As filed with the Securities and Exchange Commission on July 12, 2000
File No. 333-36522
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
Form SB-1/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WHOLESALE ON THE NET, INC.
(Exact name of registrant as specified in its charter)
Nevada 522200 75-2823489
----------------------------- ------------------------ ------------------
(State or jurisdiction of (Primary Industrial I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.
1529 E. I-30, Suite 104, Garland, Texas 75043 (972) 303-0405
(Address, including the ZIP code & telephone number, including area code of
Registrant's principal executive office)
Thomas N. Bieger
1529 E. I-30, Suite 104, Garland, Texas 75043 (972) 303-0405
(Name, address, including zip code, and telephone number, including area code
of agent for service)
Copies to:
T. Alan Owen & Associates
Attorneys at Law
1112 East Copeland Road, Suite 420
Arlington, Texas 76011
(817) 460-4498
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------
Title of Each Amount Proposed Maximum Proposed Amount of
Class of Securities To be Offering Price Maximum Aggregate Registration
to be Registered Registered Per Unit Offering Price Fee
--------------------------------------------------------------------------------
Common Stock,
$0.001 par value
Minimum 200,000 $0.25 $ 50,000 $278
Maximum 4,000,000 $0.25 $1,000,000 $278
--------------------------------------------------------------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the registration statement
shall hereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Initial public offering
prospectus
Wholesale On The Net, Inc.
Minimum of 200,000 shares of common stock, and a
Maximum of 4,000,000 shares of common stock
$0.25 per share
We are making a best efforts offering to sell common stock in our company. The
common stock will be sold by our sole officer and director, Thomas Bieger. The
offering price was determined arbitrarily and we will raise a minimum of $50,000
and a maximum of $1,000,000. The funds will be held in escrow by an attorney
until the minimum amount is sold, at which time the funds will be released to
the company and stock certificates issued. The offering will end on December 31,
2000 and should we not sell the minimum amount and funds are returned to
investors, no interest will be paid on these funds.
The Offering:
Per Share Minimum Maximum
--------- -------- ----------
Public Price . . . $0.25 $ 50,000 $1,000,000
There is currently no market for our securities.
----------------------------
This investment involves a high degree of risk. You should purchase shares only
if you can afford a complete loss. See "Risk Factors" Beginning on Page 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
-----------------------------
This Prospectus is dated July 12, 2000
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PROSPECTUS SUMMARY
OUR COMPANY
We were incorporated on June 30, 1999 in the State of Nevada. We are
engaged in the sale of products over the internet. We currently sell framed art,
water filters and air filters and purifiers. Sales to date have been limited. We
will focus totally on sales of products over the internet by entering into
agreements with suppliers to provide us products where we can sell them
wholesale over the internet. The funds from this offering will allow us to begin
advertising, make strategic marketing alliances and make agreements with other
suppliers in order to increase sales. The minimum funds raised in this offering
will take us to a point where we reach the operating stage.
THE OFFERING
Minimum Maximum
--------- ---------
Common stock offered 200,000 4,000,000
Total shares outstanding after this offering 1,200,000 5,000,000
Officers, directors and their affiliates will not be able to purchase shares in
this offering.
USE OF PROCEEDS
Most of the money you invest will represent proceeds to the company. We will use
the proceeds from this offering to:
o pay expenses of this offering
o develop our website to offer more products and better service
o marketing and general working capital
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RISK FACTORS
You should carefully consider the risks described below and all other
information contained in this prospectus before making an investment decision.
We are a recently formed company, formed in the State of Nevada on July 30,
1999, with limited sales and losses that may continue for the foreseeable
future.
We have not achieved profitability and expect to continue to incur net losses
for the foreseeable future. We expect to incur significant operating expenses
and, as a result, will need to generate significant revenues to achieve
profitability, which may not occur. Even if we do achieve profitability, we may
be unable to sustain or increase profitability on a quarterly or annual basis in
the future. If we are unable to achieve profitability, your investment in our
common stock may decline or become worthless.
We rely on our sole officer for decisions and he will retain substantial control
over our business after the offering and may make decisions that are not in the
best interest of all stockholders.
Upon completion of this offering, our sole officer will, in the aggregate,
beneficially own approximately 50% (or 12% if maximum is sold) of the
outstanding common stock. In addition, stockholders who own more than 5% of our
common stock will own approximately 33.3% (or 8% if the maximum is sold). As a
result, our major stockholders will have the ability to control substantially
all the matters submitted to our stockholders for approval, including the
election and removal of directors and any merger, consolidation or sale of all
or substantially all of our assets. He will also control our management and
affairs. Accordingly, this concentration of ownership may have the effect of
delaying, deferring or preventing a change in control of us, impeding a merger,
consolidation, takeover or other business combination involving us or
discouraging a potential acquirer from making a tender offer or otherwise
attempting to take control of us, even if the transaction would be beneficial to
other stockholders. This in turn could materially cause the value of our stock
to decline or become worthless.
We may have to raise additional capital which may not be available or may be too
costly.
Our capital requirements are and will continue to be more than our operating
income. We do not have sufficient cash to indefinitely sustain operating losses.
Our potential profitability depends on our ability to generate and sustain
substantially higher net sales while maintaining reasonable expense levels. We
cannot assure you that we will be able to operate on a profitable basis or that
cash flow from operations will be sufficient to pay our operating costs. We
anticipate that the funds raised in this offering will be sufficient to fund
operations through June 2001. Thereafter, if we do not achieve profitability, we
will need to raise additional capital to finance our operations. We anticipate
seeking additional financing through debt or equity offerings. We cannot assure
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<PAGE>
you that additional financing will be available to us, or, if available, any
financing will be on terms acceptable or favorable to us. If we need and cannot
raise additional funds, further development of our business, upgrades in our
technology, additions to our product lines may be delayed and we otherwise may
not be able to execute our business plan, all of which may have a material
adverse effect on our operations; if this happens, the value of your investment
will decline and may become worthless.
We may experience difficulties with our suppliers, we may experience delays, be
forced to purchase elsewhere at higher prices or lose customers.
We are dependent on two suppliers for 100% of products to us for shipment or to
drop ship products on our behalf on a timely basis. We do not produce our own
products and purchase inventory to ship only after we have received an order. It
is possible that events beyond our control may affect the ability of our
suppliers to deliver merchandise to us or to our customers. Any such event could
negatively affect our business since customer orders are often time-sensitive
and any delays by our suppliers could cause us to lose customers. If this
happens, the value of your investment will decline.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These
forward-looking statements are not historical facts but rather are based on
current expectations, estimates and projections about our industry, our beliefs
and our assumptions. Words such as "anticipates", "expects", "intends", "plans",
"believes", "seeks" and "estimates", and variations of these words and similar
expressions, are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed, implied or forecasted in the forward-looking statements. In
addition, the forward-looking events discussed in this prospectus might not
occur. These risks and uncertainties include, among others, those described in
"Risk Factors" and elsewhere in this prospectus. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect our
management's view only as of the date of this prospectus.
PLAN OF DISTRIBUTION
This is a direct participation offering of the common stock of our
company and is being sold on our behalf by our sole officer and director, who
will receive no commission on such sales. All sales will be made by personal
contact by our sole officer and director, Thomas Bieger. We will not be mailing
our prospectus to anyone or soliciting anyone who is not personally known by Mr.
Bieger or introduced to Mr. Bieger and personally contacted by him.
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The money we raise in this offering before the minimum amount is sold
will be held under an escrow agreement with T. Alan Owen & Associates, P.C.,
Attorneys at Law. Such funds will be refunded immediately if the minimum amount
is not sold by December 31, 2000.
Certificates for shares of common stock sold in this offering will be
delivered to the purchasers by Signature Transfer Company, the stock transfer
company chosen by the company as soon as the minimum subscription amount is
raised.
USE OF PROCEEDS
The total cost of the minimum offering, exclusive of any sales
commissions paid to participating broker dealers, is estimated to be $15,278, or
$32,278 if the maximum is sold consisting primarily of legal, accounting and
blue sky fees. There are no agreements or arrangements in place as of the date
of this prospectus for participation of any broker dealers in this offering.
The following table sets forth how we anticipate using the proceeds
from selling common stock in this offering, reflecting the minimum and maximum
subscription amounts:
$50,000 $500,000 $1,000,000
Minimum Midpoint Maximum
--------------------------------------------------------------------------------
Legal, Accounting & Printing Expenses 8,000 12,000 25,000
Other Offering Expenses 7,278 7,278 7,278
Net Proceeds to Company 34,722 480,722 967,722
---------------------------------------
TOTAL $ 50,000 $ 500,000 $1,000,000
The following describes each of the expense categories:
o legal, accounting and printing expense amount is the estimated costs
associated with this offering;
o other offering expenses includes SEC registration fee, blue sky fees
and miscellaneous expenses with regards to this offering.
The following table sets forth how we anticipate using the net proceeds
to the company:
$50,000 $500,000 $1,000,000
Minimum Midpoint Maximum
--------------------------------------------------------------------------------
Development of website $ 10,000 $ 50,000 $ 100,000
Office equipment 4,000 46,000 64,000
Salaries -0- 78,000 172,000
Internet security -0- 27,000 27,000
Advertising our website 12,000 215,000 425,000
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Agreements to add new products 5,000 30,000 70,000
General corporate overhead 3,722 34,722 109,722
-------- --------- ---------
Proceeds to company $ 34,722 $ 480,722 $ 967,722
We have a fully operational website which is our main asset. Our
internet sales activity is established operationally as we have has some sales,
but we need funds for expanding our website awareness and customer base. The
funds we raise in this offering will be used to upgrade, enhance and secure our
website and market our website so that we can expand our product line and our
internet visibility to attract more customers to our site. Additional products
will be added quickly after the close of this offering and, as volume of sales
increase, we will add employees to handle the administrative, receiving and
shipping activities that will come with an increase in sales. As our sales
increase to the point that we need a full time shipping and receiving person, we
should be profitable.
DESCRIPTION OF BUSINESS
We were incorporated in Nevada on June 30, 1999. The founder, Thomas
Bieger is our sole director, officer and employee and holds 600,000 shares of
common stock which we issued to him for $2,000, composed of $500 cash and $1,500
of his services.
We are in the business of selling products over the internet. We
currently have two categories of products available for sale, and will add more
categories as we make marketing agreements with suppliers. The categories we
currently offer are:
o Framed Art
o Water filters
As we have recently been organized, there exists very little historical
operating performance and minimal sales. All sales have been framed art.
Wholesaleonthenet.net is an internet based seller of various products.
Today we sell only artwork and water filters. It is the intention of the company
to expand its product offerings in the future as we enter into agreements with
suppliers of other products and can afford to place them on our website. We
currently are selling prints/artwork that are by a well know artist, Doris
Morgan. We plan to add additional high quality limited edition prints purchased
from publishers around the country. In addition, oil paintings and standard
prints are also available.
The use of the internet as a sales forum is a cost effective,
convenient method for a customer to make purchases. We allow our buyers
customers to bypass traditionally expensive, regionally fragmented
intermediaries and transact business on a 24-hour-a-day, seven-day-a-week basis.
We do not have to bear overhead expenses generally associated with traditional
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storefront operations, customers thereby cutting out costly traditional
intermediaries, thus allowing for lower selling costs.
Additionally, at this time we inventory no product because under our
agreements with suppliers, we purchase items to fill orders only after we have
received an order which we are able to do since currently all of our suppliers
are local. However, our agreements with our suppliers allow us to have them drop
ship under our name directly to our customers. This again reduces our overhead
since we have no need for inventory carrying cost.
Our website platform is a robust, internet-based, centralized trading
platform that facilitates the selling of a wide variety of items. It is a fully
automated, topically arranged, intuitive and easy-to-use online service that is
available on a 24- hour-a-day, seven-day-a-week basis. Buyers can easily search
the items listed by category. At this time, our customers cannot search by
specific item, but we plan to add that feature in the future.
Buying from Wholesaleonthenet.net: Buyers enter Wholesaleonthenet.net
through its home page, which contains a listing of product categories that
allows for easy exploration of current products and prices.
MARKET ANALYSIS
The rise of the internet shows that there has been a change in the
environment for purchasing goods and services. Traditional methods are time
consuming and expensive, involving companies to carry large amounts of inventory
and customers having to personally visit the place of business to choose a
product.
The following table from Associates First Capital Corporation reflects
the changing methods in which consumers transact business:
<TABLE>
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INDUSTRY TRADITIONAL E-BUSINESS "NET EFFECT"
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AUTOS Consumers physically Internet users shop EGM is born 8/99 -
visit multiple online auto sites to spec. consumers use the Net to
dealerships, haggle over cars and compare invoice order customized cars for
price, and eventually prices or even place a bid delivery in less than 10
drive a car home days.
------------------------------------------------------------------------------------------------------------------
MORTGAGES Customer calls broker, Customer visits e-loan, E-loan closed over $2
receives approval in 2-3 receives approval, selects billion in mortgage loans
days and closes loan in best rate and closes in 3 in 1998
21 days days
------------------------------------------------------------------------------------------------------------------
BROKERAGE Customer calls Merrill Customer researches From 1997 to today, the
Lynch, consults with company on-line and US stock broker
broker on a trade and executes trade for as population has been
pays $650 commission little as $8.95 reduced by over 20,000
fee
------------------------------------------------------------------------------------------------------------------
INSURANCE Customer visits local Customer visits Today, 12% of insurers
------------------------------------------------------------------------------------------------------------------
State Farm representative Progressive on-line, sell policies on-line,
for quote and policy receives competitive several even by-passing
quotes, purchase policy traditional agent network
------------------------------------------------------------------------------------------------------------------
</TABLE>
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Associates First Capital Corporation says that it is this trend of
purchasing patterns that the internet is fostering and we are strategically
positioned to capitalize on. The growth in business to business e-commerce has
grown to $110 trillion in 1999. Projections estimate business to business
e-commerce will grow to $250 trillion in the year 2000, $500 trillion in 2001,
$840 trillion in 2002 and $1,330 trillion in 2003. Similarly, business to
consumer e-commerce business totaled $20 trillion in 1999. It is estimated
business to consumer growth will be to $30 trillion in 2000, $50 trillion in
20001, $80 trillion in 2002, and $110 trillion in 2003. This translates into a
compound growth rate of 113% per year.
According to Jupiter Communications, Inc.'s October 7, 1999 SEC filing, the
internet has emerged as a global medium allowing millions of people from all
over the world to not only communicate with each other but also get most any
information they desire and, more critically, transact business electronically.
Jupiter Communciations believes the increase in internet usage will be a result
of:
o The increase of personal computers both in residential domiciles and
places of business;
o Easier, faster, and less expensive access to the internet;
o Improvements in the infrastructure of the internet; and
o New methods to access the internet, specifically cable and satellite
Jupiter Communications adds further that as the use of the internet
grows as a business to business medium, this company believes businesses will
develop products and services to satisfy this new method of doing business. Many
products already support such initiatives and due to the convenience and
simplicity of Internet commerce, it is the belief of this company that as
consumers become more comfortable in transacting business over the internet,
internet commerce will only increase.
Jupiter Communications goes on to say that the unique interactive and
user friendly nature of the internet has led to its fast growth as a method by
which to buy and sell goods and services. Internet companies can be fast,
efficient and inexpensive. Companies that have traditionally delivered goods and
services from land based brick and mortar locations have embraced the internet
as it has afforded them the ability to:
o Reach broad, world wide audiences overcoming the limitations inherent
in brick and mortar operations
o Attract and penetrate new revenue streams
o Marketing efficiencies and economies are realized as they can be
directed to specific demographic groups
A recent report by the University of Texas' Center for Research In Electronic
Commerce estimated that the internet economy generated approximately $300
billion in US revenue and was responsible for 1.2 million jobs in 1998.
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A recent study by the Organization for Economic Cooperation and Development
predicted that worldwide Internet commerce will grow to $1 trillion by 2005. It
is the belief of this company that internet retail purchases will grow by
similar amounts.
THE INTERNET: THE MEDIUM OF TOMORROW'S RETAILER
This entire section summarizes the comments of Andrew S. Grove, CEO and Chairman
of Intel Corporation, presented the keynote presentation at the Asia Pacific
Information Technology Summit.
Mr. Grove stated the following:
The megatrend in information technology will be the internet.
The internet will grow due to home personal computer
penetration, the connectedness of those computers, low cost,
and available telecommunications access.
Internet commerce:
o Allows small companies and individuals as well as large companies to
transact business electronically
o Allows a real-time matching of sellers and qualified buyers
o Reduces the cost of infrastructure for supplies by using standard,
shared networks
Types of internet commerce:
o Consumer to business
o Business to business
Total adult users of the Internet: 60 million in the US or 20% of the population
Internet commerce:
o Reduces cost of sales/distribution for sellers
o Turns buyers into informed purchasers
Growth of internet commerce worldwide:
o In 1996 $8 billion was transacted over the internet. In 2002, it is
projected $327 billion will be transacted over the Internet, 21% of
that being business to consumer and 79% business to business.
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According to Forrester Research and Cowles/Simba, 1997 online transactions
totaled $9 billion. According to these same surveys, 1997 business to business
transactions totaled $7.5 billion. Piper Jaffray estimates that by the year 2001
internet based business to business transactions will total $201.6 billion a
year. Forrester Research estimates that by 2002 online business to business
transactions will total $327 billion.
Additionally, CommerceNet/Neilsen Internet Demographic Survey for April 1999
yielded the following statistics:
The number of internet users over the age of 16 in the US and Canada has reached
92 million, up from 79 million just 9 months prior.
- The number of women purchasing online increased 80% from the last
survey.
- 13% of all online buyers mde their first purchase in the preceding
month.
- The number 1 category of items shopped for online was cars and car
parts
Survey by NFO Interactive: Three Million New Internet Shoppers for
Christmas (October 18, 1999): The following section contains excerpts
from the NFO Interactive survey.
o Three million new shoppers will make their first online purchase by the
1999 holiday season, according to a survey by NFO Interactive. The
survey found that the new shoppers are taking to the Internet because
of promises of privacy, discounts, real-time customer support, and the
ability to return a product to a brick-and-mortar facility.
o "The upcoming holiday shopping season provides an excellent opportunity
for online retailers to cultivate their market share," said Tim Washer,
Director of Research for NFO Interactive. "The key will be to win
first-time shoppers by ameliorating privacy-related concerns and
providing more attractive discounts, and then to convert them into
site-loyal customers. At easy check-out and fulfillment experience will
be critical.
o Nearly 80% of internet window shoppers say deeper price discounts will
entice them to purchase online. Privacy assurances ease of product
return, and real-time customer support will also influence online
purchase decisions, the study found.
o According to the survey, the online shoppers who will buy online for
the first time this holiday season are Internet savvy, and while they
haven't purchased online yet, they have typically researched an average
of four of five product categories online, including apparel, consumer
electronics, computer software, and software and music.
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o The new shoppers are somewhat evenly divided along gender lines (56%
percent women and 44% men) and are surprisingly diverse in age. Almost
30% are in the 40-49 age group and one-quarter are 30-39. More than
half (55%) have household incomes over $55,000. The new shoppers enjoy
shopping offline, but have spent as much time online as shoppers who
have already purchased something via the internet.
Real-time Customer support 11.6%
------------------------------------------------------ ------------------------
Gender of First-Time Buyers
------------------------------------------------------ ------------------------
Women Men
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56% 44%
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Ages of First-Time Buyers
------------------------------------------------------ ------------------------
Age Group Percent
------------------------------------------------------ ------------------------
Under 30 14.5%
------------------------------------------------------ ------------------------
30-39 25.4%
------------------------------------------------------ ------------------------
40-49 29.7%
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50-59 21.0%
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0ver 60 9.4%
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How Consumers Find E-Commerce Sites
------------------------------------------------------ ------------------------
Type URL directly 60.0%
------------------------------------------------------ ------------------------
Bookmarks 48.1%
------------------------------------------------------ ------------------------
Search Engines 42.2%
------------------------------------------------------ ------------------------
Banner ads 14.0%
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Source - NFO Interactive
------------------------------------------------------ ------------------------
The NFO study also reports that:
o 60% of online consumers who have already purchased from a website
arrive at destination retail sites by typing in the URL directly, while
48.1 percent bookmarks, and 42.2 percent go through search engines.
Fully 14 percent buyers report they were led to site where they made a
purchase via banner ad.
o "Brick-and-mortar merchants have a great opportunity to use their
stores to promote their websites and their websites to promote their
stores," Washer said. "Our research is clearly confirming the
importance of this symbiotic relationship between retailing channels."
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o Shoppers that look but don't buy spend about 8 hours per week on the
Internet, compared to 11 hours per week spent buy buyers. The buyers
all spend at least five more hours per week watching network
television. But the lookers and shoppers spend more than six hours a
week listening to the radio.
o "Although internet media claim a larger share of the consumer's
attention span, traditional media and conventional store-based
merchandising still have a tremendous impact on the behavior of online
shoppers," Washer said.
3rd Annual Online Retailing Report by Ernst & Young:
-----------------------------------------------------
Online Holiday Shoppers to Triple: This entire section deals with the
Ernst and Young report dated November 9, 1999.
The third Annual Online Retailing Report by Ernst & Young projects a
holiday shopping season that will see a huge increase in the volume of online
shoppers and dollars spent online.
According to the survey of 1,200 online shoppers, the number of regular
online shoppers will almost triple from 1998. Last year, 23% of respondents did
at least 10% of their holiday shopping online. On 1999, that number will be 67%,
according to Ernst & Young.
The survey also found that consumers will do more of their shopping
online. The number of people doing at least half their online shopping will
increase by a factor of five. In 1998, only 4% of online shoppers did at least
50% of their holiday shopping online; in 1999 that number jumps to 19% of
shoppers. Conversely, the number of online consumers who have no plans to shop
online during the holidays dropped dramatically, from 49% to 11%.
"Given this data, and considering the dramatic increase in the number
of Internet sites and merchandise available, we are making some bullish
predictions about 1999 online shopping figures," said Stephanie Shern, Global
Vice Chairman, Retail and Consumer Products for Ernst & Young. "We are
projecting online sales for the holiday of $12 to $15 billion. Our estimate of
total revenue for calendar year 1999 is $25 to $30 billion."
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The demographics Ernst and Young collected look like this:
o 59 % of women, continuing a growing trend of women making online
purchases
o 58% are married
o 58% are age 30-49; 23% are over 50; and 19% are 18-29
o 58% are from the middle income bracket, earning $30,000 to $69,000
o Buyers with children outweigh buyers without children, 61% to 53%
"E-tailers are not just selling to early adopters anymore. They're
selling to consumers who are more like the general population," said Tom
Reynolds, National Director, Consulting Services, Retail & Consumer Products for
Ernst & Young. "Just like brick-and-mortar stores, e-tailers have to build
relationships with their customers. This relationship begins with marketing, but
it develops through customer relationships and truly effective merchandising."
ActiveMedia Research: Consumables Market Takes Larger Share of E-Commerce: -
----------------------------------------------------------------------------
The following section reflects results from research performed by
ActiveMedia Research
o Total online retail sales during 1999 are expected to reach $66 billion,
according to ActiveMedia Research, and the buying of consumable products
will lead the way into the next century.
o ActiveMedia's report "Consumable Products: Building Customer Loyalty
Online" found that 40% of the buyers who purchase consumable products
online purchasing power and account for $3.8 billion in online revenue.
o Health & beauty products are leading the way among consumable products,
according to the report. The grocery market has been inhibited by
real-world delivery systems and has only begun to see its potential, the
report has found.
o Two in five online buyers shop for consumables online, and this group
represents a select group of mature online shoppers who purchase much more
than the basic books, music, or gifts online. In the past year, they
purchased health and beauty, healthcare and pharmaceuticals, groceries for
households supplies, gourmet items, and pet supplies online.
o In terms of dollars spent, consumables buyers spend a majority (56%) of
online purchase dollars. This group is more likely than average to shoot
for a variety of personal and business items from several sectors,
including clothing, home and garden, sporting goods, jewelry, office
supplies, and manufacturing supplies.
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The following tables are information published by AC Nielsen Net Watch:
-----------------------------------------------------------------------
New Watch Demographic Stats
--------------------------------------------------------------------------------
Percentage of Males and Females Using the Internet
--------------------------------------------------------------------------------
Nation Male Female
------------------------- ------------------------ -------------------------
Canada 41% 34%
------------------------- ------------------------ -------------------------
Singapore 30% 21%
------------------------- ------------------------ -------------------------
USA 30% 21%
------------------------- ------------------------ -------------------------
Australia 29% 21%
------------------------- ------------------------ -------------------------
New Zealand 27% 22%
------------------------- ------------------------ -------------------------
Germany 20% 9%
------------------------- ------------------------ -------------------------
Hong Kong 16% 9%
------------------------- ------------------------ -------------------------
Taiwan 15% 9%
------------------------- ------------------------ -------------------------
Malaysia 8% 5%
------------------------- ------------------------ -------------------------
China 4% 2%
------------------------- ------------------------ -------------------------
Philippines 3% 2%
------------------------- ------------------------ -------------------------
Thailand 1% 2%
------------------------- ------------------------ -------------------------
Indonesia 1% 1%
--------------------------------------------------------------------------------
Source - AC Nielsen Net Watch
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
Percentage of Population Using the Internet
--------------------------------------------------------------------------------
Canada 38%
------------------------- ------------------------
Australia 25%
------------------------- ------------------------
Singapore 25%
------------------------- ------------------------
USA 25%
------------------------- ------------------------
New Zealand 24%
------------------------- ------------------------
UK 15%
------------------------- ------------------------
Germany 14%
------------------------- ------------------------
Hong Kong 14%
------------------------- ------------------------
Taiwan 12%
------------------------- ------------------------
France 11%
------------------------- ------------------------
Philippines 8%
------------------------- ------------------------
Malaysia 7%
------------------------- ------------------------
China 4%
------------------------- ------------------------
Thailand 2%
------------------------- ------------------------
Indonesia 1%
--------------------------------------------------------------------------------
Source - AC Nielson Net Watch
--------------------------------------------------------------------------------
Andersen Consulting's Report dated January 13, 2000 is summarized in the
following section.
---------------------------------------------------------------------------
Experienced Internet Shoppers Satisfied with Online Shopping
------------------------------------------------------------
Even though 88% of experienced web buyers abandoned their online carts
at some point during the 1999 holiday season and 40% reported various problems,
Internet shoppers were generally more satisfied shopping online than anyplace
else, according to a study by Andersen Consulting.
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Nearly three-quarters (73%) of experienced web buyers ranked internet
shopping the highest in terms of overall satisfaction compared to brick and
mortar stores (60%) and catalogs (56%).
"Even though online shopping has its flaws, experienced internet users
do shopping on the web. But the long-term message is clear: internet retail must
solve their infrastructure problems or suffer consequences," said S. Johnson,
co-director of Andersen Consulting's eCommerce Program. "Thirty-five percent of
online shoppers who experienced problems on a particular site left that site for
another, our study revealed. Given high customer-acquisition costs, e-tailers
can't continue to lose one of every ten consumers and expect to survive. Their
top concern must be infrastructure improvements."
--------------------------------------------------------------------------------
Source of Gift Purchases
--------------------------------------------------------------------------------
Percent Purchased Via
--------------------------------------------------------------------------------
Type of Gift Internet Catalog Stores
--------------------------------------------------------------------------------
Toys 483357
--------------------------------------- ---------------------------------------
Books 471534
--------------------------------------- ---------------------------------------
Music 421534
--------------------------------------- ---------------------------------------
Videotapes 351730
--------------------------------------- ---------------------------------------
Clothing 294181
--------------------------------------- ---------------------------------------
Computer/Hardware
Software 251029
--------------------------------------- ---------------------------------------
Collectibles/Candies/Knickknacks 232648
--------------------------------------- ---------------------------------------
Households items/
Appliances 171234
--------------------------------------- ---------------------------------------
Consumer Electronics 171025
--------------------------------------- ---------------------------------------
Cosmetics/ Personal Care 162629
--------------------------------------- ---------------------------------------
Sporting Goods 149416
--------------------------------------- ---------------------------------------
Greeting Cards 132035
--------------------------------------- ---------------------------------------
16
<PAGE>
Food/Wine 111025
--------------------------------------- ---------------------------------------
Gift Certificates 9638
--------------------------------------- ---------------------------------------
Flowers/Gardening Items 9145
--------------------------------------- ---------------------------------------
Pet Gifts 6921
--------------------------------------- ---------------------------------------
Periodical Subscriptions 5004
--------------------------------------- ---------------------------------------
Jewelry 3724
--------------------------------------- ---------------------------------------
Other 13118
--------------------------------------------------------------------------------
Source: Anderson Consulting
--------------------------------------------------------------------------------
When asked which type of product or service feature would increase the
likelihood of purchasing more products or services over the Internet in the
future, respondents cited free delivery, on-time guarantees, and no sales
tax most often.
--------------------------------------------------------------------------------
Features That Will Drive E-Commerce
--------------------------------------------------------------------------------
Feature Percent of Internet Purchasers
--------------------------------------------------------------------------------
Free product delivery 98%
--------------------------------------- ---------------------------------------
On-time delivery guarantees 95%
--------------------------------------- ---------------------------------------
No Sales Tax 91%
--------------------------------------- ---------------------------------------
Coupons/promotions 83%
--------------------------------------- ---------------------------------------
Toll-free customer assistance 68%
--------------------------------------- ---------------------------------------
Live, online customer assistance 62%
--------------------------------------- ---------------------------------------
Customer reviews or recommendations 62%
--------------------------------------- ---------------------------------------
Helpful hints for colors, sizes, etc. 58%
--------------------------------------- ---------------------------------------
Free gift wrapping 58%
--------------------------------------- ---------------------------------------
Gift Suggestions 46%
--------------------------------------------------------------------------------
Source - Andersen Consulting
--------------------------------------------------------------------------------
17
<PAGE>
Taking respondents from Andersen Consulting's October 1999 pre-holiday
shopping study of 1,492 online shoppers, a total of 541 of these internet
users responded to a follow-up over on eight-day period beginning December
through January. The survey was administrated on the internet. The data was
weighted to the Internet population, and a small number of respondents who
did not purchase holiday gifts were eliminated from the sample.
Department of Commerce report dated March 2, 2000.
--------------------------------------------------
Q4 1999: The Official Story
---------------------------
o March 2, 2000: In its first official estimate of retail e-commerce, the
Department of Commerce announced today that fourth quarter 1999 retail
sales online reached $5.3 billion (+ $0.3 billion).
o According to the Commerce Department, these e-commerce sales equaled 0.64%
of total retail sales for the quarter, which were $821.2 billion.
Cyber Dialogue Research report survey dated February 28, 2000. -
------------------------------------------------------------------
The following section summarizes the Cyberdialogue report.
Online Shoppers Lured by Low Costs, Free Shipping (2/28/00)
-----------------------------------------------------------
Online shoppers still want guaranteed security and easy-to-use sites,
but keeping costs down, especially with free-shipping, is among the most
effective means of enticing Internet users to return to shopping sites,
according to research by Cyber Dialogue.
According to the survey of intensive internet users, the leading
categories that users found very important in prompting return visits were
guaranteed transaction security (85%), price discounts (79%), free shipping
(76%), ease of finding items (69%), and a prominently posted delivery and
shipping costs policy (67%). At the other end of the spectrum, users found the
availability of other shoppers' opinions (14%), the ability to personalize
information and receive updates (23%), and click shopping (30%) among the least
important.
Overall, free-shipping impacted the decision of 90% of online adults
who made the holiday gift purchases in 1999. Even the lure of brand names when
compared to the promise of free-shipping, with more than 63% of online users
indicating they would prefer to shop at a site offering free shipping over one
with well-known brands.
18
<PAGE>
"A clear majority of online shoppers are most interested in simple,
easy to understand characteristics like low prices and free-shipping," said
Qaalf Dibeehi, a senior analyst at Cyber Dialogue. "Currently, consumers appear
to understand cyber-shopping in something similar to catalog shopping terms.
This is not to discount the importance of online-specific innovative, however,
but the popularity of free-shipping and low prices can't be underestimated when
building a site that understands its online visitors.
Cyber Dialogue's study also examined the past and future behavior of
online shoppers. More than 73% of the survey's respondents indicating they
planned on increasing their online purchasing during 2000, indicating increased
importance of driving return visitors to shopping sites.
Other Cyber Dialogue findings include:
o Women expected to spend on average $271 during the holiday season, but
actually spent and average of $468
o Men expected to spend and average of $381 during the holiday season but
actually spent an average of only $206
o 60% of online users who made a holiday order contacted customer service via
e-mail, compared to 36% by phone and % though live online service
Cyber Dialogue's findings are from the firm's January 2000 Omnibus, a depth
survey of more than 1,000 adults drawn from Cyber Dialogue's database of
intensive online consumers.
What does this mean for online marketing tools such as e-mail updates
and personalization?
A study done in April of 1999 in the UK by Fletcher Research found that
Internet users who personalize and configure Web pages are more likely to make
online purchases than those who do not. Fletcher found that 68% of Web users who
had personalized a site made a purchase online, compared to the 28% that had not
used personalization features.
Another study done in April of 1999 by Cognitiative Inc. found that
sale-oriented e-mail is disliked so much that one-third of the consumers
surveyed avoid the vendors that send it. Only telemarketing rated as most
intrusive than e-mail as marketing measures go.
19
<PAGE>
Our company's focus and strategy - based upon all the information available to
us, we have formulated the following:
Marketing Strategy:
-------------------
Our marketing strategy is to promote its name and attract buyers to the
Wholesaleonthenet.net website. To attract users to our website, we historically
have relied primarily on word of mouth and being one of many "art" or "water
filter" companies that come up on search engines. Going forward, we are
contemplating sponsorship relationships with high traffic websites and
agreements with search engines so that our site will be near the top/front of
searches for our products. Future marketing programs will include the use of
strategic purchases of online advertising to place advertisements in areas in
which it believes it can reach its target audience. We will engage in a number
of marketing activities in traditional media such as advertising in print media
and at trade shows and other events. We also plan to advertise in a number of
targeted publications.
The market for product purchasing over the internet is new, rapidly
evolving and intensely competitive. In order to respond to changes in the
competitive environment, we may, from time to time, make pricing, service or
marketing decisions or acquisitions that could harm its business. We are not
bound by traditional geographic market boundaries. If a product can be delivered
by a shipping company such as UPS or Federal Express, we can be a viable source.
Growth Strategy:
----------------
Our objective is to be the leading provider of e-commerce purchased
framed and matted art and our other products. Key elements of our growth
strategy include:
o Partner with industry leaders to quickly acquire customers. We intend to
form strategic relationships with industry leaders to rapidly acquire
customers, build brand name recognition and accelerate adoption of Internet
purchased artwork. We anticipate continuing to add additional strategic
partnerships as our business grows and we expand our portfolio of products
and services.
o Build and promote our brand. We intend to invest in building brand
awareness through a variety of marketing and promotional techniques, both
independently and in conjunction with our strategic partners. Our brand
will be promoted through word of month as well as print, online banners,
and virtual marketing, such as including our logo and Web site address on
each product purchased.
o Pursue multiple and recurring revenue streams. In addition to wholesaling
product line goods through our Web site, we intend to expand those product
offering to include other hard goods which will not be constrained through
inventory investment, obsolescence, or falloff in demand as such goods will
be direct shipped from the manufacturer. To further elaborate, future goods
advertised for sale on our Web site will not be purchased by us but will be
available for purchase through contracted purchase agreements between
Wholesaleonthenet.net and the respective manufacturer.
20
<PAGE>
In addition to the above, we will be exploring the picture rental and
consignment markets, the intention being to increase profit margins through the
leasing and/or renting of art work to company facilities.
As mentioned, we plan to expand our e-commerce capability to include:
o Selling goods and services promoted to our advertisers' storefronts
o Auctions
o Electronic marketplaces
o Exchanges
o Selling goods and services from our proprietary virtual store
We will receive either a fee per transaction, a percentage of sales revenue
or some other minimum guaranteed payment. This type of revenue sharing or
commission sharing relationship is typical of e-commerce transactions and
relationships on the Internet.
Should we raise only a small amount in this offering we may only be able to
develop our website so that is it more user friendly and visually
appealing. If we raise only a small amount in this offering, a visually
appealing website is not sufficient in and of itself to generate sales, and
we may not have funds to market our website to generate sales; if this
happens your investment may become worthless.
Operations and Technology
-------------------------
We have built a robust, but basic transaction processing system. Our
system handles all aspects of the sales process. The market in which we compete
is characterized by rapidly changing technology, evolving industry standards,
frequent new service and product announcements, introductions and enhancements
and changing customer demands. Accordingly, our future success will depend on
its ability to adapt to rapidly changing technologies, to adapt its services to
evolving industry standards and to continually improve the performance, features
and reliability of its service in response to competitive service and product
offerings and evolving demands of the marketplace.
Competition
-----------
We compete with a number of other companies and we expect competition
to intensify in the future. Barriers to entry are relatively low, and current
and new competitors can launch new sites at a relatively low cost using
commercially available software.
21
<PAGE>
The market in which the company competes is characterized by rapidly changing
technology, evolving industry standards, frequent new service and product
announcements, introductions and enhancements and changing customer demands.
Accordingly, the company's future success will depend on its ability to adapt to
rapidly changing technologies, to adapt its services to evolving industry
standards and to continually improve the performance, features and reliability
of its service in response to competitive service and product offerings and
evolving demands of the marketplace. The failure of the Company to adapt to such
changes would harm the company's business. In addition, the widespread adoption
of new internet, networking or telecommunications technologies or other
technological changes could require substantial expenditures by the company to
modify or adapt its services or infrastructure. If we only raise a small amount
in this offering and technology changes too rapidly, we may not have the funds
to devote to these changes and if this happens, your investment may become
worthless.
Additional information:
-----------------------
We have made no public announcements to date and have no additional or
new products or services. In addition:
o we don't intend to spend funds in the field of research and development;
o no money has been spent or is contemplated to be spent on customer
sponsored research activities relating to the development of new products,
services or techniques; and
o we don't anticipate spending funds on improvement of existing products,
services or techniques.
As of the filing date, we have no paid employees. As necessary due to lease
volume, work load, and the like, employees will be brought on board.
We do not expect nor have we encountered any material effect from the
discharge of materials, environmental agencies, capital expenditures for
environmental control facilities, nor does it anticipate having to deal
with any such issue in the future.
No segmented data is required for this offering.
PLAN OF OPERATIONS
Following is our plan of operations based upon the amount of capital we
raise in this offering. We are engaged in selling items over the internet.
We have developed marketing arrangements with companies that manufacture or
distribute products whereby we purchase the products only when we get an
order. Since these companies are local to us, we can receive an order and
fill it within twenty-four hours so at this time we do not have to invest
funds in inventory. As we develop other marketing relationships we may not
find suppliers that are local and therefore we will have to start carrying
inventory or have them drop ship the products to the customer on our
behalf. We believe that we will be able to add new products that we
purchase locally for the first year or longer.
22
<PAGE>
Since we do not carry an inventory at this time, we purchase the goods only
when we have an order and therefore book the sale of the product and the
purchase of the product. Should we start carrying items where the
manufacturer drop ships the product for us, we will record as income only
the amount represented by the difference between what we sell the product
for and the amount it costs us.
We plan to add products by determining:
---------------------------------------
o what product or products we think would compliment the audience we are
targeting;
o the percentage profit we can make on each product taking into account the
cost for shipping and handling - smaller items will take less shipping and
handling and therefore we should be able to make more on the shipping and
handling charges;
o if we can purchase the product locally and if we can arrange a backup
supplier for the product; and
o the likelihood of using the our product mix, including the new product(s),
in cross marketing relationships whereby we can increase the traffic to our
site and therefore the possibility of additional sales.
Assuming we raise the minimum amount in this offering, we will use part of
the funds to develop our website so that it is more appealing and easier to
use as well as buying some more sophisticated equipment to take the
pictures and capture more of a real life image. Along with that we will add
additional products and start developing cross marketing relationships with
other websites and even pay search engines or other companies fees to
ensure that our website shows among the top fifteen (15) or thirty (30) on
particular searches i.e. "artwork".
We will not pay salaries until such time as we are generating revenue from
sales. Our overhead will be minimal because we will be using the resources
of our president. We will continue a shared relationship with the president
until our activity becomes too great for those facilities although the
facilities should be sufficient for at least a year since the space will
allow us to warehouse merchandise if necessary and has enough office space
for us to have up to five employees. As of the date of this filing, we have
no marketing or advertising arrangements in place. Although we will not
have to raise any funds in the next six months if we should we raise only
the minimum offering, our growth will be slower, we will not add as many
products, and our marketing efforts will have to be targeted to specific
groups based upon our product mix. We believe that as we add products,
advertise and market our website, that we will be successful in generating
sales.
23
<PAGE>
Assuming we raise $500,000 in this offering, a midpoint between the minimum
and maximum, we will work the same way as if we raised the minimum, except
that we will do more marketing and do it on a bigger scale. In addition, we
will institute 'weekly specials' which will be similar to closeouts, where
a company will want to reduce certain inventory as a reduced rate. Of
course, these could change at a moments notice.
Assuming we raise the maximum offering which would result in proceeds to
the company of $967,722, with which we should be able to do a significant
'makeover' on our website while still having what we believe to be adequate
funds to launch a major marketing effort. This will include banners on
other websites, payment to companies or search engines to guarantee our
site coming up near the top of the search lists, and efforts to provide to
large groups i.e. corporations and/or organizations, discounts to their
employees/groups for places on their corporate sites or brochures. Those
brochures may be on the internet or be regular printed brochures. If we
raise the maximum amount in this offering, we will not need to raise
additional funds in the next six months; we will be able to generate a
significant marketing program to direct traffic to our website, and be able
to create a more diversified range of products to appeal to every kind of
buyer.
We believe the key to building a profitable internet based sales company is
to provide many products, at a fair price, without having to inventory any
of them.
DESCRIPTION OF PROPERTY
Our corporate facilities are shared with our sole officer and director
which includes the use of telephones and equipment for $200.00 per month
which is donated to the company at this time. This arrangement will
continue until we close our offering at which time we will pay $200.00 per
month. This arrangement will continue until such time as the Company needs
and can afford to lease its own office facilities.
We also lease space on an internet service provider's server based upon the
amount of memory we use. At the present time we pay $32.50 per month. This
amount will increase as we use more space on the server.
MANAGEMENT OF THE COMPANY
The directors and officers of the company, their ages and principal
positions are as follows:
Name Age Position
--------------------------------------------------------------------------------
Thomas Bieger 38 President; Secretary and Director
24
<PAGE>
Background of Directors and Executive Officers:
Thomas Bieger. Mr. Bieger formed the Company and at this time is its
only officer and director.
His term as a director expires in May 2000. He graduated in 1999 from
Palmers Green University, London, England with a doctorate in Environmental
Science and Engineering. From 1981 to the present he has operated Thomas
Services, a State licensed environmental and indoor air quality consulting and
service company.
Mr. Bieger's business affiliations during the last five years follow:
Trustee - Fresh Air Foundation - 1999 to the present.
Manager - Baronger Enterprises, LLC - 1997 to the present.
Initially, Mr. Bieger will not spend full time on the activities of the
company since his current activities would take up some of his time. These
activities include the industrial service firm he owns and oversees at this
time. He can devote more and more time to the activities of the company as time
goes on since his employees can run the environmental and air quality service
company and Mr. Bieger can step aside from those responsibilities at any time.
Initially, he expects to spend twenty hours per week and increase that weekly
time as the activities of the company require. Mr. Bieger is prepared to devote
himself full time to the success of the company.
DIRECTOR AND EXECUTIVE COMPENSATION
Our sole officer and director has received no compensation other than the
450,000 shares of common stock he received for services in July 1999 and
has no employment contract with the company.
Name of Person Capacity in which he served Aggregate
Receiving compensation to receive remuneration remuneration
--------------------------------------------------------------------------------
Thomas Bieger President, Secretary 450,000 shares
and Treasurer of common stock
The common stock was issued soon after formation of the company and it is
impracticable to determine the cash value. The stock was issued over six
months ago for services performed which we cannot estimate the value since
that work continues through the filing and effectiveness of this
registration statement, with no other compensation to be granted for the
work done on this filing.
As of the date of this offering, there are no plans to pay any remuneration
to anyone in or associated with the company. When the company has funds
and/or revenue, the board of directors will determine any remuneration at
that time.
25
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
We have retained the same accountant, Charles E. Smith, as our independent
certified public accountant since our inception on June 30, 1999. We have
had no disagreements with him on accounting and disclosure issues.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE
Our Articles of Incorporation and our Bylaws limit the liability of
directors to the maximum extent permitted by Nevada law. We carry no
director or executive liability insurance.
PRINCIPAL SHAREHOLDERS
The following table lists the officers, directors and stockholders who, at
the date hereof, own of record or beneficially, directly or indirectly,
more than 10% of the outstanding common stock, and all officers and
directors of the company:
Name and Address Amount owned
Title of Owner before offering Percent
--------------------------------------------------------------------------------
President, Secretary Thomas Bieger 600,000 60.00%
And Director 1529 E. I-30
Suite 104
Garland, Texas 75043
N/A Crown Preston Group 200,000 20.00%
Gary Pilant
9010 Clayco
Dallas, Texas 75243
N/A Designer Art, LLC 200,000 20.00%
David Austin
8925 Sterling, Suite 120
Irving, Texas 75063
Total 1,000,000 100.00%
After offering: Minimum 1,000,000 83.33%
--------------
Maximum 1,000,000 20.00%
26
<PAGE>
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
In July 1999, the president of the company received 600,000 shares of
common stock which we issued to him for $2,000, composed of $500 cash and
$1,500 of his services.
As of the date of this filing, there are no agreements or proposed
transactions, whether direct or indirect, with anyone, but more
particularly with any of the following:
o a director or officer of the issuer;
o any principal security holder;
o any promoter of the issuer;
o any relative or spouse, or relative of such spouse, of the above referenced
persons.
SUMMARY FINANCIAL DATA
The following table sets forth certain of our summary financial
information. This information should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this
prospectus.
Audited Audited
Balance Sheet: June 30, 2000 June 30, 1999
-------------------- ---------------- -------------
Working Capital $ 853 $ -0-
Total Assets $17,208 $ -0-
Total Liabilities $ 1,518 $ -0-
Stockholders' Equity $15,690 $ -0-
June 30,1999 (date
of inception) to
Statement of Operations: June 30, 2000 June 30, 1999
------------------------ --------------- -------------
Revenue $ 3,799 $ -0-
Cost of Sales $ 2,938 $ -0-
Operating Expense $ 9,583 $ -0-
Operating Income (Loss) $(8,722) $ -0-
Other Income $ 12 $ -0-
Net Income (Loss) $(8,710) $ -0-
27
<PAGE>
DIVIDEND POLICY
To date, we have not declared or paid any dividends on our common stock. We
do not intend to declare or pay any dividends on our common stock in the
foreseeable future, but rather to retain any earnings to finance the growth
of our business. Any future determination to pay dividends will be at the
discretion of our board of directors and will depend on our results of
operations, financial condition, contractual and legal restrictions and
other factors it deems relevant.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2000. Our
capitalization is presented on:
o an actual basis;
o a pro forma basis to give effect to net proceeds from the sale of the
minimum number of shares (200,000) we plan to sell in this offering; and
o a pro forma basis to give effect to the net proceeds from the sale of the
maximum number of shares (4,000,000) we plan to sell in this offering.
28
<PAGE>
After After
Actual Minimum Maximum
June 30, 2000 Offering Offering
------------- --------- --------
Stockholders' equity
Common Stock, $0.001 par value;
25,000,000 shares authorized; 1,000 1,200 5,000
Additional Paid In Capital 23,400 57,922 987,122
Retained deficit ( 8,710) ( 8,710) ( 8,710)
Total Stockholders' Equity 15,690 50,412 983,412
Total Capitalization 15,690 50,412 983,412
Number of shares outstanding 1,000,000 1,200,000 5,000,000
The company has only one class of stock outstanding. The common stock
sold in this offering will be fully paid and non assessable, having voting
rights of one vote per share, have no preemptive or conversion rights, and
liquidation rights as is common to a sole class of common stock. The company has
no sinking fund or redemption provisions on any of the currently outstanding
stock and will have none on the stock sold in this offering.
28
<PAGE>
DILUTION
If you purchase the common stock, you will experience an immediate and
substantial dilution in the pro forma net tangible book value of the common
stock from the initial offering price.
The pro forma net tangible book value of the common stock as of June
30, 2000 was $15,690 or $0.02 per share. Pro forma net tangible book value per
share is equal to our total tangible assets, less total liabilities, divided by
the number of shares of common stock outstanding.
Aftergiving effect to the sale of common stock offered by us in this
offering, and the receipt and application of the estimated net proceeds
therefrom (at an assumed initial public offering price of $0.25 per share, after
deducting the underwriting discounts and commissions, and estimated offering
expenses), our pro forma tangible book value as of June 30, 2000 would have been
approximately $50,412 or $0.04 per share, if the minimum is sold, and $983,412
or $0.20 per share, if the maximum is sold.
This represents an immediate increase in net tangible book value per
common share to our current stockholders and an immediate and substantial
dilution to new stockholders purchasing shares in this offering. The decrease in
net tangible book value is:
o $41,598 or $0.21 per share if we sell the minimum number of shares
(200,000) in this offering; and
o $213,270 or $0.05 per share if we sell the maximum number of shares
(4,000,000) in this offering.
The following table illustrates this per share dilution:
--------------------------------------------------------
Minimum Maximum
Assumed initial public offering price $0.25 $0.25
Pro forma net tangible book value as of June 30, 2000 $0.02 $0.02
Pro forma net tangible book value after this offering $0.04 $0.20
Increase attributable to new stockholders: $0.02 $0.18
Pro forma net tangible book value
as of June 30, 2000 after this offering $0.04 $0.20
Decrease to new stockholders ($0.21) ($0.05)
Percentage dilution to new stockholders 84 % 20 %
29
<PAGE>
The following table summarizes on a pro forma basis as of June 30, 2000,
shows the differences between the number of shares of common stock
purchased, the total consideration paid and the total average price per
share paid by the existing stockholders and the new investors purchasing
shares of common stock in this offering:
Minimum offering
----------------
Number Percent Average
of shares of shares Amount price per
owned owned paid share
--------------------------------------------------------------------------------
Current
shareholders 1,000,000 83.3 $ 22,000 $ 0.02
--------------------------------------------------------------------------------
New investors 200,000 16.7 $ 50,000 $ 0.25
==================================================================
Total 1,200,000 100.0 $ 72,000
Maximum offering
----------------
Number Percent Average
of shares of shares Amount price per
owned owned paid share
--------------------------------------------------------------------------------
Current
shareholders 1,000,000 20.0 $ 22,000 $ 0.02
--------------------------------------------------------------------------------
New investors 4,000,000 80.0 $1,000,000 $ 0.25
==================================================================
Total 5,000,000 100.0 $1,022,000
DESCRIPTION OF COMMON STOCK
We have authorized capital in our company consisting of 25,000,000
shares of common stock, $0.001 par value per share. As of June 30, 2000, there
were 1,000,000 shares of common stock issued and outstanding.
Every investor who purchases common stock is entitled to one vote at
meetings of the shareholders of the company and to participate equally and
ratably in any dividends declared by us and in any property or assets that may
be distributed by us to the holders of common stock in the event of a voluntary
or involuntary liquidation, dissolution or winding up of the company.
The existing stockholders have no preemptive rights to purchase common
stock offered for sale by us, and no right to cumulative voting in the election
of our directors.
30
<PAGE>
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Under the Nevada Revised Statutes of the State of Nevada, we have broad
powers to indemnify our officers and directors against liabilities they may
incur in such capacities. Our bylaws also provide for mandatory indemnification
of our directors and executive officers to the fullest extent permissible under
Nevada law.
Our certificate of incorporation provides that the liability of our
officers and directors for monetary damages shall be eliminated to the fullest
extent permissible under Nevada law, which includes elimination of liability for
monetary damages for defense of civil or criminal actions. The provision does
not affect a director's responsibilities under any other laws, such as the
federal securities laws or state or federal environmental laws.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
We have no underwriting agreement and therefore no provision for
indemnification of officers and directors in an underwriting by a broker dealer.
LEGAL PROCEEDINGS
We are not involved in any legal proceedings at this time.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
There are no special federal tax implications associated with this
business enterprise.
LEGAL MATTERS
Certain matters relating to the legality of the Common Stock offered
hereby will be passed upon for the Company by T. Alan Owen & Associates P.C.,
Attorneys at Law, 1112 East Copeland Road, Suite 420, Arlington, Texas 76011.
31
<PAGE>
EXPERTS
The financial statements as of June 30, 2000, and for the twelve months
ended June 30, 2000, and for the period from inception (June 30, 1999) to June
30, 1999 of the Company included in this Prospectus have been audited by Charles
E. Smith, independent certified public accountant, as set forth in his report.
The financial statements have been included in reliance upon the authority of
him as an expert in accounting and auditing.
TRANSFER AGENT
We will serve as our own transfer agent and registrar for the common
stock until such time as our registration on Form SB-1 is effective and then we
intend to retain Signature Transfer Company, 14675 Midway Road, Suite 221,
Dallas, Texas 75244.
32
<PAGE>
Charles E. Smith
Certified Public Accountant
709-B West Rusk
Suite 580
Rockwall, Texas 75087
TELEPHONE (214) 212-2307
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
of Wholesale On The Net, Inc.
I have audited the accompanying balance sheets of Wholesale On The Net,
Inc. as of June 30, 2000 and 1999, and the related statements of operations,
stockholders' equity and accumulated deficit, and cash flows for the twelve
months ended June 30, 2000 and period from inception (June 30, 1999) to June 30,
1999. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Wholesale On The
Net, Inc. as of June 30, 2000 and 1999, and the results of operations and its
cash flows for the twelve months ended June 30, 2000, the period from inception
(June 30, 1999) to June 30, 1999 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As described in Note F to the
financial statements the Company is a start up enterprise and presently does not
have capital resources which raises doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustment that might arise from the outcome of this uncertainty.
Charles E. Smith
Rockwall, Texas
July 10, 2000
F-1
<PAGE>
<TABLE>
<CAPTION>
WHOLESALE ON THE NET, INC.
BALANCE SHEETS
June 30, 2000 and 1999
ASSETS
June 30, 2000 June 30, 1999
---------------- ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash $853 $0
PROPERTY AND EQUIPMENT:
Equipment (net of accumulated depreciation of $6) 244
Website (net of accumulated amortization of $3,889) 16,111
---------------- ----------------
TOTAL ASSETS $17,208 $0
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Advances from officer $1,518 $0
---------------- ----------------
TOTAL CURRENT LIABILITIES 1,518 0
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value 1,000 0
Additional paid-in-capital 23,400 0
Accumulated Deficit (8,710) 0
---------------- ----------------
Total Stockholders' Equity 15,690 0
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $17,208 $0
================ ================
See accompanying notes F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WHOLESALE ON THE NET, INC.
STATEMENT OF OPERATIONS
Twelve months ended June 30, 2000, and Period from Inception (June 30, 1999) to
June 30, 1999
Period from
Inception
Twelve months (June 30, 1999)
ended to
June 30, 2000 June 30, 1999
---------------- ----------------
<S> <C> <C>
REVENUE:
Sales 3,799 $0
---------------- ----------------
Total revenue $3,799 $0
COST OF SALES: 2,938 0
---------------- ----------------
GROSS PROFIT 861 0
OPERATING EXPENSE:
Depreciation and amortization 3,895 0
Rent - related party 2,400 0
Consulting - related party 1,500 0
General and administrative 1,788 0
---------------- ----------------
Total Operating Expense 9,583 0
---------------- ----------------
INCOME FROM OPERATIONS (8,722) 0
OTHER INCOME:
Interest income 12 0
---------------- ----------------
NET LOSS ($8,710) $0
================ ================
Weighted average shares outstanding 1,000,000 0
================ ================
LOSS PER SHARE ($0.01) ($0.00)
================ ================
See accompanying notes F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WHOLESALE ON THE NET, INC.
STATEMENT OF STOCKHOLDERS' EQUITY AND ACCUMULATED DEFICIT
Period from inception (June 30, 1999) to June 30, 2000
Common Paid In Accumulated
Shares Amount Capital Deficit Total
-------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Balance,
June 30, 1999
(date of inception) -0- -0- -0- -0- -0-
Shares issued on July 1, 1999 for:
Cash 150,000 150 350 500
Services 450,000 450 1,050 1,500
August 27, 1999 for:
Cash 150,000 400 19,600 20,000
Paid in capital by officer (rent) 2,400 2,400
Net Loss (8,710) (8,710)
-------------------------------------------------------------- ----------------
Balance
June 30, 2000 750,000 $1,000 $23,400 ($8,710) $15,690
============================================================== ================
See accompanying notes F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WHOLESALE ON THE NET, INC.
STATEMENT OF CASH FLOWS
Twelve months ended June 30, 2000, and Period from Inception (June 30, 1999) to
June 30, 1999
Period from
Inception
Twelve months (June 30, 1999)
ended to
June 30, 2000 June 30, 1999
------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($8,710) $0
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Items not requiring cash - depreciation 3,895
Items not requiring cash - stock issued for services 1,500
Increase in current liabilities 1,518
---------------- ----------------
NET CASH (USED) BY OPERATING ACTIVITIES: (1,797) 0
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of assets (20,250) 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 20,500 0
Paid in capital by officer 2,400
---------------- ----------------
Total cash flows from financing activities 22,900 0
---------------- ----------------
NET INCREASE IN CASH $853 $0
CASH, BEGINNING OF PERIOD 0 0
---------------- ----------------
CASH, END OF PERIOD $853 $0
================ ================
</TABLE>
See accompanying notes F-5
<PAGE>
WHOLESALE ON THE NET, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
Note A - Nature of Business and Summary of Significant Accounting Policies:
---------------------------------------------------------------------------
History: The Company was organized June 30, 1999 under the name of Wholesale On
The Net, Inc. in the State of Nevada. The Company's business plan outlines its
plan of operations which is to sell products over the internet.
Basis of Accounting:
--------------------
It is the Company's policy to prepare its financial statements on the accrual
basis of accounting in conformity with generally accepted accounting principles.
Sales are recorded as income in the period in which they are earned and expenses
are recognized in the period in which the related liability is incurred.
Revenue Recognition:
--------------------
Revenue is recognized when goods are shipped and invoiced. The Company will
purchase goods and resell them; on these items revenue is booked at the full
sales price and the respective cost of sales recorded. On items that are drop
shipped by a manufacturer directly to a customer, the sale price less the cost
of the item is recorded as income.
Cash and Cash Equivalents:
--------------------------
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents.
Loss per Common Share:
----------------------
Loss applicable to common share is based on the weighted average number of
shares of common stock outstanding during the year.
Accounting Estimates:
---------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Income Tax:
-----------
The Company is subject to the greater of federal income taxes computed under the
regular system or the alternative minimum tax (ATM) system. The Company uses an
asset and liability approach for the accounting and financial reporting of
income tax. Under this method, deferred tax assets and liabilities are
determined based on temporary differences between the financial carrying amounts
and the tax bases of assets and liabilities using enacted tax rates in effect in
the years in which the temporary differences are expected to reverse.
F-6
<PAGE>
WHOLESALE ON THE NET, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
Note B - Web site:
The Company's primary asset is its web site which is the center of its
operational and income generating activities for which it paid $20,000. The cost
of the web site is being amortized over three years starting in December 1999
when it was completed.
Note C - Advances from officer:
During the period from inception ( June 30, 1999) through June 30, 2000, the
President paid expenses ($1027 for product, $70 for domain registration, $331
for shipping and $90 for office supplies) on behalf of the Company for which he
has not been repaid. The Company does not owe interest on these advances, and
the advances are to be repaid when the Company makes a profit from operations.
These amounts have been recorded as a current liability.
Note D - Stockholders' Equity:
Common Stock:
-------------
The Company is authorized to issue 25,000,000 common shares of stock at a par
value of $0.001 per share. These shares have full voting rights. At June 30,
2000 and June 30, 1999, there were 1,000,000 and zero shares outstanding
respectively.
The Company has not paid a dividend to its shareholders.
Note E - Income Taxes:
The Company had a net operating loss of $3,022 for the period presented. No
deferred tax asset has been recognized for the operating loss as any valuation
allowance would reduce the benefit to zero.
Note F - Going Concern:
The Company has minimal capital resources available to meet obligations expected
to be incurred given that it is a start up enterprise. Accordingly, the
Company's continued existence is dependent upon the successful operation of the
Company's plan of operations, selling common stock in the Company, or obtaining
financing. Unless these conditions among others are met, the Company may be
unable to continue as a going concern.
F-7
<PAGE>
No dealer, salesman or any other person has been authorized to give any
quotation or to make any representations in connection with the offering
described herein, other than those contained in this Prospectus. If given or
made, such other information or representation'; must not he relied upon as
having been authorized by the Company or by any Underwriter. This Prospectus
does not constitute an offer to sell, or a solicitation of an otter to buy any
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such an offer or solicitation in such jurisdiction.
TABLE OF CONTENTS
Prospectus Summary 2
Corporate Information 2
Risk Factors 3
Forward Looking Statements 4
Plan of Distribution 4
Use of Proceeds 5
Description of Business 6
Plan of Operations 20
Description of Property 22
Management of the Company 22
Director and Executive Compensation 23
Changes In and Disagreements with Accountants 23
Director's and Officers' Indemnification and Insurance 23
Principal Shareholders 23
Interest of Management and Others in Certain Transactions 24
Summary Financial Data 24
Dividend Policy 25
Capitalization 25
Dilution 26
Description of Common Stock 27
Disclosure of Commission Position of Indemnification for
Securities Act Liabilities 28
Legal Proceedings 28
Certain Federal Income Tax Considerations 28
Legal Matters 29
Experts 29
Transfer Agent 29
Financial Statements F-1
Until the (90th day after the later of (1) the effective date of the
registration statement or (2) the first date on which the securities are offered
publicly), all dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Indemnification of Directors and Officers
Not applicable.
Item 14. Other Expenses of Issuance and Distribution
All expenses. including all allocated general administrative and overhead
expenses. related to the offering or the organization of the Company will be
borne by the Company.
The following table sets forth a reasonable itemized statement of all
anticipated out-of-pocket and overhead expenses (subject to future
contingencies) to be incurred in connection with the distribution of the
securities being registered, reflecting the minimum and maximum subscription
amounts.
Minimum Maximum
-------- ---------
SEC Registration Fee $ 278 $ 278
Printing and Engraving Expenses 2,000 19,000
Legal Fees and Expenses 5,000 5,000
Edgar Fees 1,800 1,800
Accounting Fees and Expenses 1,000 1,000
Blue Sky Fees and Expenses 5,000 5,000
Miscellaneous 200 200
-------- ---------
TOTAL $ 15,278 $ 32,278
Item 15. Recent Sales of Unregistered Securities
The Company sold to its founder 600,000 shares of common stock which was
issued to him for $2,000, composed of $500 cash and $1,500 of his services. This
stock was issued under the exemption under the Securities Act of 1933, section
4(2); this section states that transactions by an issuer not involving any
public offering is an exempted transaction. The company relied upon this
exemption because in a private transaction during July 1999, the founder, sole
officer and director purchased stock for a combination of $500 cash and $2,000
of services.
The Company sold to two companies, a total of 400,000 shares in
consideration for $20,000 which was used to pay for the website. This stock was
sold at $0.05 per share. This stock was issued under the exemption under the
Securities Act of 1933, section 4(2); this section states that transactions by
an issuer not involving any public offering is an exempted transaction. The
company relied upon this exemption because in a private transaction during
August 1999, these companies purchased stock for $20,000 cash. The purchasers
were sophisticated investors who purchased the stock for their own account and
not with a view toward distribution to the public. The certificates evidencing
the securities bear legends stating that the shares may not be offered, sold or
otherwise transferred other than pursuant to an effective registration statement
under the Securities Act, or an exemption from such registration requirements.
<PAGE>
Item 16. Exhibits
The following Exhibits are filed as part of the Registration
Statement:
Exhibit No. Identification of Exhibit
3.1* - Articles of Incorporation
3.2* - By Laws
4.2* - Specimen Stock Certificate
10.4* - Subscription Escrow Agreement
10.6* - Form of Subscription Agreement
23.1 - Opinion of T. Alan Owen & Associates, Attorneys at Law
23.2* - Consent of T. Alan Owen & Associates, Attorneys at Law
23.3 - Consent of Charles E. Smith, Certified Public Accountant
* Filed previously
--------------------
Item 17. Undertakings
The Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act; and
(ii) Reflect in the prospectus any facts or events which,
individually or together,represent a fundamental change in the
information in the Registration Statement.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form SB-1 and authorizes this Registration Statement
to be signed on its behalf by the undersigned, being duly authorized, in the
City of Garland, State of Texas, on the 12th day of July, 2000.
WHOLESALE ON THE NET, INC.
By: /s/ Thomas Bieger
-----------------------------
Thomas Bieger, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following person in the capacity and on
the date indicated:
Signature Title Date
-------------------- ------------------------ ----------------------
/s/ Thomas Bieger President, Secretary,
------------------- Treasurer; Director July 12, 2000
