Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospecus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
As filed with the Securities and Registration No. 33-
Exchange Commission on July 28, 2000
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------
EnterNet, Inc.
(Name of small business issuer in its charter)
Nevada 5499 87-0650264
------ ---- ----------
(State of jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
1403 East 900 South Salt Lake City, Utah 84105 (801) 582-9609
--------------------------------------------------------------------------------
(Address, including zip code and telephone number, including area code, of
registrant's principal executive offices)
Ruairidh Campbell, President With Copy to: Richard Surber, Esq.
1403 East 900 South 268 West 400 South, Suite 300
Salt Lake City, Utah 84105 Salt Lake City, Utah 84101
(801) 582-9609 (801) 575-8073
--------------------------------------------------------------------------------
(name, address, including zip code and telephone number, including, area code of
agent for service)
Approximate date of proposed sale to the public: As soon as practicable after
this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _________________________.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________________________.
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________________________.
If the delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of each class of Amount of Dollar Proposed Proposed
securities to be securities to be Amount to be maximum maximum
registered registered registered offering price aggregate Amount of
per share offering price registration fee
<S> <C> <C> <C> <C> <C>
Common Stock 10,000,000 shares $100,000 $0.01 $100,000 $35.00
========================= ==================== ================= ================== ================== ==================
</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Preliminary Prospectus dated July 28, 2000
ENTERNET, INC.
--------------
10,000,000 shares of Common Stock
$.01 per share
The Offering:
Per Share Total
--------- -----
Public Price $ 0.01 $100,000
Underwriting(1)
Discounts/Commissions(2) $ 0.00 $ 0.00
Proceeds to EnterNet(3) $ 0.01 $100,000
This a best efforts, no minimum basis Offering. This Offering is made on a
continuous basis.
-----------------------
(1) We have decided not to use an underwriter for the distribution. See
"Plan of Distribution."
(2)The commissions shown do not include legal, accounting, printing, escrow
fees, and related costs incurred in connection with the Offering, which will be
payable by us. These expected expenses are estimated to total $11,000.
(3)There is no arrangement to place the Proceeds from this Offering in an
escrow, trust or similar account.
EnterNet, Inc. is a Nevada Corporation which intends to be engaged in the
business of marketing high-quality, low cost vitamins, minerals, nutritional
supplements, and other health and fitness related products.
[Graphic Omitted -- Photograph of two vitamin bottles]
This is an initial public offering and prior to this:
o there has been no public market for EnterNet's securities
o no assurance can be given that a market will develop.
Proposed Trading Symbol
OTC Bulletin Board ("OTC:BB"): ENNT.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK AND THE SECURITIES
OFFERED HEREBY ARE HIGHLY SPECULATIVE. SEE "RISK FACTORS" BEGINNING ON PAGE 3 TO
READ ABOUT RISKS YOU SHOULD CAREFULLY CONSIDER BEFORE PURCHASING OUR SHARES OF
COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION, NOR ANY STATE SECURITIES
COMMISSION OR REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THESE SECURITIES OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT SELL THESE SECURITIES NOR MAY
OFFERS TO BUY BE ACCEPTED UNTIL THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
THESE SECURITIES. THERE CAN NOT BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
Inside front cover page of Prospectus
ENTERNET, INC.
Offering of 10,000,000 Shares of Common Stock
PROSPECTUS
July 28, 2000
TABLE OF CONTENTS
Page
Summary........................................................................2
Summary of Selected Financial Information .....................................3
Risk Factors ..................................................................3
Use of Proceeds ..............................................................13
Determination of Offering Price ..............................................14
Selling Security Holders .....................................................14
Plan of Distribution .........................................................14
Legal Proceedings ............................................................14
Directors, Executive Officers, Promoters
& Control Persons .........................................................14
Security Ownership of Certain
Beneficial Owners and Managers ............................................15
Description of Securities ....................................................15
Interest of Named Experts and Counsel ........................................16
Disclosure of Commission Position on
Indemnification for Securities Act Liabilities ............................16
Description of Business ......................................................17
Management's Discussion and Analysis of
Financial Condition and Results of Operations ..............................26
Description of Property ......................................................28
Certain Relationships and Related Transactions................................29
Market of Common Equity and
Related Stockholder Matters ................................................29
Executive Compensation........................................................29
Changes in and Disagreements with Accounts
or Accounting and Financial Disclosure ....................................29
Financial Statements ........................................................F-1
EnterNet, Inc. intends to become a reporting company and will file all reports
and other information as required under the Securities Exchange Act of 1934 with
the Securities and Exchange Commission (the "Commission"). The public may read
and copy, at certain prescribed rates, such material at the Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20439. The Commission maintains
a website which you can access at http:www.sec.gov that contains reports, proxy,
other information statements and other information regarding all issuers that
file electronically. We plan to apply for listing of our common stock on the OTC
Bulletin Board ("OTC:BB") and reports and other of our information may be
inspected in the future, if we become quoted on the OTC:BB.
We do not anticipate that future annual reports will be voluntarily delivered to
our security holders; however, upon request we will provide at no cost to each
security holder copies of our future annual report which will include audited
financial statements. Also, we will provide, at no cost to each person who has
received a Prospectus, a copy of any information that is incorporated herein by
reference. To request such information, call (801) 582-9609 or write to:
Ruairidh Campbell
EnterNet, Inc.
1403 East 900 South
Salt Lake City, Utah 84105
1
<PAGE>
First page of the Prospectus
SUMMARY
The following summary highlights certain information found in more detail
elsewhere in this Prospectus. As such, before you decide to buy our common
stock, in addition to the following summary, you are urged to read the entire
Prospectus carefully, especially the risks of investing in our common stock as
discussed under "Risk Factors." (See "Risk Factors" beginning on page 3.)
ENTERNET, INC.
Our Business
EnterNet, Inc. is a corporation formed under the laws of the State of Nevada on
March 16, 2000. Our executive offices are located at 1403 East 900 South in Salt
Lake City, Utah, 84105 and our telephone number is (801) 582-9609. Our
registered statutory office is located at 920 Sierra Vista Drive in Las Vegas,
Nevada 89109.
We have been granted a license to distribute the Vitamineralherb.com, Inc.
product line in Oklahoma and New Mexico. Even though we are in the early stages
of development and promotion, our primary objective is to market the high
quality, low-cost vitamins, minerals, nutritional supplements, and other health
and fitness products of the Vitamineralherb.com product line to medical
professionals, alternative health professionals, martial arts studios and
instructors, sports and fitness trainers, other health and fitness
professionals, schools and other fund raising programs and other similar types
of customers via the Internet for resale to their clients. It is our goal to
implement marketing efforts at these targeted markets in order to enhance
awareness of the products we distribute and generate sales.
The nutritional health product market is expected to have increased growth as
the "baby boomer" population ages and becomes increasingly concerned with
preventative health care. We believe this anticipated trend combined with
educating other segments of the population as to the potential health benefits
of vitamins, minerals and supplements, produces tremendous growth opportunity
for this market.
THE OFFERING
Securities Offered:
10,000,000 shares of Common Stock (See "Description of
Securities" beginning on page 15).
Shares of Common Stock Outstanding:
Before Offering .....................................500,000
After Offering....................................10,500,000
Use of Proceeds by EnterNet:
We intend to use the net proceeds from this Offering for
organizational purposes and to determine the feasibility of
selling Vitamineralherb.com products to specific markets.
(See "Use of Proceeds" beginning on page 13 and "Description
of Business" beginning on page 17.)
Risk Factors:
The securities offered hereby are speculative and involve a
high degree of risk and should not be purchased by investors
who cannot afford the complete loss of their entire
investment. (See "Risk Factors" beginning on page 3)
Trading Symbols of Securities:
Proposed OTC:BB Symbol for Common Stock ................ENNT
2
<PAGE>
SUMMARY OF SELECTED FINANCIAL DATA
STATEMENT OF OPERATIONS DATA:
June 12, 2000
(Date of Inception) to
June 30, 2000
-------------
Revenue
Net Sales $ 0
Cost of Sales 0
Gross Profit 0
Selling, General and Administrative Expense (3,009)
Operating Profit (Loss) (3,009)
Other Income (Expense) 0
Net Profit (Loss) (3,009)
Net Income $ (3,009)
=============
BALANCE SHEET DATA
June 30, 2000
-------------
Cash and Cash Equivalents $ 1,991
Working Capital (Deficit) (33,009)
Total Assets 36,991
Total Liabilities 35,000
Stockholder Equity $ 1,991
Income (Loss) Per Common Share
Net Income (Loss) per weighted average
common share outstanding
(0.00)
Weighted average number of shares outstanding 500,000
RISK FACTORS
You should carefully consider the possibility that your entire investment may be
lost, as such you are encouraged to evaluate the following risk factors and all
other information contained in this Prospectus before purchasing the common
stock of EnterNet, Inc. EnterNet's common stock involves a high degree of risk.
Any of the following risks could adversely affect our business, financial
condition and results of operations, and could result in complete loss of your
investment.
You should not rely on forward-looking statements in this Prospectus because
such forward-looking statements involve risks and uncertainties. We use the
words such as "anticipates," "believes," "plans," "expects," "future," "intends"
and similar expressions to identify these forward-looking statements.
Prospective investors should not place undue reliance on forward-looking
statements, which apply only as of the date of this Prospectus. Our actual
results could differ materially from those anticipated in these forward-looking
statements for many reasons, including the risks faced by EnterNet described in
"Risk Factors" and elsewhere in this Prospectus.
3
<PAGE>
Risks Related to EnterNet's Business
In general, in order for us to succeed in today's competitive market, we must be
able to:
o implement our business plan;
o create and increase brand recognition of the products we intend to
distribute;
o manage growth in our operations;
o expand our customer base cost-effectively;
o retain customers;
o access additional capital when required; and
o attract and retain key personnel
We cannot be certain that our business plan will be successful or that we will
successfully address these and other challenges, risks and uncertainties. The
fitness and health professionals, to whom we intend to market our products, may
not purchase products from our licensor's site, which would negatively impact
our ability to produce revenues and hence prevent us from becoming profitable.
Due to our limited operating history, we have not proven an ability to attract
and retain customers. We may not be able to convert a large number of our
targeted customers from traditional shopping methods to online shopping for
vitamins, supplements, minerals and other natural and healthy living products.
Even if we are successful at attracting online customers, we expect it will take
several years to build a critical mass of repeat customers. If we do not attract
and retain a high volume of online customers at a reasonable cost, we will not
be able to increase our revenues or achieve profitability. Specific factors that
could prevent widespread customer acceptance of Vitamineralherb.com products
include:
o lack of consumer awareness of our licensor's products because of both
their relatively short market presence and our limited operating
history under our current business plan;
o pricing that does not meet customer expectations as our licensor
expands their product offerings and incurs expenses in research and
development and marketing;
o incorrectly filled orders or damaged products resulting from our
licensor's oversight and fulfillment of the online ordering process;
o delayed response to customer service requests if we fail to adequately
monitor and grow our customer service staff.
If the Vitamineralherb.com brand does not rapidly achieve broad recognition, we
may lose the opportunity to build a critical mass of customers necessary to
achieve sales and market share.
EnterNet Has Incurred Losses Since Its Inception on June 12, 2000 and Expects
Losses to Continue For the Foreseeable Future.
We are in the extreme early stages of development and could fail before
implementing our business plan. We are a "start up" venture that will incur net
losses for the foreseeable future due to a variety of factors including:
4
<PAGE>
o fluctuations in the number of visitors to our licensor's website as a
result of the relative successes or failures of our marketing efforts
to our targeted customers;
o demand for Vitamineralherb.com products;
o amount and timing of our operating costs and capital expenditures,
which are currently difficult to predict;
o introductions by our competitors of new or enhanced websites, products
or services;
o fluctuations in shipping costs or delivery times based on changes in
the market for distribution services;
o price competition and fluctuations in the wholesale prices of the
products we sell as market demand for Vitamineralherb.com products and
competition increase;
o shifts in research findings, media publicity and consumer perception
regarding vitamins, supplements and minerals;
o changes in or enforcement of government regulations affecting our
business;
o changes in our management team and key personnel; and
o continuing fluctuations in general economic conditions and economic
conditions specific to the Internet, electronic commerce and the
vitamins, supplements, minerals and natural and healthy living
products industries as use and visibility of vitamins, supplements and
minerals increase.
Our limited operating history makes it difficult to assess the impact of these
factors on our operating results.
We have only recently acquired our principal asset, which is the license
agreement entered into in June 2000 to distribute the Vitamineralherb.com
product. We will incur additional expenses before becoming profitable, if we
ever become profitable. We are a relatively young company that has no history of
revenue, earnings or profit. This makes our business difficult to evaluate
because of the limited operating history and expectation of future losses. There
is no assurance that we will operate profitably in the future or provide a
return on investment in the future.
Changes or Interruptions to EnterNet's Arrangements with Its Supplier May Have
an Adverse Effect on Its Ability to Operate.
Vitamineralherb.com, our licensor, depends on a third party supplier for the
products they require to meet customer demands. If our licensor defaults under
its agreement with this supplier or fails to develop or maintain its
relationship with this supplier, we could lose access to this manufacturing
source, and our distribution rights would become meaningless. Similarly, any
dispute between the supplier and licensor could prevent us from selling or
delivering product to our customers. Any termination or impairment of our
license rights and access to products could prevent us from implementing our
business plan, thereby limiting our profitability and decreasing the value of
our stock.
5
<PAGE>
EnterNet Will Compete With Other Internet Retailers and May Not Achieve the
Customer Base Necessary to Become or Remain Profitable.
Our future revenues and profits, if any, substantially depend upon the
widespread acceptance and use of the Internet as an effective medium of business
by target consumers. Consumers may choose not to conduct business over the
Internet in sufficient number to establish the customer base necessary to obtain
revenues and achieve profitable operations. Even if use of the Internet and
electronic commerce continues to increase, the online vitamin market may not
develop. We may therefore be unable to successfully market and sell our product,
in which case we would not become profitable.
EnterNet Will Compete With Other Vitamin Retailers and May Not Achieve the
Customer Base Necessary to Become or Remain Profitable.
The electronic commerce industry is new, rapidly evolving and intensely
competitive, and we expect competition to intensify in the future. If we fail to
attract and retain a large customer base and our competitors establish a market
position more prominent than ours, we could experience declines in our revenue
and a loss of market share. Barriers to entry are minimal. Current and new
competitors can launch sites at a relatively low cost. In addition, the vitamin,
mineral and supplement market is very competitive and highly fragmented, with no
clear dominant leader and increasing public and commercial attention. We compete
with a variety of other companies, including traditional vitamin retailers, the
online retail initiatives of several traditional retailers, and numerous other
companies. Many of our potential competitors have longer operating histories,
larger customer or user bases, greater brand recognition and significantly
greater financial, marketing and other resources. In addition, an online
retailer may be acquired by, receive investments from, or enter into other
commercial relationships with, larger, well-established and well- financed
companies as use of the Internet and other electronic services increases.
Competitors have and may continue to adopt aggressive pricing or inventory
availability policies and devote substantially more resources to website and
systems development. Increased competition may result in reduced operating
margins and loss of market share.
EnterNet Must Rely On Its Licensor to Provide Critical Services. Failure of the
Licensor to Supply a Service Will Hinder EnterNet's Ability to Do Business.
As part of our license, our licensor has agreed to provide and maintain (1) a
website through which orders are placed and (2) a payment system for receipt of
payments from customers and disbursement of funds to EnterNet and our licensor's
supplier. Our future success is in part dependent upon our licensor's ability to
maintain and expand their website, transaction-processing systems, ordering
fulfillment infrastructure and inventory management systems without systems
interruptions in order to accommodate increased traffic and demand. If the
licensor fails to maintain and expand these services, we may be unable to
conduct our business. If we are unable to conduct our business, we may lose
customers and revenues. Our future success will depend, in part, on the
licensor's use of leading technologies to provide seamless access to and
services through its website. This includes providing adequate electronic
commerce security and procedures to control credit card fraud. The licensor's
network infrastructure may be vulnerable to computer viruses, hacking or similar
disruptive problems caused by users, other connected Internet sites,
instabilities in the Internet, interconnecting networks and various telephone
networks. Computer viruses, electronic break-ins or problems caused by third
parties could lead to interruptions, delays or cessation in service to EnterNet.
If the licensor does not maintain an up-to-date, effective website, we may not
be effective in its online sales.
6
<PAGE>
EnterNet Relies On Third Parties to Supply Telecommunications Services And Any
Interruption of These Services May Have An Adverse Effect On Its Ability to
Operate.
We will rely on our licensor's telecommunication providers, such as the local
telephone companies and other companies, to provide data communications via
local telecommunications lines and leased long-distance lines. The process of
ordering and paying for products may be disrupted or eliminated if the licensor
experiences disruptions or capacity constraints in its telecommunications
services. We or our licensor may be unable to replace these services on a timely
basis or at all. If customer sales are disrupted, we will lose customers and
profitability.
The Failure of Third-Party Delivery Services to Promptly Deliver Products Would
Impair Our Ability to Maintain Good Relationships with Existing Customers,
Attract New Customers and Generate Sales.
We rely on third-party carriers, such as the United States Postal Service, UPS
and Federal Express, for product shipments, including shipments to and from our
licensor's order fulfillment facility. We are therefore subject to the risks,
including employee strikes and delays due to inclement weather, associated with
these carriers' ability to provide delivery services to meet our shipping needs.
Government Regulation of the Internet Could Adversely Affect EnterNet's
Profitability.
Existing or future legislation could limit growth in the use of the Internet,
which would curtail our revenue growth. Any new regulation of Internet commerce
could damage our business, affect the profitability and perhaps the viability of
our business plan, and cause the price of our common stock to decline.
Regulation could prove to be burdensome, and impose significant additional costs
on our business or subject us to additional liabilities. Regulation is likely in
the area of user privacy, pricing, content, and quality of products and
services. Laws and regulations applying to the solicitation, collection, or
processing of personal or consumer information could also limit our activities.
Our licensor currently holds a web domain name relating to its brand,
"vitamineralherb.com " The acquisition and maintenance of domain names generally
is regulated by governmental agencies and their designees. The regulation of
domain names in the United States and abroad is expected to change in the near
future. Governing bodies may establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain
names. As a result, this may affect our licensor's ability to maintain the
domain name in all countries in which it conducts business and other parties may
use domain names similar to theirs. Furthermore, the relationship between
regulations governing domain names and laws protecting trademarks and similar
proprietary rights is unclear.
In addition, any regulation imposing fees for Internet use could result in a
decline in the use of the Internet and the viability of Internet commerce, which
could have a material adverse effect on our business, results of operations and
financial condition.
New Taxation Could Adversely Affect EnterNet's Profitability.
Federal, State or local jurisdictions may seek to impose sales tax collection
obligations on us for sales initiated over the Internet. If one or more States
or the Federal government successfully asserts that we should collect sales or
other taxes on the sale of Vitamineralherb.com products, this could also prevent
our business from growing or expose us to unanticipated liabilities. Taxation of
Internet use, or other charges imposed by government agencies or by private
7
<PAGE>
organizations for accessing the Internet, may also be imposed. Customers may not
be willing to pay the higher prices necessitated by a tax, or may choose to
purchase products from a company that is not subject to the tax. Any taxation
could cause loss of customers and a decrease in our profitability.
Government Regulation of Products Could Adversely Affect Viability of Diet
Supplements.
In the United States, extensive federal government regulations may restrict the
way we sell Vitamineralherb.com products, resulting in restrictions on the
products and content we offer our customers and significant additional expenses.
Also, numerous U. S. governmental agencies may regulate the manufacture,
packaging, labeling, advertising, promotion, distribution and sale of
Vitamineralherb.com products. The primary regulatory agency in the United States
for these products is the Food and Drug Administration (FDA). The laws,
regulations and enforcement policies governing dietary supplement products are
relatively new and still evolving and we cannot predict what enforcement
positions the FDA or other governmental agencies may take with respect to our
selling methods our the selling and marketing efforts of Vitamineralherb.com. In
general, the dietary supplement industry has adopted more aggressive
interpretations of these laws than have the relevant regulatory agencies.
Next, U.S. federal, state and local government regulations may restrict the
products we distribute. The U.S. FDA regulates vitamin, supplements and other
health care products under the Federal Food, Drug and Cosmetic Act and
regulations promulgated thereunder. These products are also subject to
regulation by, among other regulatory entities, the Consumer Product Safety
Commission, the U.S. Department of Agriculture, and the Environmental Protection
Agency. Additionally, the U.S. Federal Trade Commission regulates advertising
and other forms of promotion and methods of marketing of these products under
the Federal Trade Commission Act. Also, various state and local agencies may
also regulate the manufacture, labeling and advertising of these products.
We cannot be certain that our attempts, or those of our licensor and its
suppliers, to comply with laws and regulations in this area are or will be
deemed sufficient by the appropriate regulatory agencies. Enforcement actions by
any of these regulatory agencies can result in civil and criminal penalties, an
injunction to stop or modify certain selling methods, seizure of
Vitamineralherb.com products, adverse publicity or voluntary recalls and
labeling changes. If any governmental agency were to undertake an enforcement
action against us, this could cause an immediate decrease in our revenues, cause
us to incur significant additional expenses and result in a decrease in our
stock price. Our efforts to comply with existing laws and regulations may be
costly and may force us to change our selling strategy, which may not be
successful. We cannot promise that we will be able to comply with any existing
or future laws, regulations, interpretations or applications without incurring
significant costs or adjusting our business plan.
Investors Must Rely on Mr. Campbell's Abilities For All Decisions As EnterNet's
Sole Officer and Director. EnterNet Has No Employment Agreement With Mr.
Campbell and He Spends Only Part-Time On Its Business. His Leaving May Adversely
Effect EnterNet's Ability To Operate.
Mr. Campbell is serving as EnterNet's sole Officer and Director. We will be
heavily dependent upon Mr. Campbell's entrepreneurial skills and experience to
implement our business plan and may, from time to time, find that his inability
to devote full time and attention to our affairs will result in delay(s) in
progress towards the implementation of our business plan or in a complete
failure to implement our business plan. Moreover, we do not have an employment
agreement with Mr. Campbell and as a result, there is no assurance that he will
continue to manage our affairs in the future. Further, we have not obtained a
"key person" life insurance policy on Mr. Campbell and to date we have not
compensated him for his services.
8
<PAGE>
As a result, we could lose the services of Mr. Campbell, or Mr. Campbell could
decide to join a competitor or otherwise compete directly or indirectly with us,
which could have a significant adverse effect on our business and the price of
our stock. The services of Mr. Campbell would be difficult to replace.
Mr. Campbell Has No Experience in EnterNet's Line of Business and May Make Poor
Business Decisions Which May Adversely Effect Its Business.
Mr. Campbell has no experience in marketing and retail sale of vitamins and
other nutritional supplements, or the sale of products over the Internet. Mr.
Campbell is not a doctor, nutritionist, or health professional by trade. As a
result, we will likely need to rely on others who understand the sale and
marketing of nutritional supplements. Because of lack of experience in this line
of business, we may overestimate the marketability of the Vitamineralherb.com
products and may underestimate the costs and difficulties associated with
selling and distributing of the products. Any such unanticipated costs or
difficulties could prevent us from implementing our business plan, thereby
limiting our profitability and decreasing the value of our stock.
EnterNet's Ability to Increase Our Customer Base and Our Sales Depends on the
Continuing Contribution of Mr. Campbell and Our Ability to Attract and Retain
Other Qualified Employees in the Future.
We may be unable to retain Mr. Campbell or attract and retain other highly
qualified employees in the future due to the intense competition for qualified
personnel among Internet related businesses. If we were to lose the services of
Mr. Campbell, we might not be able to establish and increase our customer base
and sales. Competition for personnel is intense, and qualified technical
personnel are likely to remain a limited resource for the foreseeable future.
Locating candidates with the appropriate qualifications, particularly in the
desired geographic location, can be costly and difficult. We may not be able to
hire the necessary personnel to implement our business plan, or we may need to
provide higher compensation to such personnel than we currently anticipate. If
we fail to attract and retain sufficient numbers of highly skilled employees, we
may be unable to attract customers and initiate sales.
EnterNet May Be Subject to Product Liability Suits Which Could Adversely Effect
Its Financial Condition.
We may be subject to product liability claims if any of the products we sell
results in injury. We may be subjected to various product liability claims,
including, among others, that the products we distribute include inadequate
instructions for use or inadequate warnings concerning possible side effects and
interactions with other substances. We rely on third party manufacturers for
Vitamineralherb.com products and product disclosures. We have no product
liability insurance coverage. Although our licensor warrants the products and
provides indemnification to us for losses, claims, and expenses arising from a
breach of the product warranties, any such indemnification is limited by its
terms and, as a practical matter, is limited to the creditworthiness of the
indemnifying party. In the event that we do not have adequate indemnification,
product liability claims could be costly and divert management's attention from
business.
Unfavorable Publicity May Curtail the Market for EnterNet's Products.
The dietary supplement market is affected by national media attention regarding
the consumption of dietary supplements. We are highly dependent upon consumers'
perceptions of the safety and quality of Vitamineralherb.com products as well as
dietary supplements distributed by other companies. Any negative publicity
asserting that these products may be harmful or questioning their efficacy could
have a material adverse effect on our business, regardless of whether
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these reports are scientifically supported or whether the claimed harmful
effects would be present at the doses recommended for these products. Because of
our dependence on consumers' perceptions, adverse publicity associated with
illness or other adverse effects resulting from the consumption of the products
we distribute or any similar products distributed by other companies and future
reports of research that are perceived as less favorable or that question
earlier research could have a material adverse effect on our sales and therefore
our profitability.
Acquisition of or Combination with Another Company Could Dilute Stockholder
Value.
Should we not be successful in developing available market for the
VitaMineralherb.com products, management may spend a significant portion of
operational time evaluating other business opportunities that may be available
to us. In the event of a business combination, the ownership interests of
holders of existing shares of EnterNet's stock would be diluted. Due to our
limited financial resources, the only way we will be able to diversify our
activities, should our business plan prove to be impractical, would be to enter
into a business combination.
Any asset acquisition or business combination would likely include the issuance
of a significant amount of EnterNet's common stock, which would dilute the
ownership interest of holders of existing shares, and may result in a majority
of the voting power being transferred to new investors. Depending on the nature
of the transaction, EnterNet's stockholders may not have an opportunity to vote
on whether to approve it. For example, our Board of Directors may decide to
issue a significant amount of stock to effect a share exchange with another
company. Such a transaction does not require shareholder approval, but our
Officers and Directors must exercise their powers in good faith and with a view
to the interests of the corporation.
Acquisition of or Combination with Another Company Could Be Difficult To
Integrate and Disrupt Business.
Any acquisition of or business combination with another company could disrupt
our ongoing business, distract management and employees and increase our
expenses. Should we acquire a company, we could face difficulties in
assimilating that company's personnel and operations. In addition, the key
personnel of the acquired company may decide not to work for us. Acquisitions
also involve the need for integration into existing administrative services,
marketing, and support efforts. Any amortization of goodwill or other assets, or
other charges resulting from the costs of these acquisitions, could limit our
profitability and decrease the value of our stock. In addition, our liquidity
and capital resources may be diminished prior to or as a result of consummation
of a business combination and our capital may be further depleted by the
operating losses (if any) of the business entity that we may eventually acquire.
EnterNet May Enter In To New Lines of Business Which Investors Could Not
Evaluate.
In the event of a business combination, acquisition, or change in shareholder
control, we may enter into a new line of business that an investor did not
anticipate and in which that investor may not want to participate. We may make
investments in or acquire complementary products, technologies and businesses,
or businesses completely unrelated to our current business plan. Similarly, an
asset acquisition or business combination would likely include the issuance of a
significant amount of EnterNet's common stock, which may result in a majority of
the voting power being transferred to new investors. New investors may replace
current or existing management. New management may decide not to continue to
implement our current business plan, and may decide to enter into a business
completely unrelated to the current business plan which an investor did not
anticipate and in which that investor may not want to participate. In such case,
an investor could lose its entire investment on a business decision it did not
get to evaluate at the time of investing in EnterNet.
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Financial Risks
EnterNet Has No Operating History and Financial Results Are Uncertain.
We have no history of earnings or profit and there is no assurance that we will
operate profitably in the future. There is no meaningful historical financial
data upon which to base planned operating expenses. As a result of this limited
operating history, it is difficult to accurately forecast our potential revenue.
In order to become profitable, we must:
o implement our business plan;
o create brand recognition;
o manage growth in our operations;
o create a customer base cost-effectively;
o cultivate and retain customers;
o access additional capital when required; and
o attract and retain key personnel.
We cannot be certain that our business plan will be successful or that we will
successfully address these and other challenges, risks and uncertainties. If we
fail to successfully meet these challenges, we will likely never become
profitable.
EnterNet May Need Additional Financing Which May Not Be Available, or Which May
Dilute the Ownership Interests of Investors.
Our ultimate success will depend on our ability to raise additional capital. No
commitments to provide additional funds have been made by management or other
shareholders. We have not investigated the availability, source or terms that
might govern the acquisition of additional financing. When additional capital is
needed, there is no assurance that funds will be available from any source or,
if available, that they can be obtained on terms acceptable to EnterNet. If not
available, our operations would be severely limited, and we would be unable to
implement our business plan.
Year 2000 Risks
Many existing computer programs use only two digits to identify a year. These
programs were designed and developed without addressing the impact of the change
in century. If not corrected, many computer software applications could fail or
create erroneous results beyond the year 2000. We believe our software is year
2000 compliant. To date, we have not experienced any Year 2000 problems and our
computer programs are fully operational. However, we use software, computer
technology and other services provided by third-party venders that may
eventually fail due to the year 2000 phenomenon.
Investment Risks
EnterNet's Common Stock Has No Prior Market And Prices May Decline After the
Offering.
There is no public market for EnterNet's common stock and no assurance can be
given that a market will develop or that any shareholder will be able to
liquidate its investment without considerable delay, if at all. The trading
market price of EnterNet's common stock may decline below the offering price.
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If a marketshould develop, the price may be highly volatile. In addition, an
active public market for EnterNet's common stock may not develop or be
sustained. Factors such as those discussed in this "Risk Factors" section may
have a significant impact on the market price of EnterNet's securities. Owing to
the low price of the securities, many brokerage firms may not be willing to
effect transactions in the securities. Even if a purchaser finds a broker
willing to effect a transaction in EnterNet's common stock the combination of
brokerage commissions, state transfer taxes, if any, and other selling costs may
exceed the selling price. Further, many lending institutions will not permit the
use of these securities as collateral for loans. Thus, a purchaser may be unable
to sell or otherwise realize the value invested in EnterNet stock.
Investors May Face Significant Restrictions on the Resale of EnterNet Stock Due
to State Blue Sky Laws.
Each state has its own securities laws, often called "blue sky laws", which (1)
limit sales of stock to a state's residents unless the stock is registered in
that state or qualifies for an exemption from registration and (2) govern the
reporting requirements for broker-dealers and stock brokers doing business
directly or indirectly in the state. Before a security is sold in a state, there
must be a registration in place to cover the transaction, and the broker must be
registered in that state, or otherwise be exempt from registration. We do not
know whether our stock will be registered under the laws of any states. A
determination regarding registration will be made by the broker-dealers, if any,
who agree to serve as the market-makers for EnterNet's stock. There may be
significant state blue sky law restrictions on the ability of investors to sell
and on purchasers to buy EnterNet's securities.
Accordingly, investors should consider the secondary market for EnterNet's
securities to be a limited one. Investors may be unable to resell their stock,
or may be unable to resell it without the significant expense of state
registration or qualification.
Investors May Face Significant Restrictions on the Resale of EnterNet Stock Due
To Federal Regulations of Penny Stock.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks." These rules include, but are not limited to,
Rules 3a5l-l, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-7 under the
Securities and Exchange Act of 1934, as amended. Because our securities may
constitute "penny stock" within the meaning of the rules, the rules would apply
to EnterNet and its securities. The rules may further affect the ability of
owners of EnterNet's shares to sell their securities in any market that may
develop for them. There may be a limited market for penny stocks, due to the
regulatory burdens on broker-dealers. The market among dealers may not be
active. Investors in penny stock often are unable to sell stock back to the
dealer that sold them the stock. The mark-ups or commissions charged by the
broker-dealers may be greater than any profit a seller may make. Because of
large dealer spreads, investors may be unable to sell the stock immediately back
to the dealer at the same price the dealer sold the stock to the investor. In
some cases, the stock may fall quickly in value. Investors may be unable to reap
any profit from any sale of the stock, if they can sell it at all.
Shareholders should be aware that, according to the Securities and Exchange
Commission Release No. 34- 29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse. These patterns include:
o control of the market for the security by one or a few broker-dealers
that are often related to the promoter or issuer;
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o manipulation of prices through prearranged matching of purchases and
sales and false and misleading press releases;
o "boiler room" practices involving high pressure sales tactics and
unrealistic price projections by inexperienced sales persons;
o excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
o the wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired level,
along with the inevitable collapse of those prices with consequent
investor losses.
USE OF PROCEEDS
The gross proceeds to EnterNet from the sale of the $10,000,000 shares of common
stock offered hereby at an assumed initial public offering price of $0.01 per
share are estimated to be $100,000.
We expect to use the net proceeds, listed in the order of priority as follows:
Purpose *50% Subscription **100% Subscription
------- ----------------- -------------------
Organizational Purpose $5,000 $5,000
Expenses associated with the Offering $11,000 $11,000
Feasibility of License/Market Research $25,000 $40,000
Repayment of Shareholder Loan $0 $35,000
Working Capital $9,000 $9,000
------ ------
$50,000 $100,000
* Assumes sale of 50% of the stock being offered
** Assumes sale of 100% of the stock being offered
We continually evaluate other business opportunities that may be available to
us, whether in the form of assets acquisitions, business combinations or
diversifying into new lines of business. We may use a portion of the proceeds
for these purposes. Aside from the License Agreement with Vitamineralherb.com,
Inc. and a promissory note entered into with a major shareholder, we are not
otherwise a party to any contracts, letters of intent, commitments or agreements
and are not currently engaged in active negotiations with respect to any
acquisitions. (See "Description of Business" and "Certain Relationships and
Related Transactions").
The foregoing represents our present intentions and best estimate with respect
to the allocations of the proceeds of this Offering based upon our present plans
and business conditions. However, no assurances can be given that unforeseen
events or changed business or industry conditions will not result in the
application of the proceeds of this Offering in a manner other than as described
herein. Consequently, future events, including changes in our business plans,
research and development results and economic, competitive or industry
conditions, may make shifts in the allocation of funds necessary or desirable.
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DETERMINATION OF OFFERING PRICE
Prior to this Offering, there has been no trading market for the shares of
common stock offered. Consequently, the initial public Offering price of the
shares of Common Stock was arbitrarily determined. The factors considered in
determining the Offering price were our financial condition and prospects, our
limited operating history and the general condition of the securities market.
The Offering price is not an indication of and is not based upon the actual
value of EnterNet. The Offering price bears no relationship to the book value,
assets or earnings of EnterNet or any other recognized criteria of value. The
Offering price should not be regarded as an indicator of the future market price
of the securities.
SELLING SECURITY HOLDERS
There are no selling security holders.
PLAN OF DISTRIBUTION
We will sell a maximum of 10,000,000 shares of EnterNet's common stock to the
public on a "best efforts" basis. There can be no assurance that any of these
shares will be sold. This is not an underwritten Offering. We have not committed
to keep the registration statement effective for any set period of time. The
gross proceeds to us will be $100,000 if all the shares offered are sold -- no
commissions or other fees will be paid, directly or indirectly, to any person or
firm in connection with solicitation of sales of the shares. No public market
currently exists for shares of EnterNet's common stock. We intend to apply to
have our shares traded on the OTC bulletin board under the symbol "ENNT."
Regulation M of the Securities and Exchange Act of 1934 (which replaced Rule
l0b-6) may prohibit a broker-dealer from engaging in any market making
activities with regard to a company's securities . Under 242.104 of Regulation
M, stabilizing is prohibited except for the purpose of preventing or retarding a
decline in the market price of a security. We do not plan to engage in any
passive stabilizing activities.
The shares of Common Stock represented by the Offering are being registered
pursuant to Section 12 of the Securities Exchange Act of 1934 and Section 5 of
the Securities Act of 1933, for which an exemption from registration as provided
in Section 3 and Section 4 is not available.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding or litigation and none of our
property is the subject of a pending legal proceeding. Further, the Officer and
Director knows of no legal proceedings against us or our property contemplated
by any person, entity or governmental authority.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the name, age and position of each Director and
Executive Officer of EnterNet:
Name Age Position
---- --- --------
Ruairidh Campbell 37 President, Secretary, Treasurer, Director
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On March 15, 2000, Mr. Campbell was elected as an Officer and Director of
EnterNet. He will serve until the first annual meeting of EnterNet's
shareholders and his successors are elected and qualified. Thereafter, Directors
will be elected for one-year terms at the annual shareholders meeting. Officers
will hold their positions at the pleasure of the Board of Directors, absent any
employment agreement.
Mr. Campbell graduated from the University of Texas at Austin with a Bachelor of
Arts in History and then from the University of Utah College of Law with a Juris
Doctorate with an emphasis in corporate law, including securities and taxation.
Over the past five years he has been an Officer and Director of several public
companies that include: NovaMed, Inc., a manufacturer of medical devices
(president and Director from 1995 to present), Bren-Mar Minerals, Ltd., a
Canadian mineral resource development company (president and Director 1995 to
present), and Allied Resources Inc., a Canadian based oil and gas development
company (president and Director 1998 to present). Mr. Campbell is also the
President and a Director of Aswan Investments, Inc., Cairo Acquisitions, Inc.
and Alexandria Holdings, Inc., three shell companies that are fully reporting
and in the process of clearing comments with the SEC.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 2000, EnterNet's outstanding
common stock owned of record or beneficially by each Executive Officer and
Director and by each person who owned of record, or was known by EnterNet to own
beneficially, more than 5% of its common stock, and the shareholdings of all
Executive Officers and Directors as a group. Each person has sole voting and
investment power with respect to the shares shown.
<TABLE>
<CAPTION>
Nature of Amount of Percent
Title of Class Name and Address Ownership Ownership Of Class
-------------- ---------------- --------- --------- --------
<S> <C> <C> <C> <C>
Common Ruairidh Campbell President, 250,000 50.00%
Stock 3310 Werner Avenue Secretary,
($0.01 par Austin, Texas 77822 Treasurer, and
value) Director
Common Wolf Fiedler 50% Beneficial 250,000 50.00%
Stock 938 Howe Street, Suite 713 Holder
($0.01 par Vancouver, British
value) Columbia, Canada V6Z lN9
All Executive Officers 250,000 50.00%
and Directors as a Group
(1 Individual)
</TABLE>
DESCRIPTION OF SECURITIES
The following description of our capital stock is a summary of the material
terms of our capital stock. This summary is subject to and qualified in its
entirety by EnterNet's Articles of Incorporation and Bylaws, and by the
applicable provisions of Nevada law.
The authorized capital stock of EnterNet consists of 50,000,000 shares:
45,000,000 shares of common stock having a par value of $0.001 per share, of
which 500,000 are issued and outstanding, and 5,000,000 shares of Preferred
Stock having a par value of $0.001 per share, of which no shares are issued and
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outstanding. The Articles of Incorporation do not permit cumulative voting for
the election of Directors, and shareholders do not have any preemptive or
subscription rights to purchase shares in any future issuance of EnterNet's
common stock- There are no options, warrants or other instruments convertible
into shares outstanding.
The holders of shares of common stock of EnterNet do not have cumulative voting
rights in connection with the election of the Board of Directors, which means
that the holders of more than 50% of such outstanding shares, voting for the
election of Directors, can elect all of the Directors to be elected, if they so
choose, and, in such event, the holders of the remaining shares will not be able
to elect any of EnterNet's Directors. Each holder of common stock is entitled to
one vote for each share owned of record on all matters voted for by security
holders.
The holders of shares of common stock are entitled to dividends, out of funds
legally available therefor, when and as declared by the Board of Directors. The
Board of Directors has never declared a dividend and does not anticipate
declaring a dividend in the future. In the event of liquidation, dissolution or
winding up of the affairs of our business holders are entitled to receive,
ratably, the net assets of EnterNet available to shareholders after payment of
all creditors.
All of the issued and outstanding shares of common stock are duly authorized,
validly issued, fully paid, and non-assessable. To the extent that additional
shares of EnterNet's common stock are issued, the relative interests of existing
shareholders may be diluted.
INTEREST OF NAMED EXPERTS AND COUNSEL
No "Expert" or "Counsel" (as defined by Item 509 of Regulation S-B promulgated
pursuant to the Securities Act of 1933) whose services were used in the
preparation of this Form SB-2 was hired on a contingent basis or will receive a
direct or indirect interest in the Company.
Legal Matters
The validity of the shares of Common Stock offered hereby will be passed upon
for EnterNet by Richard Surber, Esq.
Experts
The financial statements of the Company as of June 30, 2000 included in this
Prospectus have been audited by Tanner + Co., Certified Public Accountants, our
independent auditors, as stated in their report appearing herein and have been
so included in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
EnterNet's Articles of Incorporation provide that it will indemnify its Officers
and Directors to the full extent permitted by Nevada state law. EnterNet's
Bylaws provide that it will indemnify and hold harmless each person who was, is
or is threatened to be made a party to or is otherwise involved in any
threatened proceedings by reason of the fact that he or she is or was a Director
or Officer of EnterNet or is or was serving at the request of EnterNet as a
Director, Officer, partner, trustee, employee, or agent of another entity,
against all losses, claims, damages, liabilities and expenses actually and
reasonably incurred or suffered in connection with such proceeding.
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Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to Directors, Officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
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. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a Director, Officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by, such
Director, Officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
DESCRIPTION OF BUSINESS
General
EnterNet was incorporated under the laws of the State of Nevada on March 16,
2000, and is in the early developmental and promotional stages. To date, our
only activities have been organizational, directed at acquiring our principal
asset, a license agreement, raising initial capital and developing a business
plan. We have not commenced commercial operations. We have no full time
employees and own no real estate.
The License
On June 22, 2000, we entered into a License Agreement with Vitamineralherb.com.,
Inc. The License Agreement grants us the exclusive right to distribute
Vitamineralherb.com. products to health and fitness professionals in New Mexico
and Oklahoma via the Internet. The License Agreement provides for a three year
license to market and sell vitamins, minerals, nutritional supplements, and
other health and fitness products to medical professionals, alternative health
professionals, martial arts studios and instructors, sports and fitness
trainers, other health and fitness professionals, school and other fund raising
programs and other similar types of customers via the Internet for resale to
their clients. The license will be automatically renewed unless EnterNet or
Vitamineralherb.com gives the other notice of its intent not to renew.
As a licensee of Vitamineralherb.com, this eliminates the need to develop
products, store inventory, build and maintain a website, establish banking
liaisons, and develop a fullfilment system thereby enabling us to focus strictly
on marketing and sales. We plan to target health and fitness professionals in
New Mexico and Oklahoma who wish to offer health and fitness products to their
customers.
We (and our customers) will have access to all products offered on the
Vitamineralherb.com website, as well as the ability to order custom-formulated
and custom-labeled products. When a fitness or health professional becomes a
client, a salesperson will show the client how to access the Vitamineralherb.com
website. The client is assigned an identification number that identifies it by
territory, salesperson, and business name, address, and other pertinent
information. The health or fitness professional may then order the products it
desires directly through the Vitamineralherb.com. website, paying for the
purchase with a credit card, electronic check ("e-check"), or debit card. All
products are shipped by the manufacturer directly to the professional or its
clients. Vitamineralherb.com maintains and oversee's the payment system from
customers and then disburses funds to us reflecting our profit from any sale.
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Vitamineralherb.com sets the price for products based on the manufacturer's
price, plus a markup which provides a 10% commission to Vitamineralherb.com. and
a profit for us. For example, when a customer places an order,
Vitamineralherb.com takes 10% of the sales price as their commission, then the
remaining funds are first used to pay the manufacturer the amount they are owed
for the product and then we receive the remaining profits. Three different
labeling options are available to customers. First, products may be ordered with
the manufacturer's standard label with no customization. Second, the fitness or
health professional may customize the labels by adding its name, address, and
phone number to the standard label. In most cases, these labels would be a
standardized label with product information and a place on the label for the
wording "Distributed by." This gives these health and fitness professionals a
competitive edge. Third, labels may be completely customized for the health or
fitness professional.
The website is maintained by Vitamineralherb.com, and each licensee pays an
annual website maintenance fee of $500. All financial transactions are handled
by Vitamineralherb.com's Internet clearing bank. The Vitamineralherb.com
webmaster is designed to download e-mail orders several times a day, check with
clearing bank for payment and then submit the product order and electronic
payment to Ives Formulation Co. Vitamineralherb.com then forwards the money due
EnterNet via electronic funds transfer. Vitamineralherb.com's software tracks
all sales through the customer's identification number, and at month end,
e-mails to us and the customer a detailed report including sales commissions.
Vitamineralherb.com has indicated that it will use e-commerce advertising such
as banner ads on major servers and websites, as well as trying to insure that
all major search engines pick Vitamineralherb.com first. Sales originating from
the website to customers located in New Mexico and Oklahoma will automatically
be assigned to EnterNet.
Background on the Manufacturer and Licensor
Vitamineralherb.com was incorporated as a Nevada corporation on April 2, 1999
for the purpose of creating a virtual store that would provide customers the
convenience of purchasing health conscious products from any location for direct
shipment to a home or business through the Internet. Vitamineralherb.com's
business is to market high quality low cost vitamins, herbs and health
supplements to health and fitness professionals that are then resold to their
clients. Vitamineralherb.com does not sell to the general public.
Vitamineralherb.com is a relatively young company and has just begun developing
its vitamin marketing and distributorship business.
On June 9, 1999, Vitamineralherb.com entered into a manufacturing agreement with
International Formulation and Manufacturing Inc. a nutraceuticals manufacturing
firm located in San Diego, California. International Formulation and
Manufacturing Inc. that was recently acquired by Ives Formulation Co. On June
22, 2000, Vitamineralherb.com entered into a new manufacturing agreement with
Ives Formulation Co. that incorporated the same terms and provisions of the June
9, 1999 agreement with International Formulation and Manufacturing Inc. Ives
Formulation is a wholly-owned subsidiary of Ives Health Company, a public
company traded on the OTC:BB under the symbol "IVEH." Ives Formulation has been
a contract manufacturer of vitamin, mineral, nutritional supplement, and
alternative health products for various marketing organizations. Ives
Formulation does no retail marketing. In addition to a line of standard
products, Ives Formulation is able to manufacture custom blended products and
also has the capability to supply privately labeled products for our customers
at a minimal added cost
Vitamineralherb.com's website is currently operational, but is not yet complete.
Vitamineralherb.com is finalizing the product list and the automated ordering
function, however manual ordering via e-mail is currently available.
Vitamineralherb.com has established a banking liaison and is in the process of
setting up the Internet processing facility through this bank. These items
should be completed by September 1, 2000.
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Implementation of Business Plan
Our business plan is to determine the feasibility of selling Vitamineralherb.com
products to certain targeted markets. Should we determine that our business plan
is feasible, we intend to employ sales people to call on medical professionals,
alternative health professionals, martial arts studios and instructors, sports
and fitness trainers, other health and fitness professionals, school and other
fund raising programs and other similar types of customers to interest these
professionals in selling to their clients high-quality, low-cost vitamins,
minerals, nutritional supplements, and other health and fitness products. These
professionals would sell the products to their clients via the Internet.
In order to successfully evaluate and implement our business plan, we must meet
the following objectives:
o Market Survey. In order to determine the feasibility of our business
plan, we must conduct research into the various potential target
markets, focusing on the Oklahoma and New Mexico regions. The market
analysis research will likely consist of a telephone survey to 100-200
potential clients, focusing on three or four of the core target
markets, such as chiropractors, health clubs, and alternative medicine
practitioners. The survey would likely contain questions which would
determine the marketing approach and acceptability of specific
products. The survey would take approximately four to six weeks. The
cost of the survey is estimated to range from $10,000- $15,000, which
would be paid for in part out of the proceeds of this Offering.
o Hire Salespeople. Should we determine that the exploitation of the
license is feasible, we will then have to engage salespeople to market
the products. We expect to hire two salespeople during the first year
of operation. The hiring process would include running advertisements
in the local newspaper and conducting interviews. It is anticipated
that hiring the salespeople may take four to eight weeks. We do not
intend to hire any salespeople before July, 2001.
o Establish an Office. We would then have to establish an office or
offices for the sales force in the regions where the marketing would
be most effective and appropriate. This would likely include an
office, equipment such as computers and telephones, and sample
inventory for the salespeople. We anticipate that it may take eight to
twelve weeks to locate acceptable office space and select and purchase
equipment. The expense of office rental, equipment and inventory
samples is estimated to be $45,000 per year.
o Development of Advertising Campaign. The next step would be to develop
an advertising campaign, including establishing a list of prospects
based on potential clients identified in the market survey, and
designing and printing sales materials. It is anticipated that it
would take approximately six to ten weeks to develop the advertising
campaign; although, depending on the availability of resources, we
will attempt to develop an advertising campaign concurrently with
establishing an office. The cost of developing the campaign is
estimated at approximately $12,000 per year.
o Implementation of Advertising Campaign/Sales Calls. Implementation of
the advertising campaign would begin with mailing the sales materials
to the identified list of prospects. Approximately two to four weeks
thereafter, the salespeople would begin telephone follow ups and
scheduling of sales calls. Although it will be necessary to make sales
calls throughout the life of the company, it is estimated that the
first round of sales calls will take approximately eight to twelve
weeks to complete. The cost of salary and expenses for two salespeople
is estimated at $150,000 per year.
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o Achieve Revenues. It is difficult to quantify how long it will take to
convert our marketing and sales efforts into actual sales and
revenues. We will not begin receiving orders until our sales force
successfully markets the Vitamineralherb.com product to potential
clients, and they in turn begin offering such products to their
customers. We hope that clients would begin placing orders within
weeks of a sales call, but it may take several months before people
begin to purchase products. Moreover, customers may not be willing to
pay for products at the time they order, and may insist on buying on
account, which would delay receipt of revenues another month or two.
Assuming we have received all necessary approvals to begin raising
funds by October 1, 2000, and assuming an offering period of
approximately two months, in a best case scenario we may receive our
first revenues as early as July 1, 2001. However, a more realistic
estimate of first revenues would be October 1, 2001 or later.
As discussed more fully in the "Management's Discussion and Analysis of
Financial Condition and Results of Operation," the expenses of implementing our
business plan will likely exceed the funds raised by this Offering, and we may
have to obtain additional financing through an offering or through capital
contributions by current shareholders. No commitments to provide additional
funds have been made by management or shareholders. Accordingly, there can be no
assurance that any additional funds will be available on terms acceptable to
EnterNet or at all.
Industry Background
Growth of the Internet and Electronic Commerce
The Internet has become an increasingly significant medium for communication,
information and commerce. According to NUA Internet Surveys, as of February
2000, there were approximately 275.5 million Internet users worldwide. At the
IDC Internet Executive Forum held September 28-29,1999, IDC stated that in 1999
US $109 billion in purchases were impacted by the Internet. IDC's vice
president, Sean Kaldor, indicated that figure is expected to increase more than
ten-fold over the next five years to US $1.3 trillion in 2003, with $842 million
completed directly over the Web. We believe that this dramatic growth presents
significant opportunities for online retailers.
The Vitamin, Supplement, Mineral and Alternative Health Product Market
In recent years, a growing awareness of vitamins, herbs, and other dietary
supplements by the general public has created a whole new segment in the field
of medicine and health care products. According to Jupiter Communications,
online sales of such products are expected to be US $434 million in the year
2003, up from $1 million in 1998. We believe that several factors are driving
this growth, including a rapidly growing segment of the population that is
concerned with aging and disease, a growing interest in preventative health care
and favorable consumer attitudes toward alternative health products.
Competition
The electronic commerce industry is new, rapidly evolving and intensely
competitive, and we expect competition to intensify in the future. Barriers to
entry are minimal and current and new competitors can launch sites at a
relatively low cost. In addition, the vitamin, supplement, mineral and
alternative health product market is very competitive and highly fragmented,
with no clear dominant leader and increasing public and commercial attention.
Our competitors can be divided into several groups including:
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o traditional vitamins, supplements, minerals and alternative health
products retailers;
o the online retail initiatives of several traditional vitamins,
supplements, minerals and alternative health products retailers;
o online retailers of pharmaceutical and other health-related products
that also carry vitamins, supplements, minerals and alternative health
products;
o independent online retailers specializing in vitamins, supplements,
minerals and alternative health products; mail-order and catalog
retailers of vitamins, supplements, minerals and alternative health
products, some of which have already developed online retail outlets;
and
o direct sales organizations, retail drugstore chains, health food store
merchants, mass market retail chains and various manufacturers of
alternative health products.
Many of these potential competitors have longer operating histories, larger
customer or user base, greater brand recognition and significantly greater
financial, marketing and other resources than EnterNet. In addition, an online
retailer may be acquired by, receive investments from, or enter into other
commercial relationships with, larger, well established and well financed
companies as use of the Internet and other electronic services increases.
Competitors have and may continue to adopt aggressive pricing or inventory
availability policies and devote substantially more resources to website and
systems development than EnterNet. Increased competition may result in reduced
operating margins and loss of market share. We believe that the principal
competitive factors in our market are:
o ability to attract and retain customers;
o breadth of product selection;
o product pricing;
o ability to customize products and labeling;
o and quality and responsiveness of customer service.
We believe that we can compete favorably on these factors. However, we will have
no control over how successful our competitors are in addressing these factors.
In addition, with little difficulty, our online competitors can duplicate many
of the products or services offered on the Vitamineralherb.com site.
We think that traditional retailers of vitamins, supplements, minerals and other
alternative health products face several challenges in succeeding:
o Lack of convenience and personalized service. Traditional retailers
have limited store hours and locations. Traditional retailers are also
unable to provide consumers with product advice tailored to their
particular situation.
o Limited Product Assortment. The capital and real estate intensive
nature of store-based retailers limit the product selection that can
be economically offered in each store location.
o Lack of Customer Loyalty. Although the larger traditional retailers
often attract customers, many of these customers are only one-time
users. People are often attractive to the name brands, but find the
products too expensive. It is understood that these are quality
products and have value, but the multilevel structure of marketing
often employed by large retailers mandate high prices.
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As a result of the foregoing limitations, we feel there is significant unmet
demand for an alternative shopping channel that can provide consumers of
vitamins, supplements, minerals and other alternative health products with a
broad array of products and a convenient and private shopping experience, We
hope to attract and retain consumers through the following key attributes of our
business:
o Low Product Prices. Product prices can be kept low due to volume
purchases through our affiliation with Vitamineralherb.com and other
licensees. Product prices will also be lower due to a lack of need of
inventory and warehouse space. All products are shipped from Ives
Laboratories, Inc.'s inventory.
o Accessibility to Customized Products. At minimal cost, health and
fitness practitioners may offer their customers customized products.
o Access to Personalized Programs. Health or fitness professional can
tailor vitamin and dietary supplement regimes to their clients.
Regulatory Environment
The manufacturing, processing, formulating, packaging, labeling and advertising
of the products we distribute are or may be subject to regulation by one or more
U. S. federal agencies, including the Food and Drug Administration, the Federal
Trade Commission, the United States Department of Agriculture and the
Environmental Protection Agency. These activities also may be regulated by
various agencies of the states and counties in which consumers reside.
The Food and Drug Administration, in particular, regulates the formulation,
manufacture, labeling and distribution of foods, including dietary supplements,
cosmetics and over-the-counter or homeopathic drugs. Under the Federal Food,
Drug, and Cosmetic Act, the Food and Drug Administration may undertake
enforcement actions against companies marketing unapproved drugs, or
"adulterated" or "misbranded" products. The remedies available to the Food and
Drug Administration include: criminal prosecution; an injunction to stop the
sale of a company's products; seizure of products; adverse publicity; and
"voluntary" recalls and labeling changes.
Food and Drug Administration regulations require that certain informational
labeling be presented in a prescribed manner on all foods, drugs, dietary
supplements and cosmetics. Specifically, the Food, Drug, and Cosmetic Act
requires that food, including dietary supplements, drugs and cosmetics, not be
"misbranded." A product may be deemed an unapproved drug and "misbranded" if it
bears improper claims or improper labeling. The Food and Drug Administration has
indicated that promotional statements made about dietary supplements on a
company's website may constitute "labeling" for purposes of compliance with the
provisions of the Food, Drug, and Cosmetic Act. A manufacturer or distributor of
dietary supplements must notify the Food and Drug Administration when it markets
a product with labeling claims that the product has an effect on the structure
or function of the body. Noncompliance with the Food, Drug, and Cosmetic Act,
and recently enacted amendments to that Act discussed below, could result in
enforcement action by the Food and Drug Administration.
The Food, Drug, and Cosmetic Act has been amended several times with respect to
dietary supplements, most recently by the Nutrition Labeling and Education Act
of 1990 and the Dietary Supplement Health and Education Act of 1994. The Dietary
Supplement Health and Education Act created a new statutory framework governing
the definition, regulation and labeling of dietary supplements. With respect to
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definition, the Dietary Supplement Health and Education Act created a new class
of dietary supplements, consisting of vitamins, minerals, herbs, amino acids and
other dietary substances for human use to supplement the diet, as well as
concentrates, metabolites, extracts or combinations of such dietary ingredients.
Generally, under the Dietary Supplement Health and Education Act, dietary
ingredients that were on the market before October 15, 1994 may be sold without
Food and Drug Administration pre approval and without notifying the Food and
Drug Administration. In contrast, a new dietary ingredient, i.e., one not on the
market before October 15, 1994, requires proof that it has been used as an
article of food without being chemically altered or evidence of a history of use
or other evidence of safety establishing that it is reasonably expected to be
safe. Retailers, in addition to dietary supplement manufacturers, are
responsible for ensuring that the products they market for sale comply with
these regulations. Noncompliance could result in enforcement action by the Food
and Drug Administration, an injunction prohibiting the sale of products deemed
to be noncompliant, the seizure of such products and criminal prosecution.
The Food and Drug Administration has indicated that claims or statements made on
a company's website about dietary supplements may constitute "labeling" and thus
be subject to regulation by the Food and Drug Administration. With respect to
labeling, the Dietary Supplement Health and Education Act amends, for dietary
supplements, the Nutrition Labeling and Education Act by providing that
"statements of nutritional support," also referred to as "structure/function
claims," may be used in dietary supplement labeling without Food and Drug
Administration preapproval, provided certain requirements are met. These
statements may describe how particular dietary ingredients affect the structure
or function of the body, or the mechanism of action by which a dietary
ingredient may affect body structure or function, but may not state a drug
claim, i.e., a claim that a dietary supplement will diagnose, mitigate, treat,
cure or prevent a disease. A company making a "statement of nutritional support"
must possess substantiating evidence for the statement, disclose on the label
that the Food and Drug Administration has not reviewed the statement and that
the product is not intended for use for a disease and notify the Food and Drug
Administration of the statement within 30 days after its initial use. It is
possible that the statements presented in connection with product descriptions
on Vitamineralherb.com's site may be determined by the Food and Drug
Administration to be drug claims rather than acceptable statements of
nutritional support. In addition, some of Vitamineralherb.com's suppliers may
incorporate objectionable statements directly in their product names or on their
products' labels, or otherwise fail to comply with applicable manufacturing,
labeling and registration requirements for over-the-counter or homeopathic drugs
or dietary supplements. As a result, Vitamineralherb.com may have to remove
objectionable statements or products from its site or modify these statements,
or product names or labels, in order to comply with Food and Drug Administration
regulations. Such changes could interfere with our marketing of products and
could cause us to incur significant additional expenses.
In addition, the Dietary Supplement Health and Education Act allows the
dissemination of "third party literature" in connection with the sale of dietary
supplements to consumers at retail if the publication meets statutory
requirements. Under the Dietary Supplement Health and Education Act, "third
party literature" may be distributed if, among other things, it is not false or
misleading, no particular manufacturer or brand of dietary supplement is
promoted, a balanced view of available scientific information on the subject
matter is presented and there is physical separation from dietary supplements in
stores. The extent to which this provision may be used by online retailers is
not yet clear, and we cannot provide an assurance to you that all pieces of
"third party literature" that may be disseminated in connection with the
products we offer for sale will be determined to be lawful by the Food and Drug
Administration. Any such failure could render the involved product an unapproved
drug or a "misbranded" product, potentially subjecting us to enforcement action
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by the Food and Drug Administration, and could require the removal of the
noncompliant literature from Vitamineralherb.com's website or the modification
of our selling methods, thus interfering with our continued marketing of that
product and causing us to incur significant additional expenses. Given the fact
that the Dietary Supplement Health and Education Act was enacted only five years
ago, the Food and Drug Administration's regulatory policy and enforcement
positions on certain aspects of the new law are still evolving. Moreover,
ongoing and future litigation between dietary supplement companies and the Food
and Drug Administration will likely further refine the legal interpretations of
the Dietary Supplement Health and Education Act. As a result, the regulatory
status of certain types of dietary supplement products, as well as the nature
and extent of permissible claims will remain unclear for the foreseeable future.
Two areas in particular that pose potential regulatory risk are the limits on
claims implying some benefit or relationship with a disease or related condition
and the application of the physical separation requirement for "third party
literature" as applied to Internet sales.
In addition to the regulatory scheme under the Food, Drug and Cosmetic Act, the
advertising and promotion of dietary supplements, foods, over-the-counter drugs
and cosmetics is subject to scrutiny by the Federal Trade Commission. The
Federal Trade Commission Act prohibits "unfair or deceptive" advertising or
marketing practices, and the Federal Trade Commission has pursued numerous food
and dietary supplement manufacturers and retailers for deceptive advertising or
failure to substantiate promotional claims, including, in many instances, claims
made via the Internet. The Federal Trade Commission has the power to seek
administrative or judicial relief prohibiting a wide variety of claims, to
enjoin future advertising, to seek redress or restitution payments and to seek a
consent order and seek monetary penalties for the violation of a consent order.
In general, existing laws and regulations apply fully to transactions and other
activity on the Internet. The Federal Trade Commission is in the process of
reviewing its policies regarding the applicability of its rules and its consumer
protection guides to the Internet and other electronic media. The Federal Trade
Commission has already undertaken a new monitoring and enforcement initiative,
"Operation Cure-All, " targeting allegedly false health claims for products and
treatments offered for sale on the Internet. Many states impose their own
labeling or safety requirements that differ from or add to existing federal
requirements.
We cannot predict the nature of any future U.S. laws, regulations,
interpretations or applications, nor can we determine what effect additional
governmental regulations or administrative orders, when and if promulgated,
would have on our business in the future. Although the regulation of dietary
supplements is less restrictive than that of drugs and food additives, we can
make no assurance that the current statutory scheme and regulations applicable
to dietary supplements will remain less restrictive. Further, we can make no
assurance that, under existing laws and regulations, or if more stringent
statutes are enacted, regulations are promulgated or enforcement policies are
adopted, we are or will be in compliance with these existing or new statutes,
regulations or enforcement policies without incurring material expenses or
adjusting our business strategy. Any laws, regulations, enforcement policies,
interpretations or applications applicable to our business could require the
reformulation of certain products to meet new standards, the recall or
discontinuance of certain products not capable of reformulation, additional
record keeping, expanded documentation of the properties of certain products,
expanded or different labeling or scientific substantiation.
Regulation of the Internet
In general, existing laws and regulations apply to transactions and other
activity on the Internet; however, the precise applicability of these laws and
regulations to the Internet is sometimes uncertain. The vast majority of such
laws were adopted prior to the advent of the Internet and, as a result, do not
contemplate or address the unique issues of the Internet or electronic commerce.
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Nevertheless, numerous federal and state government agencies have already
demonstrated significant activity in promoting consumer protection and enforcing
other regulatory and disclosure statutes on the Internet. Additionally, due to
the increasing use of the Internet as a medium for commerce and communication,
it is possible that new laws and regulations may be enacted with respect to the
Internet and electronic commerce covering issues such as user privacy, freedom
of expression, advertising, pricing, content and quality of products and
services, taxation, intellectual property rights and information security. The
adoption of such laws or regulations and the applicability of existing laws and
regulations to the Internet may impair the growth of Internet use and result in
a decline in our sales.
A number of legislative proposals have been made at the federal, state and local
level, and by foreign governments, that would impose additional taxes on the
sale of goods and services over the Internet, and certain states have taken
measures to tax Internet related activities. Although Congress recently placed a
three-year moratorium on new state and local taxes on Internet access or on
discriminatory taxes on electronic commerce, existing state or local laws were
expressly excepted from this moratorium. Further, once this moratorium is
lifted, some type of federal and/or state taxes may be imposed upon Internet
commerce. Such legislation or other attempts at regulating commerce over the
Internet may substantially impair the growth of commerce on the Internet and as
a result, adversely affect our opportunity to derive financial benefit from such
activities.
Employees
We are a development stage company and currently have no employees. We are
currently managed by Ruairidh Campbell, the sole Officer and Director. We look
to Mr. Campbell for his entrepreneurial skills and talents. For a complete
discussion of Mr. Campbell's experience, please see "Directors and Executive
0fficers." Management plans to use consultants, attorneys and accountants as
necessary and does not plan to engage any full-time employees in the near
future. We may hire marketing employees based on the projected size of the
market and expect to base the compensation on what is necessary to hire and
retain qualified sales employees. We presently do not have personal benefits,
pension, health, annuity, insurance, stock options, profit sharing or any
similar benefit plan; however, we may adopt such plans in the future. A portion
of any employee compensation includes the right to acquire stock in EnterNet,
which would naturally dilute the ownership interest of holders of existing
shares of our common stock.
Available Information and Reports to Securities Holders
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 with respect to the common stock offered by this
Prospectus. This Prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the registration
statement or the exhibits and schedules which are part of the registration
statement. For further information with respect to EnterNet and its common
stock, see the registration statement and the exhibits and schedules thereto.
Any document EnterNet files may be read and copied at the Commissions Public
Reference Room located at 450 Fifth Street N.W., Washington D.C. 20549, and the
public reference rooms in New York, New York, and Chicago, Illinois. Please call
the Commission at 1-800-SEC-0330 for further information about the public
reference rooms. EnterNet's filings with the Commission are also available to
the public from the Commission's website at http://www.sec.gov.
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Upon completion of this offering, we will become subject to the information and
periodic reporting requirements of the Securities Exchange Act and, accordingly,
we will file periodic reports, proxy statements and other information with the
Commission. Such periodic reports, proxy statements and other information will
be available for inspection and copying at the Commission's public reference
rooms, and the website of the Commission referred to above.
Board of Directors Committees
The Board of Directors has not yet established an audit committee or a
compensation committee. An audit committee typically reviews, acts on and
reports to the Board of Directors with respect to various auditing and
accounting matters, including the recommendations and performance of independent
auditors, the scope of the annual audits, fees to be paid to the independent
auditors, and internal accounting and financial control policies and procedures.
Certain stock exchanges currently require companies to adopt formal written
charter that establishes an audit committee that specifies the scope of an audit
committees responsibilities and the means by which it carries out those
responsibilities. In order to be listed on any of these exchanges, we will be
required to establish an audit committee.
The Board of Directors have not yet established a compensation committee.
Directors currently are not reimbursed for out-of-pocket costs incurred in
attending meetings and no Director receives any compensation for services
rendered as a Director. It is likely that we will adopt a provision for
compensating Directors in the future.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the Financial Statements and
accompanying notes and the other financial information appearing elsewhere in
this Prospectus. Also, due to our limited operating history, the financial
information presented is for the period June 12, 2000 (date of inception) to
June 30, 2000. Our fiscal year end is December 31.
This Prospectus contains forward-looking statements, the accuracy of which
involve risks and uncertainties. Words such as "anticipates," "believes,"
"plans," "expects," "future," "intends" and similar expressions are used to
identify forward-looking statements. This Prospectus also contains
forward-looking statements attributed to certain third parties relating to their
estimates regarding the potential markets for Vitamineralherb.com products.
Prospective investors should not place undue reliance on these forward- looking
statements, which apply only as of the date of this Prospectus. Our actual
results could differ materially from those anticipated in these forward-looking
statements for many reasons, including the risks we face as described in "Risk
Factors" and elsewhere in this Prospectus.
Results of Operations
During the period from June 12, 2000 (date of inception) through June 30, 2000,
we have engaged in no significant operations other than organizational
activities, acquisition of the rights to market Vitamineralherb.com products and
preparation for registration of our securities under the Securities Act of 1933,
as amended. No revenues were received by EnterNet during this period.
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For the current fiscal year, we anticipate incurring a loss as a result of
organizational expenses, expenses associated with registration under the
Securities Act of 1933, and expenses associated with setting up a company
structure to begin implementing our business plan. We anticipate that until
these procedures are completed, we will not generate revenues, and may continue
to operate at a loss thereafter, depending upon the performance of the business.
Our business plan is to determine the feasibility of marketing the
Vitamineralherb.com products in various markets, and, if the products prove to
be in demand, begin marketing and selling Vitamineralherb.com products.
Profits
For the period ending June 30, 2000, we recorded an operating loss of $3,009.
This lack of profitability is largely attributable to expenses of $3,009
associated with a start up venture. We did not generate any revenues during this
period. We expect to continue to operate at a loss through fiscal 2000. Further,
there can be no assurance that we will ever achieve profitability or that a
stream of revenue can be generated and sustained in the future.
Capital Expenditures
We expended no amounts on capital expenditures for the period ending June 30,
2000.
Capital Resources and Liquidity
At June 30, 2000, we had current assets of $1,991 and total assets of $36,991.
These assets consist of cash on hand of $1,991 and $35,000 for a license
agreement. Net stockholders' equity in EnterNet was $1,991 at June 30, 2000. We
remain in the development stage and, since inception, have experienced no
significant change in liquidity, capital resources or shareholders' equity.
Cash flow provided from the issuance of common stock was $5,000 for the period
ending June 30, 2000. In March 2000, a total of 500,000 shares of common stock
were issued as result of two subscription agreements. The shares were issued at
$0.01, and we received $5,000 as a result of the issuance. Organizational
expenses of $3,009 were funded by these shareholder subscriptions and expensed
to operations. In addition, in June 2000 we received a cash advance from a major
shareholder of $35,000. This amount is unsecured, non-interest bearing and is
due on June 15, 2001. This amount was used to acquire the distribution rights of
the Vitamineralherb.com product.
Our business plan is to determine the feasibility of selling Vitamineralherb.com
products to targeted markets. Should we determine that this business plan is
feasible, we intend to employ salespeople to call on medical professionals,
alternative health professionals, martial arts studios and instructors, sports
and fitness trainers, other health and fitness professionals, school and other
fund raising programs and other similar types of customers to interest these
professionals in selling to their clients high-quality, low-cost vitamins,
minerals, nutritional supplements, and other health and fitness products. These
professionals would sell the products to their clients via the Internet.
In order to determine the feasibility of our business plan, during the next six
to twelve months we will conduct research relating to the viability of our
target markets. Should we determine that the exploitation of the license is
feasible, we will engage salespeople to market the products. Based primarily on
discussions with the licensor, we believe that during the first operational
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quarter, a capital infusion of approximately $50,000 will be needed to achieve a
sustainable sales level where ongoing operations can be funded out of revenues.
This capital infusion is intended to cover costs of advertising, hiring and
paying two salespeople, and administrative expenses. In addition, we may need an
additional $250,000 in the event we determine that our market will not pay in
advance causing us to extend credit. These expenses will exceed the funds raised
by this Offering, and we will have to obtain additional financing through an
Offering or capital contributions by current shareholders.
We are conducting this Offering, in part, because we believe that an early
registration of our equity securities will minimize some of the impediments to
capital formation that otherwise exist. By having a registration statement in
place, we will be in a better position to either conduct a future public
Offering of securities or to undertake a private placement with registration
rights, than if we were a completely private company. Registering our shares
will help minimize the liquidity discounts we may otherwise have to take in a
future private placement of our equity securities, because investors will have a
high degree of confidence that the Rule 144(c)(1) public information requirement
will be satisfied, and a public market will exist to effect Rule 144(g) broker
transactions. We believe that the cost of registering our securities, and
undertaking the affirmative disclosure obligations that such a registration
entails, will be more than offset by avoiding deep liquidity discounts in future
sales of securities. No specific private investors have been identified, but
management has general knowledge of an investor class interested in investing in
companies that can demonstrate a clear path to an early liquidity event.
We believe that the proceeds of this Offering, together with projected cash
flows from operations, will be sufficient to satisfy contemplated cash
requirements for at least twelve (12) months following the consummation of this
Offering. In the event that plans change, assumptions prove to be inaccurate, or
if the proceeds of this Offering prove to be insufficient to fund operations and
fully implement the our business plan, we could be required to seek additional
financing from sources not currently anticipated. We have no current commitments
or arrangements with respect to, or immediate sources of, additional financing
and it is not anticipated that any existing stockholders or lenders will provide
any portion of future financing. Additionally, no assurances can be given that
any additional financing, when needed, will be available or available on
acceptable terms. Any inability to obtain additional financing when required
could have a material adverse effect on our operations, including requiring us
to curtail our marketing efforts.
In addition, we may engage in a combination with another business. We cannot
predict the extent to which our liquidity and capital resources will be
diminished prior to the consummation of a business combination or whether our
capital will be further depleted by the operating losses (if any) of the
business entity with which we may eventually combine. We have not yet engaged in
any discussions concerning potential business combinations.
DESCRIPTION OF PROPERTY
We currently maintain limited office space, occupied by Ruairidh Campbell, for
which no rent is paid. Our address is 1403 East 900 South, Salt Lake City, Utah
84105 and the phone number is (80 1) 582-9609. We do not believe that we will
need to obtain additional office space at any time in the foreseeable future and
do not anticipate a need for additional office space until our business plan is
implemented.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than as disclosed below, no Director, Executive Officer, nominee for
election as a Director of EnterNet, or an owner of five percent of more of
EnterNet's outstanding shares -- or any member of their immediate family -- has
entered into any related transaction.
On March 15, 2000, EnterNet issued 500,000 shares of common stock at $0.01 for a
total of $5,000. 250,000 shares were issued to Wolf Fiedler and 250,000 shares
were issued to Ruairidh Campbell, both of whom were either Officers or Directors
at the time of issuance.
On June 16, 2000, EnterNet executed a Promissory Note in the amount of $35,000
to be paid no later than June 15, 2001 in favor of Wolf Fiedler, a principal
shareholder. This amount is unsecured and non-interest bearing.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
No established public trading market exists for EnterNet's securities. We have
no common equity subject to outstanding purchase options or warrants. We have no
securities convertible into common equity. There is no common equity that could
be sold pursuant to Rule 144 under the Securities Act or that EnterNet has
agreed to register under the Securities Act for sale by shareholders. Except for
this Offering, there is no common equity that is being, or has been publicly
proposed to be, publicly offered.
As of June 30, 2000, there were 500,000 shares of common stock outstanding, held
by 2 shareholders of record. Upon effectiveness of the registration statement
that includes this Prospectus, 10,000,000 shares of EnterNet's common stock will
be eligible for sale.
To date we have not paid any dividends on our common stock and we do not expect
to declare or pay any dividends on our common stock in the foreseeable future.
Payment of any dividends will depend upon future earnings, if any, financial
condition, and other factors as deemed relevant by the Board of Directors.
EXECUTIVE COMPENSATION
No Officer or Director has received any remuneration from us. Although there is
no current plan in existence, it is possible that we will adopt a plan to pay or
accrue compensation to our Officers and Directors for services related to the
implementation of our business plan. We have no stock option, retirement,
incentive, defined benefit, actuarial, pension or profit-sharing programs for
the benefit of Directors, Officers or other employees, but the Board of
Directors may recommend adoption of one or more such programs in the future. We
have no employment contract or compensatory plan or arrangement with any
executive Officer of EnterNet. The Director currently does not receive any cash
compensation for his service as a member of the Board of Directors. There is no
compensation committee, and no compensation policies have been adopted (See
"Certain Relationships and Related Transactions").
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS OF ACCOUNTING AND
FINANCIAL DISCLOSURE
Since our inception, there have been no changes in accountants nor have there
been any disagreements with our current accountants regarding any matter of
account principles or practices, financial statement disclosure, or auditing
scope or procedure.
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ENTERNET, INC.
(A Development Stage Company)
Financial Statements
June 30, 2000
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Index to Financial Statements
Page
Independent Auditors' Report F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7
See accompanying notes to financial statements.
F-1
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
INDEPENDENT AUDITORS' REPORT
To the Stockholders' and
Board of Directors of
EnterNet, Inc.
We have audited the accompanying balance sheet of EnterNet, Inc. (a development
stage company), as of June 30, 2000 and the related statements of operations and
stockholders' equity, and cash flows for the period from June 12, 2000 (date of
inception) to June 30, 2000. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EnterNet, Inc. (a development
stage company), as of June 30, 2000 and the results of its operations and its
cash flows for the period from June 12, 2000 (date of inception) to June 30,
2000, 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 discussed in Note 2 to the
financial statements, the Company's revenue generating activities are not in
place and the Company has incurred a loss. These conditions raise substantial
doubt about its ability to continue as a going concern. Management's plans
regarding those matters also are described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Tanner + Co.
Salt Lake City, Utah
July 6, 2000
See accompanying notes to financial statements.
F-2
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Balance Sheet
June 30, 2000
--------------------------------------------------------------------------------
Assets
Current assets - cash $ 1,991
License agreement, net 35,000
-------------
$ 36,991
=============
-------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities - related party payable $ 35,000
-------------
Commitments -
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares
authorized, no shares issued or outstanding -
Common stock, $.001 par value, 45,000,000 shares
authorized, 500,000 shares issued and outstanding 500
Additional paid-in capital 4,500
Deficit accumulated during the development stage (3,009)
-------------
Total stockholders' equity 1,991
-------------
$ 36,991
=============
See accompanying notes to financial statements.
F-3
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Statement of Operations
June 12, 2000 (Date of Inception) to June 30, 2000
--------------------------------------------------------------------------------
Revenues $ -
General and administrative costs 3,009
------------------
Loss before income taxes (3,009)
Provision for income taxes -
------------------
Net loss $ (3,009)
==================
Loss per common share - basic and diluted $ (.00)
==================
Weighted average common shares - basic and diluted 500,000
==================
See accompanying notes to financial statements.
F-4
<PAGE>
ENTERNET, INC.
(A Developmental Stage Company)
Statement of Stockholders' Equity
June 12, 2000 (Date of Inception) to June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 12, 2000 (date
of inception) - $ - - $ - $ - $ - $ -
Issuance of common stock for
cash - - 500,000 500 4,500 - 5,000
Net loss - - - - - (3,009) (3,009)
------ ------- ------- --------- -------- ---------- --------
Balance at June 30, 2000 - $ - 500,000 $ 500 $ 4,500 $ (3,009) $ 1,991
====== ======= ======= ========= ======== ========== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Statement of Cash Flows
June 12, 2000 (Date of Inception) to June 30, 2000
--------------------------------------------------------------------------------
Cash flows from operating activities-
net loss $ (3,009)
------------------
Cash flows from investing activities-
purchase of license agreement (35,000)
------------------
Cash flows from financing activities-
Issuance of common stock 5,000
Proceeds from related party payable 35,000
------------------
Net cash provided by
financing activities 40,000
------------------
Net increase in cash 1,991
Cash, beginning of period -
------------------
Cash, end of period $ 1,991
==================
See accompanying notes to financial statements.
F-6
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 2000
--------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies
Organization
The Company was organized under the laws of the State of Nevada on March 16,
2000 and had no significant operations or activity until June 12, 2000 (date of
inception). The Company plans to market vitamins, minerals, nutritional
supplements and other health and fitness products over the internet; however,
the Company has not commenced planned principal operations. The Company proposes
to seek business ventures which will allow for long-term growth. Further, the
Company is considered a development stage company as defined in SFAS No. 7 and
has not, thus far, engaged in business activities of any kind. The Company has,
at the present time, not paid any dividends and any dividends that may be paid
in the future will depend upon the financial requirements of the Company and
other relevant factors.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with a maturity of three months or less to be cash
equivalents.
Income Taxes
Deferred income taxes are provided in amounts sufficient to give effect to
temporary differences between financial and tax reporting, principally related
to net operating loss carryforwards.
Earnings Per Share
The computation of basic earning per common share is based on the weighted
average number of shares outstanding during each period.
The computation of diluted earnings per common share is based on the weighted
average number of shares outstanding during the period plus the common stock
equivalents which would arise from the exercise of stock options and warrants
outstanding using the treasury stock method and the average market price per
share during the period. The Company does not have any stock options or warrants
outstanding at June 30, 2000.
F-7
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
--------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies (Continued)
Concentration of Credit Risk
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 and believes it is not exposed to any significant credit risk on
cash and cash equivalents.
Use of Estimates in the Preparation of Financial Statements 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.
2. Going Concern
As of June 30, 2000, the Company's revenue generating activities are not in
place, and the Company has incurred a loss for the period then ended. These
factors raise substantial doubt about the Company's ability to continue as a
going concern.
Management intends to seek additional funding through debt and/or equity
financing. There can be no assurance that such funds will be available to the
Company, or available on terms of acceptable to the Company.
3. License Agreement
The Company has a license agreement to sell certain nutritional supplements and
other health and fitness products in specific territories. The agreement
requires an annual maintenance fee of $500 beginning in June of 2001 and
payments to the licensor of 10% of gross sales. The agreement expires in June
2003.
4. Related Party Payable
The related party payable consists of cash advances from a major shareholder.
The amounts are unsecured, non-interest bearing and are due on June 15, 2001.
F-8
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
--------------------------------------------------------------------------------
5. Income Taxes
The difference between income taxes at statutory rates and the amount presented
in the financial statements is a result of an increase in the valuation
allowance to offset the deferred tax asset related to the net operating loss
carryforward.
The Company has net operating loss carryforwards of approximately $3,000, which
begin to expire in the year 2020. The amount of net operating loss carryforward
that can be used in any one year will be limited by significant changes in the
ownership of the Company and by the applicable tax laws which are in effect at
the time such carryforwards can be utilized.
6. Supplemental Cash Flow Information
No amounts were paid for interest or income taxes during the period from June
12, 2000 (date of inception) to June 30, 2000.
7. Preferred Stock
The Company has authorized up to 5,000,000 shares of preferred stock with a par
value of $.001 per share. The preferred stock can be issued in various series
with varying dividend rates and preferences. At June 30, 2000 there are no
issued series or shares of preferred stock.
8. Recent Accounting Pronounce- ments
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective date of FASB
Statements No. 133." SFAS 133 establishes accounting and reporting standards of
all derivatives as assets or liabilities in the statement of financial position
and measurement of those instruments at fair value. SFAS 133 is now effective
for fiscal years beginning after June 15, 2000. The Company believes that the
adoption of SFAS 133 will not have any material effect on the financial
statements of the Company.
F-9
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
EnterNet's Articles of Incorporation, Article 8, filed as Exhibit 3. 1, provide
that it must indemnify its directors and officers to the fullest extent
permitted under Nevada law against all liabilities incurred by reason of the
fact that the person is or was a director or officer of EnterNet or a fiduciary
of an employee benefit plan, or is or was serving at the request of EnterNet as
a director or officer, or fiduciary of an employee benefit plan, of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise.
The effect of these provisions is potentially to indemnify EnterNet's directors
and officers from all costs and expenses of liability incurred by them in
connection with any action, suit or proceeding in which they are involved by
reason of their affiliation with EnterNet. Pursuant to Nevada law, a corporation
may indemnify a director, provided that such indemnity shall not apply on
account of. (a) acts or omissions of the director finally adjudged to be
intentional misconduct or a knowing violation of law; (b) unlawful
distributions; or (c) any transaction with respect to which it was finally
adjudged that such director personally received a benefit in money, property, or
services to which the director was not legally entitled.
The Bylaws, Section 6.09, of EnterNet, filed as Exhibit 3.2, provide that it
will indemnify its officers and directors for costs and expenses incurred in
connection with the defense of actions, suits, or proceedings against them on
account of their being or having been directors or officers of EnterNet, absent
a finding of negligence or misconduct in office. The Bylaws also permit it to
maintain insurance on behalf of its officers, directors, employees and agents
against any liability asserted against and incurred by that person whether or
not EnterNet has the power to indemnify such person against liability for any of
those acts.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The securities are being registered in connection with the public offering of
10,000,000 shares of our common stock, and all of the following expenses will be
born by EnterNet. The amounts set forth are estimates except for the SEC
registration fee:
Amount to be Paid
-----------------
SEC registration fee $ 35
Printing and engraving expenses 0
Attorneys' fees and expenses 8,000
Accountants' fees and expenses. 1,500
Transfer agent's and registrar's fees and expenses. 500
Miscellaneous 965
Total $ 11,000
======
RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding the issuance and sales of EnterNet
securities without registration since its formation. No such sales involved the
use of an underwriter and no commissions were paid in connection with the sale
of any securities.
30
<PAGE>
On March 15, 2000 EnterNet issued a total 500,000 shares of common stock.
250,000 shares were issued to Ruairidh Campbell and 250,000 shares were issued
to Wolf Fiedler. EnterNet relied on exemptions provided by Section 4(2) of the
Securities Act of 1933, as amended. We made this offering based on the following
factors (1) the issuance was an isolated private transaction by EnterNet which
did not involved a public offering; (2) there were only two offerees who were
officers and directors of Enternet, (3) the offerees will not resell the stock
but will continue to hold it for at least one year; (4) there were no subsequent
or contemporaneous public offerings of the stock; (5) the stock was not broken
down into smaller denominations (6) the negotiations for the sale of the stock
took place directly between the offerees and EnterNet.
INDEX TO EXHIBITS
The following exhibits are filed as part of this Registration Statement.
Exhib. Page
No. No. Description
----- ---- -----------
3(i) 34 Articles of Incorporation of EnterNet, Inc., a Nevada
corporation, filed with the State of Nevada on March 16,
2000.
3(ii) 36 By-laws of the Company adopted on March 15, 2000.
4(i) 46 Specimen Stock Certificate.
4(ii) 47 Subscription Agreement between the Company and Ruairidh
Campbell dated March 16, 2000.
4(iii) 51 Subscription Agreement between the Company and Wolf Fiedler
dated March 16, 2000.
5 55 Opinion Letter dated July 25, 2000.
10(i) 58 License Agreement between Vitamineralherb.com Corp. and
EnterNet, Inc., dated June 22, 2000.
10(ii) 68 Promissory Note between the Company and Wolf Fiedler dated
June 16, 2000.
23(i) 70 Consent of Certified Public Accountant dated July 26, 2000.
23(ii) 55 Consent of Counsel (See Exhibit 5).
27 71 Financial Data Schedule "CE"
31
<PAGE>
UNDERTAKINGS
The Registrant hereby undertakes that it will:
o File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
o Include any prospectus required by section 10(a)(3) of the Securities
Act;
o Reflect in the prospects any facts or events which, individually or
together, represent a fundamental change in the information in the
Registration Statement; and
o Include any additional or changed material information on the plan of
distribution.
o File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the Offering.
o For determining liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of the
Registration Statement pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this Registration Statement as of
the time the Comission declared it effective.
o For determining liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
Registration Statement for the securities offered in the Registration
Statement, and the Offering of such securities at the time as the
initial bona fide Offering of those securities.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant,
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
In the event a claim for indemnification against such liabilities (other than
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
32
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in Salt Lake City, Utah, on July 27, 2000.
EnterNet, Inc. (Registrant)
By: /s/ Ruairidh Campbell
----------------------
Ruairidh Campbell, President
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates states.
Signature Title Date
--------- ----- ----
/s/ Ruairidh Campbell President, Secretary, July 27, 2000
--------------------- Treasurer and Director
Ruairidh Campbell
33
<PAGE>
