a director's
liability for violation of, or otherwise relieve the Company or its directors
from the necessity of complying with, federal or state securities laws or
affect the availability of equitable remedies such as injunctive relief or
recession.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding that may result in a claim for indemnification by any
director or officer.
ITEM 13: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Attached as Exhibits to this Form 10 are the financial statements
required by this Item. Also attached as Exhibits to this Form 10 is the
Company's 10-QSB filed with the SEC for the quarters ending March 31, 2000 and
June 30, 2000.
ITEM 14: ACCOUNTANTS AND FINANCIAL DISCLOSURES
The Registrant has engaged Corbin & Wertz, certified public
accountants, 2603 Main Street, Suite 600 Irvine, California 92614 ("Corbin &
Wertz") as its independent accountants for all accounting purposes related to
the Registrant's business operations and the Registrant's reporting
requirements. Corbin & Wertz replaces Kabani & Company, Inc., Certified Public
Accountants, as the Registrant's principal accountants as of August 14, 2000
("Kabani") for this purpose. The principal accountants' report on the
financial statements of the Registrant contained no adverse opinion or a
disclaimer of opinion, or was qualified nor modified as to audit scope, or
accounting principles. The principal accountants' report included an
explanatory paragraph describing an uncertainty regarding the Company's
ability to continue as a going concern. The engagement of Corbin & Wertz was
approved by the Board of Directors.
The Company had engaged Kabani & Company, Inc., certified public
accountants, Fountain Valley, California ("Kabani") as its independent
accountant solely for the purposes of the review of the Company's quarterly
statements for the quarter ending March 31, 2000 and June 30, 2000. Kabani
replaced Stonefield Josephson, Inc., Certified Public Accountants, as its
principal accountant as of May 11, 2000 ("Stonefield") for this purpose. The
principal accountant's report on the financial statements of the Registrant
contained no adverse opinion or a disclaimer of opinion, or was qualified nor
modified as to uncertainty, audit scope, or accounting principles. The
engagement of Kabani was approved by the Board of Directors.
During the Registrant's two most recent fiscal years and any
subsequent interim period preceding such registration, declination, or
dismissal, there were no disagreements with the former accountant on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure.
23
<PAGE>
ITEM 15: FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
--------------------
The following financial statements are included herein:
Audited Financial Statements for the Fiscal Years ended 1998 and 1999
24
<PAGE>
PART II
<TABLE>
<CAPTION>
ITEM 1 AND
----------
ITEM 2. INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS
------- ---------------------------------------------
Exhibit No. Document Description
--------------------------------
<S> <C>
3.1 Articles of Incorporation of Martinique Ventures Corporation,
dated February 18, 1988*
3.2 Certificate of Amendment to Articles of Incorporation of
Martinique Ventures Corporation changing name to Zebulon
Enterprises, Inc., dated August 13, 1997*
3.3 Certificate of Amendment to the Articles of Incorporation of
Zebulon Enterprises, Inc. changing name to Tao Partners Inc. dated
April 21, 1998*
3.5 Certificate of Amendment to the Articles of Incorporation of Tao
Partners Inc. changing name to Inetvisionz.com, Inc. dated April
30, 1999*
3.6 Bylaws of Martinique Ventures Corporation*
3.7 Articles of Incorporation of Corporate Global Search Network, Inc.
3.8 Bylaws of Corporate Global Search Network, Inc.
3.9 Amendment of Articles of Incorporation of Corporate Global Search
Network, Inc.
3.10 Amended Bylaws of Corporate Global Search Network, Inc.
10.1 Form Independent Contractor Agreement*
10.2 Web Maintenance Agreement for RxAlternative.com, dated October 25,
1999*
10.3 Web Site Development Agreement for the Creation of Two New Web
Sites for RxAlternative.com, dated October 25, 1999*
10.4 South Bay Private Industry Council Agreement Entitled Amendment
No. 4 to Agreement No. 96-67 by and between the Company and the
city of Inglewood*
10.5 Job Training Partnership Act ("JTPA") Off-the-shelf Vendor/Voucher
Training Agreement dated July 1, 1999*
10.6 Employment Training Panel Agreement dated November 30, 1999*
10.7 Lease for the property located at 19950 Mariner Avenue, Torrance
California 90503, dated December 1, 1994*
10.8 Lease for the property located at 19772 MacArthur Blvd., Irvine,
CA 92615, dated November 18, 1997*
10.9 Schedule of Receivables as of December 31, 1999*
10.10 Sub-Lease for the property located at 6033 West Century Blvd.,
Suite 500, Los Angeles, California dated March 27, 2000.
10.11 Master Lease for the property located at 6033 West Century Blvd.,
Suite 500, Los Angeles, California dated June 17, 1997.
10.12 Agreement No 00-H164 by and between the City of Hawthorne and
iNetVersity dated April 20,2000
10.13 The Form of Disclosure Document Provided by RxAlternative.
10.14 Schedule Regarding Recent Sales of Unregistered Securities.
13.1 The Form 10-QSB for the period ending March 31, 2000.
13.2 The Form 10-QSB for the period ending June 30, 2000.
24.1 Power of Attorney (see signature page)*
27.0 Financial Data Schedule*
</TABLE>
* Previously Filed
25
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: September 8, 2000 iNetVisionz.com, Inc.
By: /s/ Noreen Khan
-----------------------------
Noreen Khan
Its: Chief Executive Officer, President
Chief Financial Officer
26
<PAGE>
INETVISIONZ.COM, INC.
(FORMERLY KNOWN AS
TAO PARTNERS, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheets 2
Statements of Operations 3
Statements of Stockholders' Equity (Deficit) 4
Statements of Cash Flows 5-6
Notes to Financial Statements 7-20
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Inetvisionz.com, Inc.
Torrance, California
We have audited the accompanying consolidated balance sheet of Inetvisionz.com,
Inc. as of December 31, 1999, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the years ended
December 31, 1999 and 1998. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Inetvisionz.com, Inc. as of December 31, 1999, and the results of its operations
and its cash flows for the two years then ended in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the financial
statements, the Company has incurred net losses from operations, has negative
cash flows from operations, and has a net capital deficiency. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
March 23, 2000
1
<PAGE>
INETVISIONZ.COM, INC.
CONSOLIDATED BALANCE SHEETS - DECEMBER 31, 1999
<TABLE>
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,000
Cash - restricted 107,957
House accounts receivable, net of allowance
for doubtful accounts of $112,941 333,639
Common stock receivable (collected in January 2000) 50,000
Other current assets 23,220
-----------
Total current assets $ 515,816
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization
402,396
OTHER ASSETS:
Customer lists, net 205,436
Product license, copyrights, trademark and concept, net 183,425
Covenant not to compete, net 36,685
Loan receivable - related party 12,750
-----------
Total other assets 438,296
------------
$ 1,356,508
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,164,457
Deferred revenues 90,451
Loan payable, bank 100,015
Notes payable, related parties 250,000
-----------
Total current liabilities $ 1,604,923
STOCKHOLDERS' DEFICIT:
Common stock; $0.001 par value, 71,428,571 shares
authorized, 11,207,626 shares issued and outstanding 11,207
Additional paid-in capital 3,052,210
Accumulated deficit (3,311,832)
-----------
Total stockholders' deficit (248,415)
------------
$ 1,356,508
============
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
2
<PAGE>
INETVISIONZ.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
NET REVENUES $ 2,280,489 $ 1,016,633
COST OF REVENUES 1,098,990 458,015
--------------- ---------------
GROSS PROFIT 1,189,499 558,618
OPERATING EXPENSES 2,927,540 2,013,718
--------------- ---------------
NET LOSS $ (1,746,041) $ (1,455,100)
=============== ===============
NET LOSS PER SHARE -
basic and diluted $ (0.23) $ (0.40)
=============== ===============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
basic and diluted 7,655,667 3,684,633
=============== ===============
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
INETVISIONZ.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1999 AND 1998
Common stock Additional
------------ paid-in
Shares Amount capital
------ ------ -------
<S> <C> <C> <C>
Balance at January 1, 1998 1,142,857 $ 1,143 $ 107,097
Shares issued during private placements 3,094,000 3,094 731,596
Shares issued per asset acquisition
agreement 520,000 520 499,480
Shares issued in exchange for services 2,050,000 2,050 734,950
Net loss for the year ended December 31, 1998 - - -
------------ ------------- ---------------
Balance at December 31, 1998 6,806,857 6,807 2,073,123
Shares issued during private placements 700,000 700 124,300
Shares issued to related parties upon
conversion of debt 3,467,435 3,467 690,020
Options granted to related party in
exchange for legal services 60,000
Shares issued to related parties in
exchange for services 233,334 233 104,767
Net loss for the year ended
December 31, 1999 - - -
------------- -------------- ---------------
Balance at December 31, 1999 11,207,626 $ 11,207 $ 3,052,210
============= ============== ===============
<CAPTION>
Total
Accumulated stockholders'
deficit (deficit)/equity
------- ----------------
<S> <C> <C>
Balance at January 1, 1998 $ (110,691) $ (2,451)
Shares issued during private placements - 734,690
Shares issued per asset acquisition
agreement - 500,000
Shares issued in exchange for services - 737,000
Net loss for the year ended December 31, 1998 (1,455,100) (1,455,100)
-------------- ----------------
Balance at December 31, 1998 (1,565,791) 514,139
Shares issued during private placements - 125,000
Shares issued to related parties upon
conversion of debt - 693,487
Options granted to related party in
exchange for legal services - 60,000
Shares issued to related parties in
exchange for services - 105,000
Net loss for the year ended
December 31, 1999 (1,746,041) (1,746,041)
--------------- --------------
Balance at December 31, 1999 $ (3,311,832) $ (248,415)
=============== ===============
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
INETVISIONZ.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Year ended Year ended
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net loss $ (1,746,041) $ (1,455,100)
--------------- ----------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Allowance for doubtful accounts 104,644 41,539
Depreciation and amortization 285,611 92,798
Options and stock compensation 148,000 754,000
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable 42,439 (516,019)
Other current assets (14,268) (8,952)
INCREASE (DECREASE) IN LIABILITIES:
Accounts payable and accrued expenses 633,592 528,414
Deferred income 34,113 83,338
--------------- ----------------
Total adjustments 1,234,131 975,118
--------------- ----------------
Net cash used for operating activities (511,910) (479,982)
--------------- ----------------
CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Cash - restricted (107,957) -
Advances on loan receivable (12,750) (33,242)
Payments to acquire property, equipment and intangibles (171,168) (535,183)
--------------- ----------------
Net cash used for investing activities (291,875) (568,425)
--------------- ----------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from officer-stockholders 352,012 341,475
Proceeds from notes payable, related parties 250,000 -
Proceeds from loan payable, bank 100,015 -
Common stock receivable 23,692 -
Proceeds from private placements, net of offering costs 75,000 710,998
--------------- ----------------
Net cash provided by financing activities 800,719 1,052,473
--------------- ----------------
NET INCREASE (DECREASE) IN CASH (3,066) 4,066
CASH, beginning of year 4,066 -
--------------- ----------------
CASH, end of year $ 1,000 $ 4,066
=============== ================
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
INETVISIONZ.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Year ended Year ended
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
cash paid for income taxes $ 800 $ 800
=============== ================
cash paid for interest $ - $ -
=============== ================
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND
INVESTING ACTIVITIES:
Shares issued in exchange for services $ 88,000 $ 754,000
=============== ================
Shares issued per asset acquisition agreement $ - $ 500,000
=============== ================
Shares issued upon conversion of debt $ 693,487 $ -
=============== ================
Shares issued upon conversion of accrued consulting fees $ 17,000 $ -
=============== ================
Common stock receivable $ 50,000 $ 23,692
=============== ================
Common stock options granted for legal services $ 60,000 $ -
=============== ================
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
6
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GENERAL:
Martinique Ventures, Inc. was incorporated in the State of
Delaware on February 18, 1988 as a C corporation. On July 9,
1997, Martinique Ventures, Inc. changed its name to Zebulon
Enterprises, Inc.
Pursuant to a share acquisition agreement dated March 31,
1998, all the outstanding common stock (1,142,857 shares) of
Zebulon Enterprises, Inc. was purchased for $114,286 and
accordingly, there was a change in control of the Company.
Immediately following this transaction, the new stockholders
changed its name from Zebulon Enterprises, Inc. to TAO
Partners, Inc. and on April 30, 1999, changed its name to
Inetvisionz.com, Inc. (the "Company").
During September 1998, the Company acquired certain assets of
a computer training division from NovaQuest InfoSystems, Inc.
and transferred its assets to Inetversity, Inc., a wholly
owned subsidiary. Until this time, the Company had no
operations.
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the
accounts of Inetvisionz.com, Inc. (the "Parent"), and its
wholly owned subsidiary, Inetversity, Inc. All material
intercompany transactions have been eliminated in
consolidation.
BUSINESS ACTIVITY:
The Company and its subsidiary provide education through the
distance learning environment and develop and deliver
technology training lessons using the Internet as a means of
delivery. The Company also plans to provide major corporations
e-commerce solutions to conduct business via the Internet.
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 reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
See accompanying independent auditors' report.
7
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
REVENUE RECOGNITION:
TUITION REVENUES
The Company, through its iNetVersity subsidiary, recognizes
tuition revenue from corporate and individual customers
(excluding JTPA and ETP) as services are performed over the
term of each enrollment, usually ranging from 1 week to 20
weeks.
The Company, through its iNetversity subsidiary, also provides
tuition services and technical training under Federal and
State funded Job Training Programs, which are as follows:
Job Training Placement Act ("JTPA"): The Company currently has
yearly contracts with nine Southern California organizations
under the JTPA. Pursuant to these agreements, the Company
recognizes tuition revenue at various stages after services
have been performed without any further contingencies or
performance obligations, and thereby have earned the right to
receive and retain payments for services billed. A summary of
the various stages is as follows:
25% - Upon enrollment in the training program and
attainment of one learning objective of core training
(not less than 15 hours) and submission of
verification of enrollment, timesheets and
corresponding invoice by the Company to the
respective agency.
50% - Upon satisfactory completion of at least 50% of
the designated course hours and competencies as
outlined in the course curriculum and attainment of
test scores or achievement levels prescribed in the
curriculum. The Company is responsible for submitting
corresponding timesheets, performance evaluations and
test scores documenting activity and related invoice
to the respective agency.
25% - Upon satisfactory completion of the remaining
curriculum hours and being placed in unsubsidized
employment of 8 hours or more. The Company is
responsible for submitting corresponding timesheets,
correspondence documenting activity, evidence of
employment with certain information and related
invoice to the respective agency.
Employment Training Panel ("ETP") - The Company currently has
a contract under the ETP and is funded by the State of
California. Pursuant to this agreement, the Company recognizes
tuition revenue at various stages as services are performed
and has earned the right to retain progress payments. A
summary is as follows:
20% - Upon services rendered in connection with
enrollment of students in the training program and
submission of verification of enrollment, timesheets
and corresponding invoice by the Company to the
respective agency.
80% - Upon satisfactory completion of the curriculum
hours and continual employment for 91 consecutive
days after placement by the Company. The Company is
responsible for submitting corresponding timesheets,
correspondence documenting activity, evidence of
employment with certain information and related
invoice to the respective agency.
See accompanying independent auditors' report.
8
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
REVENUE RECOGNITION, CONTINUED:
CONSULTING REVENUES
The Company, through its iNetproz division, plans to provide
computer consulting and technical support on internal computer
networks on an hourly basis and temporary placement of
technical personnel in exchange for a percentage of their
hourly wage rates. The Company also plans to recognize revenue
upon permanent placement of technical personnel with the
Company's customers at revenue amounts to be determined on an
individual basis. In the event that the employer of the
permanently placed Inetversity candidate is dissatisfied with
the candidates performance within the initial 30 days of
employment, the Company would be obligated to replace the
candidate at their cost, provided the employer has paid their
fees in full.
The Company, through its iNetecommerce division, plans to
implement primarily internet based business plans developed
internally and externally. The Company will recognize revenues
at various stages of the business plan development process as
outlined in each individual agreement.
The Company plans to recognize consulting and technical
support revenues only when no further contingencies or
material performance obligations are warranted, and thereby
would have earned the right to receive and retain payments for
services performed and billed.
DEFERRED REVENUES
Deferred revenue represents amounts received as non-refundable
deposits on student enrollments for which, the revenue is not
yet recognizable as the services have not yet been performed.
The deposits received are non-refundable. However, the Company
honors delayed enrollments at a future date, for as long as a
timely notice as determined on an individual basis is provided
to the Company.
FAIR VALUE:
Unless otherwise indicated, the fair values of all reported
assets and liabilities which represent financial instruments,
none of which are held for trading purposes, approximate the
carrying values of such amounts.
CASH:
EQUIVALENTS
For purposes of the statement of cash flows, cash equivalents
include all highly liquid debt instruments with original
maturities of three months or less which are not securing any
corporate obligations.
See accompanying independent auditors' report.
9
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
CASH, CONTINUED:
CONCENTRATION
The Company maintains its cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company has
not experienced any losses in such accounts.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to earnings as incurred,
whereas, additions, renewals, and betterments are capitalized.
When property and equipment are retired or otherwise disposed
of, the related cost and accumulated depreciation are removed
from the respective accounts, and any gain or loss is included
in operations. Depreciation is computed using the
straight-line method over the estimated useful lives of 3-5
years.
Leasehold improvements are being amortized straight line over
its estimated useful life of 60 months.
INTANGIBLES:
During September 1998, the Company entered into a non-compete
agreement and acquired customer lists, product licenses and
copyrights from the training division of Novaquest
InfoSystems, Inc. Based on managements best estimates, the
Company allocated $600,000 to these intangible assets, which
are stated at cost and are being amortized straight-line over
the estimated useful lives of 60 months from the date of
acquisition.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
OF:
The Company adopted the provision of FASB No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. This statement requires that
long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amounts of the assets exceed the fair values of
the assets. In estimating expected future cash flows for
determining whether an asset is impaired and if expected
future cash flows are used in measuring assets that are
impaired, assets will be grouped at the lowest level for which
there are identifiable cash flows that are largely independent
of the cash flows of other groups of assets. Assets to be
disposed of are reported at the lower of the carrying amount
or fair value less costs to sell. Adoption of this statement
did not have a material impact on the Company's financial
position, results of operations or liquidity.
See accompanying independent auditors' report.
10
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INVESTMENT:
The Company owns 50% of the outstanding common stock of
LiquidationBid.com, a start-up company. This investment is
accounted for by the equity method, as the Company does not
have control.
There is no cost basis in this investment and there are no
assets, liabilities nor operating activities of the investee.
Pursuant to APB 18, "The Equity Method of Accounting for
Investments in Common Stock," there are no recorded amounts
included in the financial statements.
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 the alternative fair value
accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of
option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the
exercise price of the Company's employee (including key
consultants and directors) stock options equals the fair
market value of the underlying stock on the date of grant, no
compensation expense is recognized.
INCOME TAXES:
The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which adopts the asset and liability approach to
measurement of temporary differences between financial
reporting and income tax return reporting. The principal
temporary difference is the Federal and State net operating
loss carryforward. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is
more likely than not that some portion or all of the deferred
tax assets will not be realized as future taxable income is
not certain during the carryforward period. Deferred tax
assets and liabilities are adjusted for effects of changes in
tax laws and rates on the date of enactment. Federal net
operating loss carryforward starts to expire on December 31,
2018 and California state net operating loss carryforward
starts to expire on December 31, 2003. A summary is as
follows:
<TABLE>
FEDERAL STATE
---------------------------------- -----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net operating loss
carryforward $ 2,850,000 $ 1,350,000 $ 2,850,000 $ 1,350,000
Estimated tax rate 35% 35% 6% 6%
---------------- -------------- -------------- --------------
Deferred tax benefit 997,500 472,500 171,000 81,000
Less valuation allowance 997,500 472,500 171,000 81,000
---------------- -------------- -------------- --------------
$ - $ - $ - $ -
================ ============== ============== ==============
</TABLE>
See accompanying independent auditors' report.
11
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
NET LOSS PER SHARE:
Basic and diluted net loss per share have been calculated
based upon the weighted average number of common shares
outstanding during the period. Common equivalent shares have
been excluded from the calculation of diluted earnings per
share as their impact would be anti-dilutive.
SEGMENT:
As substantially all the Company's operations occur at the
subsidiary level, and based on the Company's integration and
management strategies, the Company currently believes it
operates in two business segments, which are as follows:
- Provide education through the distant learning
environment using the internet and traditional
classroom setting;
- Provide corporations e-commerce solutions through
web consulting.
In the event the Company starts to operate in additional
business segments in the future, the appropriate segment
disclosures would be made pursuant to Statement of Financial
Accounting Standards No. 131.
During the year ended December 31, 1999 and 1998, the Company
operated primarily to provide education through the Internet
and traditional classroom tuition, which accounted for 98% and
100% of the Company's operations, respectively. The other 2%
of the Company's operation during 1999 was in the
web-consulting and e-commerce division.
NEW ACCOUNTING PRONOUNCEMENTS:
The Company has adopted Statements of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" and No. 133
"Accounting for Derivative Instruments and Hedging
Activities." The Company also adopted Statement of Position
No. 98-5 "Reporting on the Costs of Start-up Activities."
Adoption of these activities did not materially affect the
financial statements.
GOING CONCERN:
The Company's consolidated financial statements are prepared
using the generally accepted accounting principles applicable
to a going concern, which contemplates the realization of
assets and liquidation of liabilities in the normal course of
business. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern.
This factor raises substantial doubt about the Company's
ability to continue as a going concern.
See accompanying independent auditors' report.
12
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
GOING CONCERN, CONTINUED:
Management recognizes that the Company must generate
additional resources to enable it to continue operations. The
Company intends to begin recognizing significant revenues
during early 2000. Management's plans also include the sale of
additional equity securities and debt financing from related
parties. However, no assurance can be given that the Company
will be successful in raising additional capital. Further,
there can be no assurance, assuming the Company successfully
raises additional equity, that the Company will achieve
profitability or positive cash flow. If management is unable
to raise additional capital and expected significant revenues
do not result in positive cash flow, the Company will not be
able to meet its obligations and will have to cease
operations.
(2) MAJOR CUSTOMER:
During the years ended December 31, 1999 and 1998, revenues under the
JTPA accounted for approximately 34% and 30%, respectively. Included in
accounts receivable at December 31, 1999 is approximately $168,000 due
from various agencies under the JTPA.
(3) COMMON STOCK RECEIVABLE:
In December 1999, the Company commenced a private placement offering
(the "Offering") of the Company's common stock at a purchase price of
approximately $0.25 per share pursuant to Regulation D of the
Securities and Exchange Act of 1933. During December 1999, a share
subscription commitment agreement was executed for 200,000 restricted
shares and cash proceeds of $50,000 was received in January 2000.
(4) PROPERTY AND EQUIPMENT:
Property and equipment is comprised of the following:
<TABLE>
December 31,
1999
----
<S> <C>
Computer and electronic equipment $ 373,137
Office furniture and equipment 168,560
Leasehold improvements 75,350
Automobile 9,305
---------------
626,352
Less accumulated depreciation and amortization 223,956
---------------
$ 402,396
===============
</TABLE>
Depreciation and amortization expense related to property and equipment
for the years ended December 31, 1999 and 1998 amounted to $169,611 and
$54,344, respectively.
See accompanying independent auditors' report.
13
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(5) CUSTOMER LIST:
A summary is as follows:
<TABLE>
December 31,
1999
----
<S> <C>
Customer list $ 280,000
Less accumulated depreciation and amortization 74,564
---------------
$ 205,436
===============
</TABLE>
Amortization expense related to customer list for the year ended
December 31, 1999 and for the period from acquisition of this asset on
September 1, 1998 to December 31, 1998 amounted to $56,000 and $18,564,
respectively.
(6) PRODUCT LICENSE, COPYRIGHTS, TRADEMARK AND CONCEPT:
A summary is as follows:
<TABLE>
December 31,
1999
----
<S> <C>
Product license, copyrights, trademark and concept $ 250,000
Less accumulated depreciation and amortization 66,575
---------------
$ 183,425
===============
</TABLE>
Amortization expense related to Product license, copyrights, trademark
and concept for the year ended December 31, 1999 and for the period
from acquisition of these assets on September 1, 1998 to December 31,
1998 amounted to $50,000 and $16,575, respectively.
(7) NON-COMPETE AGREEMENT:
A summary is as follows:
<TABLE>
December 31,
1999
----
<S> <C>
Non-compete agreement $ 50,000
Less accumulated depreciation and amortization 13,315
---------------
$ 36,685
===============
</TABLE>
Amortization expense related to customer list for the year ended
December 31, 1999 for the period from acquisition of this asset on
September 1, 1998 to December 31, 1998 amounted to $10,000 and $3,315,
respectively.
See accompanying independent auditors' report.
14
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(8) ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
A summary is as follows:
<TABLE>
December 31,
1999
----
<S> <C>
Delinquent payroll taxes payable, including
estimated penalties and interest (see Note 14) $ 554,020
Accounts payable 386,067
Payroll and related taxes 67,000
Professional fees 60,000
Instructor fees 36,131
Courseware and supplies 17,868
Sales commission 14,652
Sales taxes payable, paid in January 2000 12,177
Interest 7,375
Other overhead expenses 9,167
---------------
$ 1,164,457
===============
</TABLE>
MAJOR VENDOR
Purchases from one vendor (Microsoft Corporation) amounted to
approximately $170,000 and $91,000 for the years ended December 31,
1999 and 1998, respectively, representing approximately 20% of total
courseware purchases in both years. Included in accounts payable and
accrued expenses at December 31, 1999 is approximately $57,000 due to
this vendor. The Company purchases courseware from this vendor under no
contractual relationship and at competitive market prices.
SUBSEQUENT EVENT
During March 2000, the Company used the cash proceeds raised from the
Private Offering in March 2000 to pay down $200,000 of the delinquent
payroll taxes. The Company is currently negotiating a payment plan on
the remaining balance and plans to repay the entire balance as cash
flow improves.
(9) LOAN PAYABLE, BANK/RESTRICTED CASH:
Loan payable, bank, bears interest at 8.5% payable monthly, due on
demand and collateralized by certificate of deposit of $107,957 which
is presented on the accompanying consolidated balance sheet as
restricted cash. Subsequent to December 31, 1999, the Company paid off
the loan using the collateral certificate of deposit. Interest expense
under this loan amounted to $6,375 for the year ended December 31,
1999.
See accompanying independent auditors' report.
15
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(10) NOTES PAYABLE, RELATED PARTIES:
During December 1999, the Company commenced an offering of up to 20
units to raise up to $500,000 and is exempt from registration under
Regulation D of the Securities Act of 1933. Each unit is comprised of
the following:
a. A $25,000 promissory note which bears interest at 8% per
annum, interest calculated daily, unsecured and principal and
interest is due on the maturity date. Pursuant to this
agreement, the maturity date shall be one year from the
execution date of the promissory note or the raising of at
least $1 million in equity financing, whichever is earlier.
b. One warrant ("Warrant") which shall entitle the note holder to
purchase 10,000 shares of the Company's common stock at an
exercise price of $0.80 per share which may be adjusted based
upon fair market value. Pursuant to this agreement, the
exercise price of this Warrant shall not exceed $2.00 per
share in the event of an adjustment as set forth in the
Warrant agreement. The Company is responsible for all costs
related to registering the Common Stock shares underlying the
Warrants in any registration statements filed with the
Securities and Exchange Commission under the Securities Act of
1933. In the event the underlying shares of the Warrants are
not registered within 1 year after the issuance of this
Warrant, the holder has the right to demand registration at
the Company's expense and be entitled to a 5% reduction per
month on the exercise price.
As of December 31, 1999, the Company raised $250,000 from the issuance
of 10 units to related parties. Interest expense related to this note
amounted to $1,000 during the year ended December 31, 1999.
(11) LOANS PAYABLE, OFFICER-STOCKHOLDERS:
Loans payable, officer-stockholders were non-interest bearing,
unsecured and originally due on January 1, 2000. Pursuant to the terms
of these agreements effective May 1, 1998, the officer-stockholders
will provide working capital on an as needed basis up to a combined
limit of $850,000, and all these notes are convertible into common
stock of the Company at the rate of $0.20 per share at any time prior
to its due date.
During the year, the officer-stockholders of the Company converted
these notes to equity and a summary is as follows:
<TABLE>
Number of
shares
Date Debt converted
---- ---- ---------
<S> <C> <C>
September 15, 1999 $ 113,000 565,000
November 12, 1999 43,000 215,000
December 5, 1999 527,000 2,635,000
December 30, 1999 10,487 52,435
--------------- ---------------
$ 693,487 3,467,435
=============== ===============
</TABLE>
See accompanying independent auditors' report.
16
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(12) COMMITMENTS:
The Company leases its office space and training locations under
renewable operating leases, which expire at various times starting
September 2001 to December 2004. Pursuant to these lease agreements,
the Company is also responsible for maintaining certain minimum
insurance requirements and general utilities.
The following is a schedule by years of future minimum rental payments
(including subsequent event) as required under operating leases that
have noncancellable lease terms in excess of one year as of December
31, 1999:
<TABLE>
Year ending December 31,
<S> <C>
2000 $ 432,000
2001 414,700
2002 180,000
--------------
$ 1,026,700
==============
</TABLE>
Total rent expense amounted to $259,800 and $77,205 for the years ended
December 31, 1999 and 1998, respectively.
SUBSEQUENT EVENT
During March 2000, the Company entered into a new lease agreement to
rent office space and training locations which expire in September 2000
at a monthly rent of $20,000. The Company is responsible for
maintaining certain insurance requirements and general utilities.
SERVICE AGREEMENTS
The Company entered into agreements with RxAlternative.com, Inc. to
develop two websites starting January 2000 and provide monthly
technical support and maintenance services over a period of one year.
Pursuant to these agreements, the Company shall receive 750,000 shares
of RxAlternative's restricted common shares (4.17% of undiluted
interest through the IPO of RxAlternative) and was granted 100,000
stock options to purchase 100,000 shares of common stock at $1.00 per
share. The Company will also receive $10,000 per month as consulting
revenues for up to 40 man-hours of services rendered and plans to
record this revenue over the term of the agreement upon satisfactory
completion of services and acceptance by RxAlternative.
(13) STOCKHOLDERS' EQUITY (DEFICIT):
PRIVATE PLACEMENTS
During April 1998, the Company initiated a private placement offering
(the "April 1998 Private Placement") of 1,114,000 shares of the
Company's common stock at an offering price of $0.085 per share. The
Private Placement was exempt from the registration provisions of the
Securities and Exchange Commission Act of 1933 and Rule 504 of
Regulation D. As of December 31, 1998, proceeds amounted to $94,690.
See accompanying independent auditors' report.
17
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(13) STOCKHOLDERS' EQUITY (DEFICIT), CONTINUED:
PRIVATE PLACEMENTS, CONTINUED
During May 1998, the Company initiated a private placement offering
(the "May 1998 Private Placement") of 1,400,000 shares of the Company's
common stock at an offering price of $0.15 per share. The Private
Placement was exempt from the registration provisions of the Securities
and Exchange Commission Act of 1933 and Rule 504 of Regulation D. As of
December 31, 1998, proceeds amounted to $210,000.
During December 1998, the Company initiated two private placement
offerings (the "December 1998 Private Placements") of 400,000 and
180,000 shares of the Company's common stock at offering prices of
$.625 and $1.00, respectively, per share. The Private Placement was
exempt from the registration provisions of the Securities and Exchange
Commission Act of 1933 and Rule 506 of Regulation D. As of December 31,
1998, proceeds amounted to $430,000.
During March 1999, the Company initiated a private placement offering
(the "March 1999 Private Placement") of 500,000 shares of the Company's
common stock at an offering price of $0.15 per share. The Private
Placement was exempt from the registration provisions of the Securities
and Exchange Commission Act of 1933 and Rule 504 of Regulation D. As of
December 31, 1999, proceeds amounted to $75,000.
During December 1999, the Company initiated a private placement
offering (the "December 1999 Private Placement") of 200,000 shares of
the Company's common stock at an offering price of $0.25 per share. The
Private Placement was exempt from the registration provisions of the
Securities and Exchange Commission Act of 1933 under Rule 504 of
Regulation D. As of March 23, 2000, proceeds amounted to $50,000.
CONVERSION OF DEBT
Pursuant to loan agreements, the officer-stockholders/note holders (see
Note 9) converted $693,487 of debt to equity at the rate of $0.20 per
share into 3,467,435 restricted common shares during the year ended
December 31, 1999.
SERVICES RENDERED
Pursuant to three consulting agreements with related parties, the
Company issued 233,334 restricted common shares for (i) services
rendered during the year ended December 31, 1999 in the amount of
$88,000, and (ii) from the satisfaction of $17,000 of accrued
consulting fees for the year ended December 31, 1998. These shares were
recorded at a value of $0.45 per share, management's best estimate of
their fair value at date of issuance.
PURCHASE OF ASSETS OF TRAINING DIVISION
During September 1998, the Company acquired certain assets from the
training division of Novaquest InfoSystems, Inc. for a total cost of
$1,000,000. Pursuant to this agreement, the Company paid $500,000 in
cash and issued $500,000 worth of shares (520,000 shares) of its
restricted common stock.
See accompanying independent auditors' report.
18
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(13) STOCKHOLDERS' EQUITY (DEFICIT), CONTINUED:
STOCK OPTIONS
On November 11, 1999, the Company granted 500,000 options to purchase
restricted shares of the Company's common stock to select employees,
consultants and non-employee directors. The options were not issued
under a formal plan, as the Company has not yet adopted an Option Plan.
The options have a three-year term, are exercisable at $1.00 per share,
and are exercisable on or after January 1, 2000 and vest effective
January 1, 1999 to December 31, 1999.
During November 1999, the Company granted 300,000 common stock options
to a current shareholder/corporate counsel at a cash exercise price of
$0.75 per share. Pursuant to this agreement, the stock options will
vest at the rate of 1 common stock option for $1 of legal and
consulting fees billed to the Company at various times. The options
expire, if not exercised, on the 5th year after the presentation of the
legal and consulting bills to the Company. Upon the successful filing
of Form 10 and becoming effective pursuant to the Securities Act of
1933, the shares underlying the options shall be registerable pursuant
to Form S-8, however, after the exercise of the options, the common
shares will be restricted for 90 days thereafter.
The number and weighted average exercise price of outstanding options
at December 31, 1999 are as follows:
<TABLE>
Weighted Average
Shares Exercise Price
------ --------------
<S> <C> <C>
Outstanding at beginning of period - $ -
Outstanding at end of period 800,000 1.28
Exercisable at end of period 60,000 1.75
Granted during period 800,000 1.28
Exercised during period - -
</TABLE>
Pro forma information regarding the effect on operations is required by
SFAS 123, and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that
statement. Pro forma information using the Black-Scholes method at the
date of grant based on the following assumptions:
Expected life (years) 3-5 years
Risk-free interest rate 6.50%
Dividend yield -
Volatility 70%
This option valuation model requires input of highly subjective
assumptions. Because the Company's employee stock options have
characteristics significantly different from those of traded options,
and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing
model does not necessarily provide a reliable single measure of fair
value of its employee stock options.
See accompanying independent auditors' report.
19
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(13) STOCKHOLDERS' EQUITY (DEFICIT), CONTINUED:
STOCK OPTIONS, CONTINUED
For purposes of proforma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The
Company's proforma information is as follows:
<TABLE>
December 31,
1999
----
<S> <C>
Net loss, as reported $ (1,746,041)
Proforma net loss $ (2,071,458)
Basic and diluted historical loss per share $ (0.23)
Proforma basic and diluted loss per share $ (0.27)
</TABLE>
(14) SUBSEQUENT EVENTS:
During March 2000, the Company received $250,000 from Winthrop Venture
Fund, Ltd., an accredited investor, from the issuance of two securities
in exchange for this investment, which are as follows:
a. Promissory note payable, bears interest at 9% per annum,
unsecured and all interest and principal due by March 2001.
b. 75,000 warrants were granted with an exercise price of $0.80
per share, which expire in three years from the date of grant.
Pursuant to this agreement, in the event the Company completes a
registration statement under the Securities Act of 1933, the Company
shall be obligated to register the shares underlying these warrants.
TAX PAYMENTS
During March 2000, the Company used the cash proceeds raised from the
Private Offering in March 2000 to pay down $200,000 of the delinquent
payroll taxes. The Company is currently negotiating a payment plan on
the remaining balance and plans to pay off the entire balance as cash
flow improves.
LEASE
During March 2000, the Company entered into a new lease agreement to
rent office space and training locations which expire in September 2002
at a monthly rent of approximately $20,000. The Company is responsible
for maintaining certain insurance requirements and general utilities.
LOAN PAYMENT
Subsequent to December 31, 1999, the Company paid off the loan payable,
bank using the collateral certificate of deposit.
See accompanying independent auditors' report.
20
