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 prospectus 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 Exchange Registration No. 33-42436
Commission on December 8, 2000
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
Form SB-2/A-5
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 December 8, 2000
EnterNet, Inc.
10,000,000 shares of common stock
$0.01 per share
The Offering:
Per Share Total
Public Price $ 0.01 $100,000
Underwriting(1)
Discounts/Commissions(2) $ 0.00 $ 0.00
Proceeds toEnterNet(3) $ 0.01 $100,000
This is a "self-underwritten" offering, with no minimum purchase requirement.
This offering is made on a continuous basis until July 31, 2001, when this
offering will end.
-----------------
(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 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 engage in the business of marketing high-quality, low cost vitamins,
minerals, nutritional supplements, and other health and fitness related
products, to professionals involved in health care issues. We plan to market
these products by directing prospective customers to buy from our licensor's
internet web site, which automatically credits sales in our territory to us.
This is the initial public offering of the common stock of EnterNet, Inc., and
no public market exists for shares of EnterNet, Inc.'s common stock. There can
be no assurance given that a market will develop in these shares. The initial
public offering price is $0.01 per share of common stock, which is the same
price that the officers, directors, promoters, and affiliates of EnterNet, Inc.
paid for their stock since inception.
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
December 8, 2000
TABLE OF CONTENTS
Page
Summary........................................................................2
Summary of Selected Financial Information .....................................3
Risk Factors ..................................................................4
Use of Proceeds ..............................................................10
Determination of Offering Price ..............................................10
Plan of Distribution .........................................................10
Legal Proceedings ............................................................11
Directors, Executive Officers, Promoters
& Control Persons .........................................................11
Security Ownership of Certain
Beneficial Owners and Managers ............................................12
Description of Securities ....................................................12
Interest of Named Experts and Counsel ........................................13
Disclosure of Commission Position on
Indemnification for Securities Act Liabilities ............................13
Description of Business ......................................................14
Management's Discussion and Analysis of
Financial Condition and Results of Operations ..............................25
Description of Property ......................................................28
Certain Relationships and Related Transactions................................28
Market of Common Equity and
Related Stockholder Matters ................................................29
Executive Compensation........................................................29
Changes in and Disagreements with Accounts
or Accounting and Financial Disclosure ....................................30
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 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."
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 intend to market high quality, low cost vitamins, minerals and
supplements for purchase through the internet.
The nutritional health product market is expected to grow as the "baby boomer"
population ages and becomes increasingly concerned with preventative health
care. We believe that this concern combined with a growing awareness of the
benefits of vitamins, minerals and supplements will lead to increased demand for
health related products. The increased demand will offer a tremendous
opportunity to those involved in the effective sale and distribution of low
cost, high quality products. Since the new medium for cost effective sales and
distribution is the internet, we will market health related products through the
internet.
We recently acquired a license to market VitaMineralHerb.com products to
customers in Oklahoma and New Mexico. VitaMineralHerb.com hosts an Internet web
site where health related products can be purchased for resale; the web site
then automatically credits the licensee with purchases from their customers (the
site is accessed by a User ID and password). Each sale generated on the
VitaMineralHerb.com web site is identified by the location of the particular
customer. Sales derived from within Oklahoma and New Mexico are credited to us
minus VitaMineralHerb.com's cost to the manufacturer of the health products plus
a ten percent commission for handling the transaction. Our revenue will be
driven by the number of customers and the type of transactions that originate
within our licensed territory.
We have focused on health professionals and those involved in fitness related
businesses as our target customers. We have included physicians, alternative
health care providers, martial arts studio owners and instructors, sports and
fitness trainers, other health and fitness professionals, schools and fund
raising programs as the intended market for the VitaMineralHerb.com products.
The marketing concept is for us to direct health care professionals to the
VitaMineralHerb.com web site to purchase health related products for resale to
their clients.
EnterNet is a "start-up" company in the early stages of development and we could
certainly fail before fully implementing our business plan. Our company's
prospects for success are controlled by a single individual who has no
experience in marketing health related products. We have had no operations to
date, have generated no revenue and currently have no employees. We are a "start
up" venture that will incur net losses for the foreseeable future.
2
<PAGE>
THE OFFERING
Securities Offered:
10,000,000 shares of common stock
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 selling VitaMineralHerb.com
products to specific markets.
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.
SUMMARY OF SELECTED FINANCIAL DATA
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
Three Months Ended June 12, 2000 (Date of June 12, 2000 (Date of
September Inception) to June 30, Inception) to September
30, 2000 (Unaudited) 2000 (Audited) 30, 2000 (Unaudited)
----------------------- ------------------------- ----------------------
<S> <C> <C> <C>
Revenue
Net Sales $ - $ - $ -
Cost of Sales - - -
----------------------- ------------------------- ----------------------
Gross Profit - - -
Selling, General and Administrative Expense 1,170 38,009 39,179
----------------------- ------------------------- ----------------------
Operating Profit (Loss) (1,170) (38,009) (39,179)
Other Income (Expense) - - -
Net Profit (Loss) (1,170) (38,009) (39,179)
----------------------- ------------------------- ----------------------
Net Income $ (1,170) $ (38,009) $ (39,179)
======================= ========================= =====================
BALANCE SHEET DATA
Cash and Cash Equivalents 821 1,191 821
Working Capital (Deficit) (34,179) (33,009) (34,179)
Total Assets 821 1,991 821
Total Liabilities 35,000 35,000 35,000
----------------------- ------------------------- ----------------------
Stockholder Equity $ (34,179) $ (33,009) $ (34,179)
======================== ========================= ======================
Income (Loss) Per Common Share
Net Income (Loss) per weighted average
common share outstanding $ - $ (0.08)
====================== ==========================
Weighted average number of shares outstanding 500,000 500,000
======================= ==========================
</TABLE>
3
<PAGE>
RISK FACTORS
You should carefully consider the possibility that your entire investment may be
lost. Given this possibility, 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 the complete
loss of your investment.
Risks Related to EnterNet's Business
1. EnterNet Has Generated No Revenues to Date, and There Is Substantial Doubt
About Its Ability to Continue As a Going Concern.
All investors should be aware of the risk that our company has generated no
revenues to date. It currently faces an extreme shortage of cash, and our
auditor's report has stated that "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."
2. EnterNet Has Incurred Losses Since Its Inception on March 16, 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. We have only recently acquired our principal
asset, which is the license agreement entered into in June, 2000 to distribute
VitaMineralHerb.com products. We will incur additional expenses before we become
profitable. We are a relatively young company that has no history of earnings or
profit. There is no assurance that we will operate profitably in the future or
provide a return on investment in the future.
3. 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 Affect 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. 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. The services of Mr. Campbell would be difficult to replace. Mr.
Campbell will devote only such time to the affairs of the company as deemed
appropriate, which is estimated to be approximately 5 hours per week.
The company currently has no employees. Management of the company expects to use
consultants, attorneys, and accountants as necessary, and does not anticipate a
need to engage any full-time employees. The need for employees and their
availability will be addressed when we determine the feasibility of our business
plan.
4
<PAGE>
4. 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 could be severely limited.
Investment Risks
5. 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. If
a market should 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.
6. 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.
7. Investors May Face Significant Restrictions on the Resale of EnterNet Stock
Due To Federal Regulations of Penny Stock.
EnterNet's stock differs from many stocks, in that it is a "penny stock." 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.
5
<PAGE>
Because our securities probably 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;
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.
Risks Related to Distributing VitaMineralHerb.com Products
8. EnterNet May Be Subject to Product Liability Suits Which Could Adversely
Affect Its Financial Condition.
Particularly because we plan to sell VitaMineralHerb.com products such as
vitamins, minerals, nutritional supplements, and other health and fitness
products, 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.
6
<PAGE>
9. Unfavorable Publicity May Curtail the Market for VitaMineralHerb.com
Products.
Our company's business plan focuses almost entirely on the feasibility of
distributing VitaMineralHerb.com products, which are in large part dietary
supplements. The dietary supplement market is affected by national media
attention regarding the consumption of dietary supplements. Dietary supplement
products are highly dependent upon consumers' perceptions of safety and quality.
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 these reports are scientifically supported or whether the
claimed harmful effects would be present at the doses recommended for these
products. Because dietary supplements depend to such a degree 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.
10. 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.
11. Changes to or Impairment of Our License Arrangement with
VitaMineralHerb.com Could Adversely Affect, Or Entirely Prevent, Our
Ability to Operate.
Our principal asset is an intangible asset, namely a license agreement of June
2000 which gives us a right to distribute VitaMineralHerb.com products. There is
a risk that this license may become impaired, which could happen if
VitaMineralHerb.com refuses to honor the license, or if it gives out a competing
license, or if other non-licensed people wrongfully distribute
VitaMineralHerb.com products. If this license becomes impaired, it could
significantly decrease, or perhaps even cut off, the number of
VitaMineralHerb.com products we could sell. This risk could in turn
significantly decrease, or perhaps entirely stop, our company's operations,
revenues, and income.
12. Mr. Campbell Has No Experience in EnterNet's Line of Business and May Make
Poor Business Decisions Which May Adversely Affect 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 the products. Any such unanticipated costs or
difficulties could prevent us from fully implementing our business plan, thereby
limiting prospective revenue.
7
<PAGE>
13. EnterNet's Ability to Create a Customer Base and 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.
14. EnterNet Will Compete With Other Vitamin Retailers and May Not Achieve the
Customer Base Necessary to Become or Remain Profitable.
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.
15. 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 (VitaMineralHerb.com) has agreed to provide
and maintain (1) a web site 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. The license obligates VitaMineralHerb.com
to keep this web site up to date and effective, as it contains an agreement to
"maintain" the web site and to "post current prices for all products." Our
future success depends in part, upon our licensor's ability to maintain and
expand their web site, 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 our
online sales.
8
<PAGE>
16. 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 or 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.
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.
Use Caution Regarding Forward Looking Statements
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.
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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 from this offering in the following order of
priority (since there is no minimum investment, funds will be immediately
available and applied in the following order):
Costs of making this offering: $11,000
Marketing survey: $ 5,000
Establishing office: $10,000
Developing marketing campaign: $ 5,000
Hiring salesperson: $30,000
Repaying loan to buy license: $35,000
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.
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 plan,
research and development results and economic, competitive or industry
conditions, may make shifts in the allocation of funds necessary or desirable.
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 - essentially - 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.
EnterNet, Inc. is selling its common stock in this proposed offering at one cent
($0.01) per share, which is the same price at which all other shares of its
common stock have been purchased to date, including those shares purchased by
officers, directors, promoters, and affiliated persons.
PLAN OF DISTRIBUTION
We will sell a maximum of 10,000,000 shares of EnterNet's common stock to the
public on a "self- underwritten" basis, meaning we will sell shares through our
officer and director, Ruairidh Campbell, without an underwriter. Mr. Campbell
will wait until this prospectus clears comments by the SEC, and then he will
begin to offer EnterNet's common stock only to potential buyers who qualify
under the relevant exemptions provided by state "blue sky" law, and only to
those persons who have first received a copy of this prospectus. After delivery
of the prospectus, Mr. Campbell will accept subscriptions and payments for stock
to be issued in this offering. Payments will be deposited into the company's
account.
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There can be no assurance that any of these shares will be sold. This is not an
underwritten offering. 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. Funds raised from this offering will be applied first to pay the
costs of this offering which are estimated to be approximately $11,000, and
after those costs are paid the remainder of the funds raised from this offering
will be used in accordance with the "Use of Proceeds" section detailed in this
prospectus.
There is no minimum purchase requirement for this offering, and in conjunction
with this no-minimum requirement, any funds received in this offering will be
immediately available to the company for its use, and no funds will be placed in
an escrow or trust account.
Regulation M of the Securities and Exchange Act of 1934 (which replaced Rule
10b-6) may prohibit a broker- dealer from engaging in any market making
activities with regard to a company's securities. Under Section 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 the sole director
and executive officer of EnterNet:
Name Age Position
---- --- --------
Ruairidh Campbell 37 President, Secretary,
Treasurer, Director
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
with the SEC.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 8, 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 $0.01 per share, of
which 500,000 are issued and outstanding, and 5,000,000 shares of Preferred
Stock having a par value of $0.01 per share, of which no shares are issued and
outstanding. 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.
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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/A-5 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, 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.
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.
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DESCRIPTION OF BUSINESS
General
EnterNet was incorporated under the laws of the State of Nevada on March 16,
2000 and is in the very early developmental stage. To date, our only activities
have been organizational, directed at acquiring our principal asset (a license
agreement), raising capital and developing a business plan. We have not
commenced commercial operations, and we are in the process of performing market
research to identify the most likely market segments in which to sell
VitaMineralHerb.com products under our license agreement. 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 allows us 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
agreement grants us the right to market VitaMineralHerb.com products for a
three-year period. The license will automatically renew at the end of each
three-year period unless either the licensor or licensee provides written notice
of termination 90 days before the end of the term. The licence may also be
terminated by either party in the event of a material breach of the license.
Notice of breach provides 14 days for the breaching party to cure the default;
otherwise the license automatically terminates.
Under the terms of the license agreement VitaMineralHerb.com warrants that all
products purchased on the VitaMineralHerb.com web site will be fit for the
purpose for which they were produced, labeled and manufactured by the supplier
in full compliance with local, state and federal regulations. Orders received
requesting the manufacture of product according to custom specifications are
warranted to be in accordance with those specifications. Further,
VitaMineralHerb.com. has agreed to indemnify us and hold us harmless, as a
licensee, as well as our customers, directors and officers, from any loss, claim
or expense incurred as the result of its breach of the warranties detailed in
the licence.
As a licensee of VitaMineralHerb.com, we have no need to develop products, store
inventory, build and maintain a website, establish banking liaisons, and develop
a fulfilment 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 oversees 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 includes a 10% commission to VitaMineralHerb.com and
a profit to 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 owed for the
product purchased and then we receive the remaining difference between the 10%
commission and the manufacturer's cost. Although the profit to us will vary
according to the specific product purchased, an average profit margin of 20% is
a reliable indicator of our prospective profit margin going forward.
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
the 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.
We are aware that VitaMineralHerb.com has granted marketing rights for its
products in the Canadian province of British Columbia to BentleyCapitalCorp.com,
Inc. However, we do not know to what extent BentleyCapitalCorp.com has marketed
the VitaMineralHerb.com products and do not believe that marketing activities
conducted by another licensor of the VitaMineralHerb.com products will
negatively impact our prospective business under our license agreement. We have
no intention of seeking the right to market the VitaMineralHerb.com products in
any territory other than that currently under license.
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 related products from any location for direct
shipment to a home or business through the Internet. It is a private company,
and is not registered with the SEC. 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. It currently offers 61 products for sale on its web site, including
kava kava, St. John's Wort, Saw Palmetto, Gingko Biloba, Echinacea, Siberian
Ginseng, Chromium Picolinate, Glucosamine Chondroitin, and Vitamin C, as well as
many others.
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. 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.
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VitaMineralHerb.com's web site 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. They have
indicated to us that these items should be completed by November 1, 2000.
VitaMineralHerb.com management has informed us that it has, to date, recognized
no revenues from the sale of its products on its web site.
Implementation of Business Plan: Milestones
The implementation of our business plan involves an initial market survey to
determine the most likely markets in which to sell VitaMineralHerb.com products
to health professionals within territories designated by our license agreement.
Once we have completed our market survey, we will establish an office, from
which a list of prospective clients will be generated from contacts identified
in the marketing survey. Marketing materials (a printed circular) will then be
produced as part of a low-cost advertising campaign that will detail the health
products available on the VitaMineralHerb.com web site, provide ordering
instructions and describe the advantages of purchasing health products for
resale through the Internet. A sales person will then be hired to solicit and
respond to prospective purchasers of the VitaMineralHerb.com products. The sales
person's activities will be integrated into our mailing of circulars to our list
of prospects. The circular will be followed up by a telephone call initiated by
the sales person, who will direct prospective purchasers to the
VitaMineralHerb.com web site and interest them in selling to their clients
high-quality, low-cost vitamins, minerals, nutritional supplements and other
health and fitness products. Health professionals will then order
VitaMineralHerb.com products on the Internet using a customer identification
that will credit any purchases to our business. Income realized from the
Internet purchases of VitaMineralHerb.com products will then form the basis of
our revenue. Implementation of our business plan will be accomplished by
achieving the following objective milestones:
Milestone 1- Conduct Market Survey. The first step in our business plan requires
that we conduct research to identify and contact prospective customers and
introduce them to the concept of purchasing low cost, high quality health
products on the Internet for resale to clients. The concept introduction will
include a survey to determine product preferences and potential purchasing
patterns. Once prospective customers are identified, we will contact by
telephone 500 to 1,000 of them in New Mexico and Oklahoma to gauge their
interest in our marketing concept and get their responses to our survey. We have
already begun our marketing survey, and we expect it will continue into the 1st
quarter (January) of 2001, and will involve approximately three months of active
research and initial contact with potential customers. The cost to achieve this
milestone of our business plan is anticipated to be $5,000 -$10,000, which cost
will be borne out of the proceeds of this offering.
Milestone 2- Establish Office. Once the market survey is completed, we will
establish a formal office from which to solicit prospective customers and direct
salespeople in the field. We will initially use this office to produce sales and
information materials to be used in our marketing campaign and as a storage
space for sample inventory that can be used by salespeople in the marketing
process. Establishing our office will involve identifying appropriate office
space, purchasing office equipment and connecting our business to a toll free
telephone service. We expect this process to begin in the 2nd quarter (April) of
2001, and we expect it to take up to eight weeks. The expense of office rental
and the purchase of equipment and inventory samples is estimated at a total of
between $10,000 and $15,000 for the 2nd through 4th quarters of 2001. The cost
of establishing an office will be borne out of the proceeds of this offering.
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Milestone 3- Develop Marketing Campaign. The establishment of a formal office
will coincide with the production of marketing materials during the 2nd quarter
of 2001. We expect the marketing materials to detail information related to the
products available for purchase on the VitaMineralHerb.com web site, how to
visit the VitaMineralHerb.com web site address, the advantages of buying health
products through the Internet for resale to clients and the process by which
each customer can purchase the VitaMineralHerb.com products. We will also start
to place small advertisements in local papers directing potential purchasers of
health care product for resale to our toll free phone number. The extent to
which direct advertising can be implemented will depend on resources. We expect
our development of a marketing campaign to take eight to ten weeks, including
the printing of written materials, and to cost approximately $5,000. The
development of a marketing campaign, the production of marketing materials and
direct advertising will be borne out of the proceeds of this offering.
Milestone 4- Hire Salesperson. Once we have the sales materials ready for
distribution to prospects identified as part of the initial market survey, we
will be ready to engage a salesperson. We expect to hire one salesperson during
the first year of marketing VitaMineralHerb.com products, at an estimated cost
of $5,000 per month, plus a 10% commission of the net income from sales. The
hiring process is expected to take between four and eight weeks. Based on the
current time frames made part of these objective milestones, we do not expect to
hire a salesperson before the 3rd quarter (July) of 2001, and estimate the
salesperson's salary for the last 6 months of 2001 to reach $30,000. The costs
associated with hiring a salesperson will be borne out of the proceeds of this
offering.
Milestone 5- Initiate Marketing Campaign. We expect to start a formal marketing
campaign by the 3rd quarter (July) of 2001. The salesperson will be responsible
for mailing our marketing materials to prospective customers identified in the
initial market survey, and for making telephone follow ups on the mailed
marketing materials. The salesperson will also be responsible for making
appointments for on-location marketing and instruction for prospective
customers. We will continue to place small advertisements in local papers,
responses to which will be directed to our salesperson for personal contact. We
expect the initial phase of this marketing campaign to take approximately three
months. We do not estimate that there will be additional costs, other than the
costs described in milestones 1-4 above, involved in reaching this milestone.
Milestone 6- Achieve Revenues. We are a "start-up" company and cannot quantify
with any certainty at what point our marketing efforts will result in actual
sales on the VitaMineralHerb.com web site, resulting in revenues to us. We do
not expect to begin receiving revenues until our salesperson successfully
markets the VitaMineralHerb.com products to potential customers. Customers must
then purchase product through the VitaMineralHerb.com web site in order for us
to receive revenues. We hope that customers will begin placing orders within
days of receiving a phone call from our salesperson, but it may take several
months with numerous follow-up conversations after the initial contact before
customers purchase from the VitaMineralHerb.com web site. Since we do not
anticipate hiring a salesperson until July of 2001, we do not expect to realize
any revenues before that time. Indeed, a more realistic expectation for
realizing our first revenues will be the start of the 4th quarter (October) of
2001. Our business plan is therefore designed around the assumption that the
proceeds of this offering will enable us to start up our business for the 2001
calendar year.
As discussed more fully in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section, we believe that the
expenses of implementing our business plan may exceed the proceeds of this
offering, and we may have to obtain additional financing through a subsequent
offering or through capital contributions from current shareholders. The
determination of whether additional funding will be required can only be
assessed in view of whether this offering is fully subscribed, the time frames
involved in realizing the milestones made part of this business plan, and the
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time period in which we must operate without revenues sufficient to fund
operations. Should we require additional funding, no commitments to provide
additional funds have been made by management or shareholders. Accordingly,
there can be no assurance that any additional funding will be available on terms
acceptable to us 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, a leading online
source for Internet demographics and trends, there were approximately 359.8
million Internet users, worldwide, as of July 2000-157 million of whom are
located in Canada and the United States(This information comes from NUA Internet
Survey's web site at http://www.nua.net/surveys/how_many_online/index.html). As
reported by NUA on4/21/00 at http://www.nua.net/surveys/index.cgi?f=VS&art
_id=905355736&rel=true,Forrester Research estimated that global e-commerce
will be worth USD6.9 trillion by 2004, and online buyers in North America will
account for just over half of this total, or USD3.5 trillion. Another study by
Gartner Group, reported by NUA on 6/30/00 at http://www.nua.net/surveys/index.
cgi?f=VS&art_id=905355877&rel=true, estimates that online B2C [business to
consumer] sales in the US this year are up 75 percent on 1999 and are expected
to surpass USD29.3 billion. Total revenues in this sector last year were USD
16.8 billion, an increase of 157 percent over 1998. Online sales represented
less than 1 percent of total retail activity in the US last year, but Gartner
Group predicts this will rise to 5 to 7 percent by 2004. We believe that this
dramatic growth presents significant opportunities for online retailers.
The Vitamin, Supplement, Mineral and Alternative Health Products 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. This segment is sometimes referred to as
the VSM (vitamin, supplements, and minerals) market, or the nutraceuticals
market. According to Jupiter Communications, as reported by NUA Internet Surveys
on May 26, 1999, at http://www.nua.ie/surveys/index.cgi?f=VS&art_id=905354928&
rel=true,the nutraceutical market is expected to be worth USD434 million by
2003, up from a mere USD1 million in 1998. Jupiter Communications estimated
that the online consumer healthcare market will be worth USD 1.7 billion by 2003
accounting for less than one percent of its estimated total 205.2 billion
combined (online and offline) consumer healthcare market by 2003. A more
recent report by Jupiter Communications, reported by NUA Internet Survey on
2/2/00 at http://www.nua.ie/surveys/index.cgi?f=VS&art_id=905355567&rel=true,
estimates that in 2004 the nutraceuticals sector will represent 17 percent,
or USD1.7 billion, of the online health sales market. 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 vitamin, supplement, and mineral ("VSM") market is highly competitive. In
addition, the online commerce market in which we operate is new, rapidly
evolving and highly competitive. We expect competition to intensify in the
future because current and new competitors can launch web sites at a relatively
low cost.
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Our competitors operate in one or more distribution channels, including retail
stores, direct selling, catalog operations or online commerce. We compete with a
variety of companies, including health/natural specialty retailers, drugstores,
supermarkets and grocery stores, and mass merchant retailers. We discuss each
briefly below:
o Health/natural specialty retailers. This category includes local,
regional and national chains, as well as catalog marketers and online
retailers. The largest participant in this sector is General
Nutritional Centers, which has a nationwide presence and recently
launched a web site. Another large competitor is NBTY, which sells
exclusively private-label products through its Puritan's Pride and
Nutrition Headquarters mail order catalogs and its Vitamin World
retail stores. NBTY also sells through separate Vitamin World and
Puritan's Pride web sites. In addition, Rexall Sundown, a large VSM
manufacturer, sells directly to consumers through both catalog and
direct mail operations. Competitors focusing exclusively on online
operations include www.MotherNature.com, www.GreenTree.com, and
www.VitaminShoppe.com.
o Drugstores. This category is dominated by national chains, such as
Walgreen's, CVS and RiteAid. Most national chains have a limited
online presence, if any. Others have recently acquired an online
presence, as CVS did when it acquired www.soma.com and RiteAid did
when it invested in www.drugstore.com. Recent online entrants include
www.drugstore.com and www.planetRx.com. This category currently offers
a moderate selection of VSM products, focusing instead on
prescriptions and over-the-counter products.
o Supermarkets and grocery stores. This category includes traditional
supermarkets (such as Safeway and Kroger) and natural food markets
(such as Whole Foods and Wild Oats), some of which have entered the
online market with a limited offering of VSM products. Online grocery
stores (such as www.Peapod.com and www.netgrocer.com) also compete
against us. This category generally offers a limited selection of VSM
products and infrequent discounts.
o Mass merchant retailers. This category is dominated by companies such
as Wal-Mart, Kmart and Target, which have extensive retail locations
but limited online presence. These chains offer attractive pricing on
VSM products but have limited selection at retail stores and offer
little product information.
Our competitive position in this industry is that of a small, unproven newcomer.
Many of our current and potential competitors have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than we do. Our competitors may develop
products or services that are equal or superior to our solutions, and many
achieve greater market acceptance than we do. In addition, larger,
well-established and well-financed entities may acquire, invest in or form joint
ventures with online competitors or suppliers as the use of the Internet
increases.
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.
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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 because of our
decision to target health professionals such as medical professionals,
alternative health professionals, martial arts instructors, and others. We have
identified these professionals as "trusted intermediaries" whom people
frequently consult on decisions of whether, and which brand, to buy. We believe
that gaining the approval of these "trusted intermediaries" will bring with it
the trust of their clients, and a stream of purchasers to follow, thus enabling
us to attract and retain customers, customize our products and labeling for each
"trusted intermediary" and provide superior, responsive customer service. We
also believe that our selection of a salesperson to contact these "trusted
intermediary" health professionals provides an additional level of customer
service, since both the health professional and their clients will be able to
contact our salesperson with questions directly, rather than relying only on the
comparatively impersonal internet web site alone, thus allowing us to
"personalize" our internet distribution with human personnel. 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
web site.
Moreover, 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 attracted 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.
As a result of the foregoing limitations, we feel there is significant 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 be kept lower because we will not need
inventory and warehouse space. All products are shipped directly from
Ives Laboratories, Inc.'s inventory.
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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 professionals 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
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 preapproval 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.
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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
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.
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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.
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.
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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. Management plans to use independent consultants and attorneys, rather
than in-house counsel, to prepare the reports necessary to keep the company
current in its Exchange Act reporting. Management further plans to use
independent accountants, rather than hire an in- house accountant, to prepare
its financial statements for inclusion in its Exchange Act reports, as well as
for dealing with the accounting to keep this start-up company running.
Management's criteria for choosing such independent consultants, attorneys, and
accountants will include the following guidelines: they should have at least 5
years of experience in law practice, consulting, or accounting, and should have
previous experience preparing reports and financial statements for small public
companies. Management currently anticipates that such outside advisors will be
hired for approximately one year, though extensions may be necessary if the
company's operations cannot justify hiring full-time, in-house staff for these
functions. 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 may include 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/A-5 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 SEC's 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.
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.
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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 has 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 audited for the period March 16, 2000 (date of
inception) to June 30, 2000, and unaudited for the period March 16, 2000 (date
of inception) to September 30, 2000. Our fiscal year end is December 31.
Plan of Operation
General
Our business plan for the next twelve months involves 6 milestones, which are
detailed further in our "Description of Business" section, above. We plan to
achieve these milestones during the following quarters of the year 2001: (1)
conducting market surveys to determine the most receptive market segments in
which to sell health-related products under the VitaMineralHerb.com license we
have purchased (1st quarter of 2001); (2) establishing an office (2nd quarter of
2001); (3) developing a marketing campaign (2nd quarter of 2001); (4) hiring a
salesperson (3rd quarter of 2001); (5) initiating marketing campaign (3rd
quarter of 2001); and (6) achieving revenues (4th quarter of 2001).
Expected Cash Requirements
As of September 30, 2000, we had $821 cash on hand. We do not believe this
amount will satisfy our cash requirements to further our business plan. As
further detailed in our "Description of Business" section, above, we believe
that we will need approximately $100,000 cash to fund our company's operations
during the 2001 calendar year. These requirements over the 2001 calendar year
are estimated as follows:
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Costs of making this offering: $11,000
Marketing survey: $ 5,000 - $10,000
Establishing office: $10,000 - $15,000
Developing marketing campaign: $ 5,000
Hiring salesperson: $30,000
Repaying loan to buy license: $35,000
We expect to incur approximately $16,000 to $21,000 of the above-stated costs in
the 1st quarter of 2001. We will then incur approximately $15,000 to $20,000 of
the above costs in the 2nd quarter; approximately $50,000 of the above costs in
the 3rd quarter, and approximately $15,000 of the above costs in the 4th quarter
of 2001. However, we can provide no assurance that we will be able to obtain the
funds necessary to incur these anticipated expenditures. Further, should we be
unable to generate the funding projected from the proceeds of this offering, we
can provide no assurance that the company will be able to continue as a going
concern.
Expected Research & Development
We have begun to conduct significant market research in the form of a market
survey which we plan to complete during the 1st quarter of 2001. We further plan
to engage in significant development in order to establish our office and
develop our marketing campaign during the 2nd quarter of 2001. We do not plan to
develop any products on our own.
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Expected Purchase or Sale of Plant and Equipment
We expect to lease office space and purchase some minor office equipment (less
than $15,000 during the year 2001) during the 2nd quarter of 2001.
Expected Changes in Number of Employees
We expect to hire one salesperson in the 3rd quarter of 2001, which would
increase our employees from 0 to 1.
Results of Operations
During the period from March 16, 2000 (date of inception) through September 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.
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 we will
complete our market survey, organizational and implementation phases by the 3rd
quarter of 2001, and that we will not generate revenues during this time. We
anticipate hiring a salesperson in the 3rd quarter of 2001, and expect to begin
generating revenues during the 4th quarter of 2001. However, we may continue to
operate at a loss even after generating some revenue, depending on how our
business performs, as well as the other risk factors described in the "Risk
Factors" section of this prospectus.
Our business plan is to market and sell VitaMineralHerb.com products via the
Internet under our license agreement.
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Profits
For the period from March 16, 2000 (inception) to September 30, 2000, we
recorded an operating loss of $39,179. This lack of profitability is
attributable to a $35,000 expense to obtain our license with VitaMineralHerb.com
and additional expenses of $4,179 associated with starting up our business. We
did not generate any revenues during this period. We expect to continue to
operate at a loss through fiscal 2001. 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 September
30, 2000.
Capital Resources and Liquidity
At September 30, 2000, we had current assets of $821 and total assets of $821.
These assets consist of cash on hand of $821. Net stockholders' deficit in
EnterNet was $34,179 at September 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
from March 16, 2000 (inception) up to September 30, 2000. In March 2000, a total
of 500,000 shares of common stock were issued as the 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 $4,179 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 license for VitaMineralHerb.com products.
The first step in our business plan is to perform market research to determine
the most receptive market segments in which to sell VitaMineralHerb.com
products. After we complete our market survey, we will set up an office and
employ a salesperson 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.
We have already begun, and expect to complete during the 1st quarter of 2001,
market research relating to our target markets. After completing our market
survey, we will establish an office, develop marketing materials, advertise and
hire a salesperson to market the products. We believe that during the calendar
year 2001, we will need a capital infusion of approximately $100,000 to achieve
a sustainable sales level where ongoing operations can be funded out of
revenues. This capital infusion is intended to cover costs of our marketing
survey, advertising, hiring and paying one salesperson, repaying our $35,000
loan to obtain the VitaMineralHerb.com license, and administrative expenses. We
believe these costs can be borne out of the proceeds of this offering, if it is
fully subscribed. If it is not fully subscribed, we will probably need to obtain
additional financing through another offering or capital contributions by
current shareholders.
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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
higher degree of confidence that the Rule 144(c)(1) public information
requirement will be satisfied, and that 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 which is
interested in investing in companies that provide a relatively higher likelihood
that they will eventually be able to liquidate their investment under Rule 144,
as signified by a company that is fully reporting under the Securities Exchange
Act of 1934, that can meet the "current public information" requirement of Rule
144(c), and that has reliable, audited financial statements of the type commonly
submitted to satisfy the reporting requirements of the Securities Exchange Act
of 1934.
We believe that the proceeds of this offering 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.
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 (801) 582-9609. We do not believe that we will
need to obtain additional office space at any time in the foreseeable future
until our business plan is implemented.
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. Mr. Fiedler
loaned the company this $35,000 in order to enable the company to acquire the
license to market VitaMineralHerb.com products.
28
<PAGE>
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.
We plan to become listed on the NASDAQ Over the Counter Bulletin Board (OTC:BB),
but there can be no absolute assurance that we will become listed on the OTC:BB.
However, we will contact market-makers to determine their interest in making a
market in our stock, and we will work with such market maker to file the
appropriate disclosure documents under Rule 15c2-11, to obtain an appropriate
transfer agent and CUSIP numbers for the stock, and to comply with applicable
NASD regulations for listing on the OTC:BB.
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 (whether cash, stock, or
other non-cash payment) 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.
The following table and the accompanying notes provide summary information for
each of the last three fiscal years concerning cash and non-cash compensation
paid or accrued by Mr. Campbell.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Awards Payouts
Securities
Restricted Underlying
Other Annual Stock Options All Other
Name and Principal Salary Bonus Compensation Award(s) SARs LTIP payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ruairidh Campbell, 2000 0 - - - - - -
President, Secretary, 1999 0 - - - - - -
Treasurer, Director 1998 0 - - - - - -
</TABLE>
29
<PAGE>
Until July 31, 2001, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
Compensation of Directors
The company's director is not compensated for any meeting of the board of
directors which he attends.
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.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
30
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Financial Statements
June 30, 2000 (audited) and September 30, 2000 (unaudited)
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Index to Financial Statements
--------------------------------------------------------------------------------
Page
Independent Auditors' Report.................................................F-2
Balance Sheet................................................................F-4
Statement of Operations......................................................F-5
Statement of Stockholders' (Deficit) Equity..................................F-6
Statement of Cash Flows......................................................F-7
Notes to Financial Statements................................................F-8
--------------------------------------------------------------------------------
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' deficit, 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.
TANNER + CO.
-------------------
Salt Lake City, Utah July 6, 2000 except
for notes 1 and 3, which are dated
November 30, 2000
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
F-2
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Balance Sheet
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
(unaudited) (audited)
-------------------------------------------
<S> <C> <C>
Assets
Current assets - cash $ 821 $ 1,991
==================== ==================
-----------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' (Deficit) Equity
Current liabilities - related party payable $ 35,000 $ 35,000
-------------------- ------------------
Commitments - -
Stockholders' (deficit) 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 500 500
Additional paid-in capital 4,500 4,500
Deficit accumulated during the development stage (39,179) (38,009)
-------------------- ------------------
Total stockholders' (deficit) (34,179) (33,009)
-------------------- ------------------
$ 821 $ 1,991
==================== ==================
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Statement of Operations
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 12, 2000
Three Months June 12, 2000 (Date of
Ended (Date of Inception) to
September 30, Inception) to September 30,
2000 June 30, 2000 2000
(unaudited) (audited) (unaudited)
-----------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ - $ - $ -
General and administrative costs 1,170 38,009 39,179
-----------------------------------------------------------------
Loss before income taxes (1,170) (38,009) (39,179)
Provision for income taxes - - -
-----------------------------------------------------------------
Net loss $ (1,170) $ (38,009) $ (39,179)
=================================================================
Loss per common share - basic and diluted $ - $ (.08)
=========================================
Weighted average common shares
- basic and diluted 500,000 500,000
=========================================
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ENTERNET, INC.
(A Developmental Stage Company)
Statement of Stockholders' Deficit
June 12, 2000 (Date of Inception) to September 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<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 - - - - - (38,009) (38,009)
------ ------- ------- --------- -------- ---------- --------
Balance at June 30, 2000
(audited) - - 500,000 500 4,500 (38,009) (38,009)
Net loss (unaudited) - - - - - (1,170) (1,170)
------ ------ ------- --------- -------- ---------- --------
Balance at September 30, 2000
(unaudited) - - 500,000 500 4,500 (39,179) (34,179)
====== ====== ======= ========= ======== ========== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Statement of Cash Flows
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 12, 2000
Three Months June 12, 2000 (Date of
Ended (Date of Inception) to
September 30, Inception) to September 30,
2000 June 30, 2000 2000
(Unaudited) (Audited) (Unaudited)
-------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,170) $ (38,009) $ (39,179)
-------------------------------------------------------
Cash flows from financing activities-
Issuance of common stock - 5,000 5,000
Proceeds from related party payable - 35,000 35,000
-------------------------------------------------------
Net cash provided by
financing activities - 40,000 40,000
-------------------------------------------------------
Net (decrease) increase in cash (1,170) 1,991 821
Cash, beginning of period 1,991 - -
-------------------------------------------------------
Cash, end of period $ 821 $ 1,991 $ 821
=======================================================
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
F-6
<PAGE>
ENTERNET, INC.
Notes to Financial Statements
June 30, 2000 (Audited) and September 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
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. 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 September 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.
Unaudited Information
The unaudited financial statements include the accounts of EnterNet, Inc. and
include all adjustments (consisting of normal recurring items) which are, in the
opinion of management, necessary to present fairly the financial position as of
September 30, 2000 and the results of operations and cash flows for the three
month period ended September 30, 2000, and cumulative amounts since inception.
The results of operations for the three months ended September 30, 2000 are not
necessarily indicative of the results to be expected for the entire year.
2. Going Concern
As of September 30, 2000, the Company's revenue generating activities are not in
place, and the Company has incurred a loss for the period then ended. In
addition, the Company does not currently have any source of financing readily
available. These factors raise substantial doubt about the Company's ability to
continue as a going concern.
The Company intends to raise additional funds through the sale of equity
securities and/or borrowings.
--------------------------------------------------------------------------------
F-8
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
--------------------------------------------------------------------------------
2. Going Concern (Continued)
The Company's ability to commence operations depends heavily on its ability to
raise such funds through equity financing activities. There can be no assurance
that such funds will be available to the Company, or available on terms of
acceptable to the Company. If the Company is unable to raise such funds in
equity markets, it will be unable to commence operations or generate revenues.
3. License Agreement
The Company purchased a license agreement to sell certain nutritional
supplements and other health and fitness products in specific territories. Due
to the absence of revenues or operations and uncertainty about the Company's
ability to continue as a going concern, the cost of the license agreement of
$35,000 has been expensed in the period it was acquired. The agreement also
requires an annual maintenance fee (which will be expensed as incurred) 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.
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 $39,000, 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.
--------------------------------------------------------------------------------
F-9
<PAGE>
ENTERNET, INC.
(A Development Stage Company)
Notes to Financial Statements
Continued
--------------------------------------------------------------------------------
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 September 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 September 30, 2000 there are no
issued series or shares of preferred stock.
8. Recent Accounting Pronouncements
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-10
<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.
Section 78.751 of the Nevada Revised Statutes provides for indemnification of
the company's officers and directors in certain situations where they might
otherwise personally incur liability, judgments, penalties, fines and expenses
in connection with a proceeding or lawsuit to which they might become parties
because of their position with the company.
Section 78.751 of the Nevada Revised Statutes states the following:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation,
by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good
faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal
action or proceeding, he had reasonable cause to believe that his
conduct was unlawful.
2. A corporation may indemnify an person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him
in connection with the defense or settlement of the action or suit if
he acted in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to
which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable
to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the
action or suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances of
the case, the person is fairly and reasonable entitled to indemnity
for such expenses as the court deems proper.
31
<PAGE>
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections 1 and 2,
or in defense of any claim, issue or matter therein, he must be
indemnified by the corporation against expenses, including attorneys'
fees, actually and reasonably incurred by him in connection with the
defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a
court or advanced pursuant to subsection 5, must be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee
or agent is proper in the circumstances. The determination must be
made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were
not parties to the act, suit or proceeding so orders, by
independent legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
act, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding
must be paid by the corporation as they are incurred and in advance of
the final disposition of the action, suit or proceeding, upon receipt
of an undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined by a court of competent
jurisdiction that he is not entitled to be indemnified by the
corporation. The provision of this subsection do not affect any rights
to advancement of expenses to which corporate personnel other than
directors or officers may be entitled under any contract or otherwise
by law.
6. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either
an action in his official capacity or an action in another
capacity while holding his office, except that indemnification,
unless ordered by a court pursuant to subsection 5, may not be
made to or on behalf of any director or officer if a final
adjudication establishes that his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law
and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
32
<PAGE>
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.
On March 15, 2000 EnterNet issued a total of $500,000 shares of common stock in
exchange for a total of $5,000 in cash, representing a purchase price of One
Cent ($0.01) per share. 250,000 shares were issued to Ruairidh Campbell in
exchange for $2,500 in cash, and 250,000 shares were issued to Wolf Fiedler in
exchange for $2,500 in cash. EnterNet relied on exemptions provided by Section
4(2) of the Securities Act of 1933, as amended, based on the following factors
(1) the issuance was an isolated private transaction by EnterNet which did not
involve a public offering; (2) there were only two offerees who were officers
and directors of EnterNet, (3) the stock certificates were stamped with a
restrictive legend which stated substantially the following language: "The
shares represented by this certificate have not been registered under the
Securities Act of 1933. The shares have been acquired for investment and may not
be offered, sold, or otherwise transferred in the absence of an effective
registration statement for the shares under the Securities Act of 1933, or a
prior opinion of counsel satisfactory to the issuer, that registration is not
required under the Act"; (4) the offerees will not resell the stock but will
continue to hold it for at least one year; (5) there were no subsequent or
contemporaneous public offering of the stock; (6) the stock was not broken down
into smaller denominations; (7) the negotiations for the sale of the stock took
place directly between the offerees and EnterNet.
33
<PAGE>
INDEX TO EXHIBITS
Exhib. Page
No. No. Description
------ ---- -----------
3(i) * Articles of Incorporation of EnterNet, Inc., a Nevada
corporation, filed with the State of Nevada on March 16,
2000.
3(ii) * By-laws of the company adopted on March 15, 2000.
4(i) * Specimen Stock Certificate.
4(ii) * Subscription Agreement between the company and Ruairidh
Campbell dated March 16, 2000.
4(iii) * Subscription Agreement between the company and Wolf Fiedler
dated March 16, 2000.
5 * Opinion Letter dated July 25, 2000.
10(i) * License Agreement between VitaMineralHerb.com Corp. and
EnterNet, Inc., dated June 22, 2000.
10(ii) * Promissory Note between the company and Wolf Fiedler dated
June 16, 2000.
23(i) 36 Consent of Certified Public Accountant dated December 1,
2000.
23(ii) * Consent of Counsel (See Exhibit 5).
27 * Financial Data Schedule "CE"
* Incorporated by reference to EnterNet, Inc's Form SB-2, SB-2/A and
SB-2/A-4 filed with the Securities and Exchange Commission on July 28,
2000, September 25, 2000 and December 4, 2000, respectively.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
34
<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 Commission 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]
35
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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/A-5 and authorized this Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in Salt Lake City, Utah, on December 8, 2000.
EnterNet, Inc. (Registrant)
By: 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, December 8, 2000
Ruairidh Campbell Treasurer and Director
36
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