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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 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)
19951 Mariner Ave., Torrance, CA 90503
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(Address of principal executive offices) (Zip Code)
(310) 921-1999
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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<S> <C>
None None
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</TABLE>
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 Bulletin Board 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.
The Company has never had a formal research and development department.
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 juncture, since their inception on October 1, 1999 these divisions have
provided information to iNetversity which iNetversity has begun to incorporate
into its course offerings.
(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").
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(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 December 15,
1999 the Company had sixty employees divided as follows: ten in general
administration, 24 providing Education Services through iNetversity, 18
providing Consulting and Placement Services through iNetproz and 8 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.
Prior to June 30, 1999 100% of the Company's revenues and expenses were
generated through providing Education Services. Between July 1, 1999 and
September 30, 1999, 90% of the Company's revenues and expenses were generated
through providing Education Services and 10% of the Company's revenues and
expenses were generated through providing Consulting and Placement Services.
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").
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
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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 employers 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 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. 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.
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
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.
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
1999. 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 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
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entitled to retain the number of shares necessary to compensate it as 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.
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. These applications are all pending.
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 which might give rise to such a fluctuation.
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(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 juncture. 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 customer's 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 (discussed above) to generate
approximately 100% of its revenues through the first 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.
(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 at least
January, 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 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
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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.
(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. The Company will provide temporary
outplacement employees and permanent employment (sometimes referred to as
"headhunting") for iNetversity's students, as well as third parties with a
background in Technical Applications through its iNetproz division. 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
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division. RxAlternative, the initial External Business Plan project implemented
by iNetcommerce (discussed above) 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.
The Company has never had a formal research and development
department. 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
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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 inception on October 1, 1999 these divisions have
provided information to iNetversity which iNetversity has begun to incorporate
into its course offerings.
(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
December 15, 1999 the Company had sixty employees divided as follows: ten in
general administration, 24 providing Education Services through iNetversity, 18
providing Consulting and Placement Services through iNetproz and 8 developing
Internal and External Business Plans through iNetcommerce. All of the Company's
employees are full-time employees.
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 anticipates that during calendar 2000 it shall add an average of one
employee during each month to iNetversity (90% of which shall be instructors
and 10% of which shall assist in class-room set-up and administration), 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 divided 50% to the
development of Internal Business Plans and 50% to the development of External
Business Plans). The Company also anticipates that it will add 5-10 general
accounting and administration employees during calendar year 2000. 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, California facility or its Irvine, California facility.
As these two facilities are within 40 miles, 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 intends to file its first Form 10Q-SB for the first
quarter of the calendar year 2000. Once the Company begin filing under the
Exchange Act 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.
(F) REPORTS TO SECURITY HOLDERS.
As noted above, the Company's initial Exchange Act filing shall be its
Form 10-QSB for the first quarter of 2000. Thus, it shall not file a Form
10K-SB for the year 1999 nor shall it file a related Annual Report to
Shareholders. The Company intends to become a Reporting Company 60 days after
the filing of this Form 10Q-SB. As a result, it 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.
8
<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.
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 fourth quarter of 1999.
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.
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 anticipates it
will pay the full amount of the delinquency by September 2000.
The following information was derived from the Company's historical
financials statements incorporated herein.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
(audited) (audited)
--------- ---------
<S> <C> <C>
Statement of Operations Data
Revenue $2,280,489 $1,016,663
(Net Loss)/Net Profit (1,746,041) (1,455,100)
(Net Loss)/ Net Profit per share (0.23) (0.40)
Balance Sheet Data
Current Assets 515,816 544,432
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
(audited) (audited)
--------- ---------
<S> <C> <C>
Total Property and Equipment, net 402,396 400,839
Total Assets 1,356,508 1,486,817
Total Current Liabilities 1,604,923 631,203
Accumulated Deficit (3,311,832) (1,565,791)
Stockholder's Equity(deficiency) (248,415) 514,139
</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 $160,000,
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 $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 37,078 96,401
---------------------------------------
$ 2,013,719 $ 2,927,540
=======================================
</TABLE>
ITEM 3: PROPERTIES AND YEAR 2000 COMPLIANCE.
The Company currently operates out of two 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.,
10
<PAGE>
Irvine, California 92615. The Company's primary administrative operations are
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 rental is $11,395.80. The sublease expires December 31, 2000. The
Irvine lease requires monthly payments of $8,236.20 per month and expires in
September, 2000.
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.
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 March 31, 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(5) AMOUNT AND NATURE OF OWNERSHIP PERCENT(5)
- ----------------- ------------------- ------------------------------ ----------
<S> <C> <C> <C>
Common Stock Ramsey Hakim, Director 453,000(1) 3.87%
Common Stock Noreen Khan, President, 1,417,435(1) 12.11%
Director
Common Stock Lawrence W. Horwitz 500,000(2) 4.27%
Secretary, Director
Common Stock Tariq Khan 4,391,667(3) 37.51%
Common Stock Mahin Samadani, Director 110,000(1) .94%
Total Shares held by officers, directors and 5% shareholders: 6,872,102 58.70%
</TABLE>
- ------------------------------------------------
(1) This amount includes 13,000, 199,000, 10,000 options exercisable at $1.00
per share, issued to Mr. Hakim, Ms. Khan and Mr. Samadani respectively.
This amount does not include 15,000, 195,000, and 15,000 options to
purchase common stock exercisable at $1.00 per share granted to Mr. Hakim,
Ms. Khan, and Mr. Samadani respectively. on January 1, 2000.
(2) This amount includes up to 300,000 options exercisable at $1.75 and
200,000 shares acquired by Floyd Horwitz, the father of Lawrence W.
Horwitz. This amount does not include options to purchase 15,000 shares of
common stock at $1.00 per share granted to Mr. Horwitz on January 1, 2000.
(3) This amount includes 83,000 options exercisable at $1.00 per share but
does not include options to purchase 15,000 shares of common stock at
$1.00 per share granted on January 1, 2000.. Tariq Khan is the son of
Noreen Khan, the president of the Company.
(4) 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.
(5) c/o Company's address: 19950 Mariner Avenue, Torrance, CA 90503.
(6) The percentage calculation is based on 7,671,857 shares issued and
outstanding as of September 1, 1999 and 8,171,857 on a fully diluted
basis.
11
<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
Mahin Samadani 25 Director
</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, has been a founding
shareholder and officer of the Irvine, California law firm of Horwitz & Beam,
Inc. since 1992. Horwitz & Beam is currently comprised of 14 attorneys. 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 the Summer of 1999. Mr. Horwitz is also the president of Strawberry
Canyon Capital, Inc., 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.)
MAHIN SAMADANI, Director since May of 1998. Mr. Samadani currently works
for Scient, Corp., an E-commerce consulting group based in San Francisco. Prior
to joining Scient, Mr. Samadani worked with the Enterprise Server Group at
Intel Corporation where he was responsible for identifying and promoting
emerging Internet Software. Prior to joining Intel, Mr. Samadani was employed
by Apple Computer.
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>
=============================================================================================================
Name and
Principal Position Annual Compensation
-------------------
Year Salary Stock Options
<S> <C> <C> <C>
Noreen Khan 1999 $66,000 199,000
CEO, President,
Secretary & CFO
=============================================================================================================
</TABLE>
12
<PAGE>
<TABLE>
=============================================================================================================
<S> <C> <C> <C>
Meenaz Hudani 1999 $60,000 30,000
CIO
Ralph Hutchinson 1999 $60,000 -0-
VP, Marketing
Linda Ruby 1999 $54,000 25,000
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. 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;
(2) In April, 1998 she acquired 50,000 shares of the Company under
Rule 504 of Regulation D at the price of $.15 per share;
(3) In July, 1998 she acquired 100,000 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.
13
<PAGE>
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 $.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 of time. Manhattan West was eventually paid
$30,000 in stock at the price of $.45 per share (66,667 shares in
the aggregate);
(3) On January 1, 1999 the Company issued Mr. Khan 125,000 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;
(4) During 1999 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
(5) On January 1, 2000 the Company issued Mr. Khan 120,000 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 January, 1999 Mr. Hakim received 90,000 options to acquire
stock at $1.00 per Share;
(2) During 1999, Mr. Hakim received 250,000 shares for services
provided as the Chairman of the Board of the Company;
(3) 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 eventually 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);
(4) 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
(5) 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) Mr. Horwitz received 300,000 options exercisable at $1.75 per
share;
(2) Floyd Horwitz, the father of Lawrence Horwitz, acquired 200,000
shares of the Company at the price of $0.25 per share; and
(3) 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.
14
<PAGE>
Mahin Samadani, a member of the Board of Directors, entered into the following
transactions with the Company:
(1) On January 1, 1999 Mr. Samadani received 10,000 options
exercisable at $1.00 per share;
(2) During 1999 Mr. Samadani received 100,000 shares for services
provided as a member of the Board of Directors of the Company; and
(3) On January 1, 2000, Mr. Samadani received 15,000 options
exercisable at $1.00 per share.
ITEM 8: LEGAL PROCEEDINGS
The Company is not a plaintiff or a defendant in any legal proceedings.
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 quote in system displayed by Yahoo Finance at www.YahooFinance.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 .75
February 1 - February 28 1.22 .69
March 1 - March 31 1.19 .66
----------------------------------------------------------------------------------------
</TABLE>
On April 26, 2000, the closing bid price for the Company's common stock
was $.25.
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 2,932,917 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.
15
<PAGE>
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.
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 March 31, 2000, there were approximately 49 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 which 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 issued 500,000 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.
On January 1, 2000, the Company issued 1,000,000 options exercisable at
$1.00 per share. These options have a three year term and a percentage of the
options are exercisable on a quarterly basis commencing April 1, 2000. 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. Currently the Company does
not have any employment agreements with any of its employees
E. TRANSFER AGENT
The Company's transfer agent is Alpha Tech Stock Transfer, 929 East
Fires Lane, Drapers, Utah, 84020, the agent's telephone number is (801)
571-5118.
16
<PAGE>
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.
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 under Rule 504 of Regulation D (aggregate proceeds of $94,600).
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 during the 18 month period of time following
the date of the Subscription Agreement. One of these investors was the President
of the Company. As of the date of this filing, 100% of the debt obtained
($693,487 in the aggregate) was converted into 3,467,435 restricted shares of
common stock pursuant to Rule 506 of Regulation D.
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. 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 $.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.
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"). 200,000 of these shares were issued directly to
NovaQuest and 320,000 of these shares were issued directly to certain employees
of NovaQuest. All of these issuances were of restricted shares under Rule 505 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 233,334 shares. 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. Those shares were sold based on an exemption from registration available
under 4(6) of the Act.
During December 1998, the Company sold 180,000 shares of common stock
at $1.00 per share, under Rule 506 of Regulation D, 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.
In December 1998, the Company received $250,000 from a single
accredited investor at the price of $0.625 per share. These shares were issued
under Rule 506 of Regulation D.
Effective January 1, 1999, the Company issued 500,000 options
exercisable at $1.00 per share to certain key employees, directors, officers and
consultants.
In March 1999, the Company issued 500,000 shares at the price of $0.15
to a single accredited investor under Rule 504 of Regulation D and the Company
received 100% of the proceeds of this offering.
17
<PAGE>
On November 12, 1999, the Company entered into two Agreements: (a) it
entered into 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) it entered into 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, 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.
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. Those shares were sold based on an
exemption from registration available under 4(6) 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 December 31, 1999.
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 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.
18
<PAGE>
ITEM 14: ACCOUNTANTS AND FINANCIAL DISCLOSURES
The Company has engaged Stonefield Josephson ("SJ") as its principal
accountants. SJ's business address is 1620 26th Street, Suite 400 South Santa
Monica, CA 90401-4041 SJ conducted both the 1999 and 1998 which are attached.
Neither the Company nor anyone on its behalf has consulted any former
accountants during the two most recent past fiscal years regarding any matter
for which reporting is required under Regulation S-B, Item 304(a)(2)(i) or (ii)
and the related instructions. The decision to engage SJ was approved by the
Board of Directors.
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
19
<PAGE>
PART II
ITEM 1 AND
ITEM 2. INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS
<TABLE>
<CAPTION>
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*
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*
24.1 Power of Attorney (see signature page)*
27.0 Financial Data Schedule
</TABLE>
* Previously Filed
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: May 5, 2000 iNetVisionz.com, Inc.
By: /s/ Noreen Khan
---------------------------------------
Noreen Khan
Its: Chief Executive Officer, President
Chief Financial Officer
20
<PAGE>
INETVISIONZ.COM, INC.
(FORMERLY KNOWN AS
TAO PARTNERS, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
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
ASSETS
<TABLE>
<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
==============
</TABLE>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<S> <C> <C>
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>
INETVISIONZ.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Additional Total
Common stock paid-in Accumulated stockholders'
Shares Amount capital deficit (deficit)/equity
------ ------ ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1998 1,142,857 $ 1,143 $ 107,097 $ (110,691) $ (2,451)
Shares issued during private placements 3,094,000 3,094 731,596 - 734,690
Shares issued per asset acquisition
agreement 520,000 520 499,480 - 500,000
Shares issued in exchange for services 2,050,000 2,050 734,950 - 737,000
Net loss for the year ended December 31, 1998 - - - (1,455,100) (1,455,100)
------------- ----------- ------------ ------------- ------------
Balance at December 31, 1998 6,806,857 6,807 2,073,123 (1,565,791) 514,139
Shares issued during private placements 700,000 700 124,300 - 125,000
Shares issued to related parties upon
conversion of debt 3,467,435 3,467 690,020 - 693,487
Options granted to related party in
exchange for legal services 60,000 - 60,000
Shares issued to related parties in
exchange for services 233,334 233 104,767 - 105,000
Net loss for the year ended
December 31, 1999 - - - (1,746,041) (1,746,041)
------------- ---------- ------------ ------------- -------------
Balance at December 31, 1999 11,207,626 $ 11,207 $ 3,052,210 $ (3,311,832) $ (248,415)
============= ========== ============ ============== ==============
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
4
<PAGE>
INETVISIONZ.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
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 69,439 (516,019)
Other current assets (14,268) (8,952)
INCREASE (DECREASE) IN LIABILITIES:
Accounts payable and accrued expenses 633,592 528,414
Deferred income 7,113 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>
INETVISIONZ.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
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 July 13, 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.
<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 as services are
performed, which are 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,
which are 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, temporary placement of technical
personnel in exchange for a percentage of their hourly wage
rates, and permanent placement of technical personnel with the
Company's customers at revenue amounts to be determined on an
individual basis.
The Company, through its iNetecommerce division, plans to
implement primarily internet based business plans developed
internally and externally. The Company recognizes revenues at
various stages of the business plan development process as
outlined in each individual agreement.
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.
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.
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:
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.
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. 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.
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.
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:
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. 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>
<CAPTION>
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>
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.
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:
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.
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.
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.
See accompanying independent auditors' report.
12
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(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>
<CAPTION>
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.
(5) CUSTOMER LIST:
A summary is as follows:
<TABLE>
<CAPTION>
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.
See accompanying independent auditors' report.
13
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(6) PRODUCT LICENSE, COPYRIGHTS, TRADEMARK AND CONCEPT:
A summary is as follows:
<TABLE>
<CAPTION>
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>
<CAPTION>
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.
(8) ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
A summary is as follows:
<TABLE>
<CAPTION>
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>
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, CONTINUED:
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.
(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.
See accompanying independent auditors' report.
15
<PAGE>
INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(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>
<CAPTION>
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>
(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>
<CAPTION>
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.
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, CONTINUED:
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.
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.
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 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 $0.25 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.
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.
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, CONTINUED
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>
<CAPTION>
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:
<TABLE>
<S> <C>
Expected life (years) 3-5 years
Risk-free interest rate 6.50%
Dividend yield -
Volatility 70%
</TABLE>
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>
<CAPTION>
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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 108,957 0
<SECURITIES> 0 0
<RECEIVABLES> 446,580 0
<ALLOWANCES> 112,941 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 515,816 0
<PP&E> 626,352 0
<DEPRECIATION> 223,956 0
<TOTAL-ASSETS> 1,356,508 0
<CURRENT-LIABILITIES> 1,604,923 0
<BONDS> 0 0
0 0
0 0
<COMMON> 11,207 0
<OTHER-SE> (259,622) 0
<TOTAL-LIABILITY-AND-EQUITY> 1,356,508 0
<SALES> 0 0
<TOTAL-REVENUES> 2,280,489 1,016,633
<CGS> 0 0
<TOTAL-COSTS> 1,098,900 458,015
<OTHER-EXPENSES> 2,822,096 1,971,379
<LOSS-PROVISION> 104,644 41,539
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,745,241) (1,454,300)
<INCOME-TAX> 800 800
<INCOME-CONTINUING> (1,746,041) (1,455,100)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,746,041) (1,455,100)
<EPS-BASIC> (0.23) (0.40)
<EPS-DILUTED> (0.23) (0.40)
</TABLE>
