AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 2000
REGISTRATION NO. _________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________
NETCO INVESTMENTS INC.
(EXACT NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
WASHINGTON 5499 91-2031335
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) INDUSTRIAL CODE) IDENTIFICATION NUMBER)
#1502 - 1166 ALBERNI STREET
VANCOUVER, BRITISH COLUMBIA V6E 3Z3, CANADA
(604) 689-3141
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
___________________
AGENT FOR SERVICE: WITH A COPY TO:
MICHAEL JACKSON, PRESIDENT JAMES L. VANDEBERG
NETCO INVESTMENTS INC. OGDEN MURPHY WALLACE, PLLC
#1502 - 1166 ALBERNI STREET 1601 FIFTH AVENUE, SUITE 2100
VANCOUVER, BRITISH COLUMBIA V6E 3Z3, CANADA SEATTLE, WASHINGTON 98101
(604) 689-3141 (206) 447-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock . . . 4,250,000 $ .01 $ 42,500.00 $ 11.22
=============================================================================================
=============================================================================================
</TABLE>
THE REGISTRATION 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>
SUBJECT TO COMPLETION-[ENTER DATE, 2000]
PROSPECTUS
, 2000
NETCO INVESTMENTS INC.
#1502 - 1166 ALBERNI STREET
VANCOUVER, BRITISH COLUMBIA V6E 3Z3, CANADA
(604) 689-3141
4,250,000 SHARES OF COMMON STOCK
This is the initial public offering of common stock of Netco Investments
Inc., and no public market currently exists for shares of Netco Investments'
common stock. The initial public offering price is $0.01 per share of common
stock which was arbitrarily determined. The offering is on a best efforts-no
minimum basis. There is no minimum purchase requirement and no arrangement to
place funds in an escrow, trust, or similar account. The latest date on which
this offering will close will be 30 days after the date of this prospectus.
______________
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 2.
______________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. THE INFORMATION
IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
TABLE OF CONTENTS
PAGE
----
PART I-PROSPECTUS
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DETERMINATION OF OFFERING PRICE .. . . . . . . . . . . . . . . . . . . 3
SELLING SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . 3
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . 3
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS . . . . . 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . 4
DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . 5
INTEREST OF NAMED EXPERTS AND COUNSEL . . . . . . . . . . . . . . . . . 5
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION . . . . . . . 14
DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . 16
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS . . . . . . . 16
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . 16
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . F-1
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . F-7
<PAGE>
PROSPECTUS SUMMARY
NETCO INVESTMENTS
Netco Investments Inc. is a corporation formed under the laws of the State
of Washington, whose principal executive offices are located in Vancouver,
British Columbia, Canada.
The primary objective of the business is designed to market high-quality,
low-cost 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 sale to their clients in
Massachusetts.
NAME, ADDRESS, AND TELEPHONE NUMBER OF REGISTRANT
Netco Investments Inc.
#1502 - 1166 Alberni Street
Vancouver, British Columbia V6E 3Z3, CANADA
(604) 689-3141
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Price per share Offered. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.01
Common Stock Offered by Netco Investments. . . . . . . . . . . . . . . . . . . . . . 4,250,000 shares
Common Stock Outstanding Prior to Offering . . . . . . . . . . . . . . . . . . . . . 4,300,000 shares
Common Stock Outstanding After Offering Assuming 50% of the Offering is Sold . . . . 6,425,000 shares
Common Stock Outstanding After Offering Assuming 100% of the Offering is Sold. . . . 8,550,000 shares
</TABLE>
Netco Investments expects to use the net proceeds for organizational
purposes and to determine the feasibility of selling Vitamineralherb products to
specific markets.
1
<PAGE>
RISK FACTORS
Netco Investments Has Incurred Losses Since Its Inception March 15, 2000 and
Expects Losses to Continue For the Foreseeable Future
Netco Investments is in the extreme early stages of development and could
fail before implementing its business plan. It is a "start up" venture that will
incur net losses for the foreseeable future. Netco Investments has only recently
acquired its principal asset. Netco Investments will incur additional expenses
before becoming profitable, if it ever becomes profitable. It is a relatively
young company that has no history of earnings or profit. There is no assurance
that it will operate profitably in the future or provide a return on investment
in the future.
Changes or Interruptions to Netco Investments' Arrangements with Its Supplier
May Have an Adverse Effect on Its Ability to Operate
If Netco Investments' licensor defaults under its agreement with its
supplier, Netco Investments could lose access to its manufacturing source, and
Netco Investments' distribution rights would become meaningless. Similarly, any
dispute between the supplier and licensor could prevent Netco Investments from
selling or delivering product to its customers. Any termination or impairment of
Netco Investments' license rights and access to products could prevent Netco
Investments from implementing its business plan, thereby limiting its
profitability and decreasing the value of its stock.
If the Vitamineralherb Business Plan Does Not Prove To Be Feasible, Netco
Investments May Be Considered a Blank Check Company Which Would Restrict
Resales of Its Stock
If the Vitamineralherb business plan does not prove to be economically
feasible, and Netco Investments does not otherwise have a specific business plan
or purpose, Netco Investments would be considered a "blank check company", which
could limit an investor's ability to sell its stock, thereby decreasing the
value of the stock. A "blank check company" is subject to Rule 419 of the
Securities Act. Pursuant to Rule 419, all funds raised by and securities issued
in connection with a public offering by a blank check company must be held in
escrow, and any such securities may not be transferred. Many states have also
enacted statutes, rules and regulations limiting the sale of securities of blank
check companies within their respective jurisdictions. As a result, Netco
Investments would have great difficulty raising additional capital. In addition,
there would be a limited public market, if any, for resale of the shares of
Netco Investments common stock issued in this offering.
Netco Investments May Need Additional Financing Which May Not Be Available, or
Which May Dilute the Ownership Interests of Investors
Netco Investments' ultimate success will depend on its ability to raise
additional capital. No commitments to provide additional funds have been made by
management or other shareholders. Netco Investments has 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 Netco Investments. If not available, Netco Investments'
operations would be severely limited, and it would be unable to implement its
business plan.
Purchasers Must Rely on Mr. Jackson's Abilities For All Decisions As He Will
Control the Majority of the Stock After the Offering. Netco Investments Has No
Employment Agreement With Mr. Jackson and He Spends Only Part-time On Its
Business. His Leaving May Adversely Effect Netco Investments' Ability To
Operate
Mr. Jackson is serving as Netco Investments' sole officer and director.
Netco Investments will be heavily dependent upon Mr. Jackson's entrepreneurial
skills and experience to implement its business plan and may, from time to time,
find that his inability to devote full time and attention to its affairs will
result in delay(s) in progress towards the implementation of its business plan
or in a failure to implement its business plan. Moreover, Netco Investments does
not have an employment agreement with Mr. Jackson and as a result, there is no
assurance that he will continue to manage its affairs in the future. Nor has
Netco Investments obtained a key man life insurance policy on Mr. Jackson. Netco
Investments could lose the services of Mr. Jackson, or Mr. Jackson could decide
to join a competitor or otherwise compete directly or indirectly with
entleyCapitalCorp, which would have a significant adverse effect on its business
and could cause the price of its stock to be worthless. The services of Mr.
Jackson would be difficult to replace.
2
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary", "Risk Factors",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Description of Business", and elsewhere in this prospectus
constitute forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may", "will", "should",
"expects", "plans", "anticipates", "believes", "estimated", "predicts",
"potential", or "continue" or the negative of such terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties, and other factors that may cause Netco Investments' actual
results, levels of activity, performance, or achievements to be materially
different from any future results, levels of activity, performance, or
achievements expressed or implied by such forward-looking statements. These
factors include, among other things, those listed under "Risk Factors" and
elsewhere in this prospectus. Although Netco Investments believes that the
expectations reflected in the forward-looking statements are reasonable, it
cannot guarantee future results, levels of activity, performance, or
achievements.
USE OF PROCEEDS
The net proceeds to Netco Investments from the sale of the 4,250,000 shares
of common stock offered by Netco Investments hereby at an assumed initial public
offering price of $.01 per share are estimated to be $42,500. Netco Investments
expects to use the net proceeds as follows:
<TABLE>
<CAPTION>
ASSUMING SALE OF ASSUMING SALE OF
---------------- ----------------
50% OF STOCK BEING 100% OF STOCK BEING
------------------ -------------------
PURPOSE OFFERED OFFERED
------- -------- -------
<S> <C> <C>
Organizational Purposes . . . . . . . . . $ 1,000 $ 1,000
Feasibility of License/Market Research. . $ 13,500 $ 13,500
Operational Expenses. . . . . . . . . . . $ 6,750 $ 28,000
</TABLE>
Netco Investments continually evaluates other business opportunities that
may be available to it, whether in the form of assets acquisitions or business
combinations. Netco Investments may use a portion of the proceeds for these
purposes. Netco Investments is not currently a party to any contracts, letters
of intent, commitments or agreements and is not currently engaged in active
negotiations with respect to any acquisitions.
Netco Investments has not yet determined the amount of net proceeds to be
used specifically for any of the foregoing purposes. Accordingly, Netco
Investments' management will have significant flexibility in applying the net
proceeds of the offering.
DETERMINATION OF OFFERING PRICE
Netco Investments arbitrarily determined the price of the Units in this
Offering. The offering price is not an indication of and is not based upon the
actual value of Netco Investments. It bears no relationship to the book value,
assets or earnings of Netco Investments or any other recognized criteria of
value. The offering price should not be regarded as an indicator of the future
market price of the securities.
SELLING SECURITY HOLDERS
There are no selling security holders.
PLAN OF DISTRIBUTION
Netco Investments will offer and sell its common stock through its sole
officer and director, Michael Jackson, pursuant to and in compliance with Rule
3a4-1 of the Exchange Act. There are currently no plans at present to conduct
any general solicitation in conjunction with this offering (other than the
filing of this registration statement). However, if Mr. Jackson is unable to
sell all of the shares in this offering to purchasers with whom he has a
pre-existing relationship in jurisdictions where those sales may be permitted,
he may engage in a general solicitation under Rule 135 of the Securities Act of
1933. All sales will be made in compliance with the securities laws of local
jurisdictions. Mr. Jackson intends to offer Netco Investments' stock to
potential buyers who qualify under the relevant exemptions provided by British
Columbia law, primarily the "sophisticated purchaser" exemptions under Revised
Statutes of British Columbia Section 128.
3
<PAGE>
LEGAL PROCEEDINGS
Netco Investments is not a party to any pending legal proceeding or
litigation and none of its property is the subject of a pending legal
proceeding. Further, the officer and director knows of no legal proceedings
against Netco Investments or its property contemplated by any governmental
authority.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the name, age and position of each director
and executive officer of Netco Investments:
NAME AGE POSITION
---- --- --------
Michael Jackson......59 President, Secretary, Treasurer, Director
In March, 2000, Mr. Jackson was elected as the sole officer and director
of Netco Investments, of which he is the sole stockholder. He will serve until
the first annual meeting of Netco Investments' 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. Jackson practiced law from 1966 through 1978. Mr. Jackson has been a
real estate land developer and investment banker since 1978. Mr. Jackson is
currently president of Hillcon Developments Ltd. Mr. Jackson's duties with
Hillcon Developments include locating properties, preparing pro forma
statements, raising capital, marketing, and dealing with Canadian governmental
agencies, architects, and engineers. In his capacity as president for Hillcon
Developments, he has been responsible for raising $50 million for 22 projects
with a market value in excess of $150 million. He also acts as corporate
counsel for Hillcon, and prepares all legal documents and negotiates all
contracts. Previously, Mr. Jackson was with Geneva Capital Corporation, where
his functions included taking companies public on the Vancouver Stock Exchange,
the Toronto Stock Exchange, and NASDAQ. He acted as counsel for the company and
prepared all offering memoranda, and other legal documents. He also raised
capital for the company and negotiated all contracts. Mr. Jackson was
previously a director of Waterloo Resources Inc., Lucky Mines Inc., and Burcon
Developments Inc. which were all public companies listed on the Vancouver Stock
Exchange.
There are no plans, arrangements, or understandings pending for Netco
Investments to acquire any or to be acquired by any company. Netco Investments
has engaged in discussions concerning potential business combinations, but has
not entered into any agreement for such a combination.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 1, 2000, Netco Investments'
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
Netco Investments 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>
SHARES PERCENTAGE OF
NAME OWNED SHARES OWNED
----- ----- ------------
<S> <C> <C>
Michael Jackson . . . . . . . . . . . . . . . . . . 4,300,000 100%
President, Secretary, Treasurer, and Director
#1502 - 1166 Alberni Street
Vancouver, BC Canada V6E 3Z3
All Executive Officers and Directors as a Group
(1 Individual) . . . . . . . . . . . . . . . . 4,300,000 100%
</TABLE>
4
<PAGE>
DESCRIPTION OF SECURITIES
The following description of Netco Investments' capital stock is a summary
of the material terms of its capital stock. This summary is subject to and
qualified in its entirety by Netco Investments' articles of incorporation and
bylaws, and by the applicable provisions of Washington law.
The authorized capital stock of Netco Investments consists of 120,000,000
shares: 100,000,000 shares of Common Stock having a par value of $0.0001 per
share and 20,000,000 shares of Preferred Stock having a par value of $0.0001 per
share. The articles of incorporation do not permit cumulative voting for the
election of directors, and shareholders do not have any preemptive rights to
purchase shares in any future issuance of Netco Investments' common stock.
The holders of shares of common stock of Netco Investments 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 Netco Investments' directors.
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. Each outstanding share of common
stock entitles the holder thereof to one vote per share on all matters. The
holders of the shares of common stock have no preemptive or subscription rights.
In the event of liquidation, dissolution or winding up of the affairs of Netco
Investments, holders are entitled to receive, ratably, the net assets of Netco
Investments available to shareholders after payment of all creditors.
All of the issued and outstanding shares of common stock are duly
authorized, validly issued, fully paid, and non-assessable. To the extent that
additional shares of Netco Investments' common stock are issued, the relative
interests of existing shareholders may be diluted.
INTEREST OF NAMED EXPERTS AND COUNSEL
Neither Elliott Tulk Pryce Anderson nor Ogden Murphy Wallace, PLLC was
employed on a contingent basis in connection with the registration or offering
of Netco Investments' common stock.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Netco Investments' articles of incorporation provide that it will indemnify
its officers and directors to the full extent permitted by Washington state law.
Netco Investments' bylaws provide that it will indemnify and hold harmless each
person who was, is or is threatened to be made a party to or is otherwise
involved in any threatened proceedings by reason of the fact that he or she is
or was a director or officer of Netco Investments or is or was serving at the
request of Netco Investments 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 Netco
Investments pursuant to the forgoing provisions or otherwise, Netco Investments
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable.
5
<PAGE>
DESCRIPTION OF BUSINESS
General
Netco Investments was incorporated under the laws of the State of
Washington on March 15, 2000, and is in its early developmental and promotional
stages. To date, Netco Investments' only activities have been organizational,
directed at acquiring its principal asset, raising its initial capital and
developing its business plan. Netco Investments has not commenced commercial
operations. Netco Investments has no full time employees and owns no real
estate.
Acquisition of The License
On March 15, 2000, Netco Investments' sole shareholder, Michael Jackson, in
return for 3,500,000 shares of Netco Investments' common stock, transferred to
Netco Investments his rights under that certain License Agreement with
Vitamineralherb. The License Agreement grants an exclusive right to distribute
Vitamineralherb products to health and fitness professionals in Massachusetts
via the Internet. Mr. Jackson acquired the license under the terms of a
settlement agreement by and between Mr. Jackson, Texmont, Inc., a company in
which he is the sole shareholder, officer and director, and Mortenson &
Associates, an affiliate of Vitamineralherb. Mortenson & Associates had granted
Texmont a license to distribute and produce an oxygen enriched water product,
called "Biocatalyst," for fish farming and aquarium use. Mortenson & Associates
acquired its right to sublicense Biocatalyst to Texmont from NW Technologies
Inc. As a result of a legal dispute between Mortenson & Associates' principal
and NW Technologies, Mortenson & Associates was unable to fulfill its
obligations to Texmont under the license. Under the terms of the settlement
agreement, Vitamineralherb, an affiliate of Mortenson & Associates, granted to
Jackson the license to distribute Vitamineralherb products in part for his
agreement not to pursue his individual claims against Mortenson & Associates.
The License
Netco Investments has a three year license to market and sell vitamins,
minerals, nutritional supplements, and other health and fitness products to
medical professionals, alternative health professionals, martial arts studios
and instructors, sports and fitness trainers, other health and fitness
professionals, school and other fund raising programs and other similar types of
customers via the Internet for sale to their clients. Netco Investments'
territory is the state of Massachusetts. The license will be automatically
renewed unless Netco Investments or Vitamineralherb gives the other notice of
its intent not to renew.
Vitamineralherb has agreed to provide certain business administrative
services to Netco Investments, including product development, store inventory,
website creation and maintenance, establishment of banking liaisons, and
development and maintenance of an order fulfillment system, thereby enabling
Netco Investments to focus strictly on marketing and sales. Some services, such
as development of the website and the order fulfillment system, will be provided
by Vitamineralherb, while others, such as product development and store
inventory, will be provided by the product supplier. Vitamineralherb sets the
price for products based on the manufacturer's price, plus a mark up which
Vitamineralherb and Netco Investments share equally.
Netco Investments and its customers will also be able to request quotes for
and order custom-formulated and custom-labeled products via the website. Three
different labeling options are available to customers: First, products may be
ordered with the manufacturer's standard label with no customization. Second,
the fitness or health professional may customize the labels by adding its name,
address, and phone number to the standard label. In most cases, these labels
would be a standardized label with product information and a place on the label
for the wording "Distributed by." This gives these health and fitness
professionals a competitive edge. Third, labels may be completely customized
for the health or fitness professional.
When a fitness or health professional becomes a client, Netco Investments'
salesperson will show the client how to access the Vitamineralherb 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 website. It is anticipated that the customer will
pay for the purchase with a credit card, electronic check ("e-check"), or debit
card. All products will be shipped by the manufacturer directly to the
professional or its clients.
The website will be maintained by Vitamineralherb, and each licensee will
pay an annual website maintenance fee of $500. All financial transactions will
be handled by Vitamineralherb's Internet clearing bank. The Vitamineralherb
webmaster will download e-mail orders several times a day, check with clearing
bank for payment and then submit the product order and electronic payment to the
supplier. Vitamineralherb will then forward the money due Netco Investments via
electronic funds transfer. Vitamineralherb's software will track all sales
through the customer's identification number, and at month end, e-mail to Netco
Investments and customer a detailed report including sales commissions.
Vitamineralherb 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 first. Sales originating from the
website to customers located in Massachusetts will automatically be assigned to
Netco Investments.
6
<PAGE>
Vitamineralherb's website is currently operational, but is not yet
complete. Vitamineralherb is finalizing the product list and the automated
ordering function (manual ordering via email is currently available).
Vitamineralherb has established a banking liaison, and is in the process of
setting up the internet processing facility through that bank. These items
should be complete by August 1, 2000.
Background on the Manufacturer and Distributor
Vitamineralherb entered into a Manufacturing Agreement, dated June 9, 2000,
with Ives Formulation Co., of San Diego, California. Ives Formulation is a
wholly-owned subsidiary of Ives Health Company, Inc., a public company traded on
the Bulletin Board under the symbol "IVEH". Ives Formulation has been a contract
manufacturer of vitamin, mineral, nutritional supplement, and alternative health
products for various marketing organizations. In addition to a line of standard
products, Ives Formulation is able to manufacture custom blended products for
customers, and to supply privately labeled products for Netco Investments'
customers at a minimal added cost. Vitamineralherb has just begun developing its
vitamin marketing and distributorship business.
Implementation of Business Plan: Milestones
Netco Investments' business plan is to determine the feasibility of selling
Vitamineralherb products to targeted markets. Should Netco Investments determine
that its business plan is feasible, it intends to employ salespeople to call on
medical professionals, alternative health professionals, martial arts studios
and instructors, sports and fitness trainers, other health and fitness
professionals, school and other fund raising programs and other similar types of
customers to interest these professionals in selling to their clients
high-quality, low-cost vitamins, minerals, nutritional supplements, and other
health and fitness products. These professionals would sell the products to
their clients via the Internet. Netco Investments will achieve implementation of
its business plan by meeting the following milestones:
- MILESTONE 1-MARKET SURVEY. In order to determine the feasibility of
its business plan, Netco Investments must conduct research into the
various potential target markets. The market analysis research will
likely consist of a telephone survey to 100-200 potential clients,
focusing on three or four of the core target markets, such as
chiropractors, health clubs, and alternative medicine practitioners.
The survey would likely contain questions which would determine the
marketing approach and acceptability of specific products. The survey
would take approximately four to six weeks. The cost of the survey is
estimated to range from $10,000-$13,500, which would be paid for in
part out of the proceeds of this offering.
- MILESTONE 2:-HIRE SALESPEOPLE. Should Netco Investments determine that
the exploitation of the license is feasible, it will then have to
engage salespeople to market the products. Netco Investments expects
that it may hire two salespeople during its first year of operation.
The hiring process would include running advertisements in the local
newspaper and conducting interviews. It is anticipated that hiring the
salespeople may take four to eight weeks. The cost of hiring the
salespeople, not including compensation, is estimated at $20,000.
- MILESTONE 3: ESTABLISH AN OFFICE. Netco Investments would then have to
establish an office or offices for the sales force in the appropriate
market or markets. This would include an office, equipment such as
computers and telephones, and sample inventory for the salespeople. It
is anticipated that it may take eight to twelve weeks to locate
acceptable office space and select and purchase equipment. The expense
of office rental, equipment and inventory samples is estimated to be
$45,000 per year.
- MILESTONE 4: DEVELOPMENT OF ADVERTISING CAMPAIGN. The next step would
be to develop an advertising campaign, including establishing a list
of prospects based on potential clients identified in the market
survey, and designing and printing sales materials. It is anticipated
that it would take approximately six to ten weeks to develop the
advertising campaign, although, depending on the availability of
resources, Netco Investments will attempt to develop its advertising
campaign concurrently with establishing an office. The cost of
developing the campaign is estimated at approximately $12,000 per
year.
- MILESTONE 5: IMPLEMENTATION OF ADVERTISING CAMPAIGN/SALES CALLS.
Implementation of the advertising campaign would begin with mailing
the sales materials to the identified list of prospects. Approximately
two to four weeks thereafter, the salespeople would begin telephone
follow ups and scheduling of sales calls. Although it will be
necessary to make sales calls throughout the life of the company, it
is estimated that the first round of sales calls will take
approximately eight to twelve weeks to complete. The cost of salary
and expenses for two salespeople is estimated at $248,000 per year.
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- MILESTONE 6: ACHIEVE REVENUES. It is difficult to quantify how long it
will take to convert a sales call into actual sales and revenues.
Netco Investments will not begin receiving orders until its sales
force is able to convince potential clients to begin offering such
products to their customers, or to convert from an existing supplier.
Netco Investments hopes that clients would begin placing orders within
weeks of a sales call, but it may take several months before people
begin to purchase products. Moreover, customers may not be willing to
pay for products at the time they order, and may insist on buying on
account, which would delay receipt of revenues another month or two.
Assuming Netco Investments has received all necessary approvals to
begin raising funds by November 1, 2000, and assuming an offering
period of approximately one month, in a best case scenario Netco
Investments may receive its first revenues as early as May 1, 2001.
However, a more realistic estimate of first revenues would be December
1, 2001 or later.
As discussed more fully in the Management's Discussion and
Analysis-Liquidity and Capital Resources section, the expenses of implementing
Netco Investments' business plan will likely exceed the funds raised by this
offering, and Netco Investments will have to obtain additional financing through
an offering or through capital contributions by current shareholders. No
commitments to provide additional funds have been made by management or
shareholders. Accordingly, there can be no assurance that any additional funds
will be available on terms acceptable to Netco Investments or at all.
Industry Background
Growth of the Internet and electronic commerce. The Internet has become an
increasingly significant medium for communication, information and commerce.
According to NUA Internet Surveys, as of February 2000, there were approximately
275.5 million Internet users worldwide. At the IDC Internet Executive Forum held
on September 28-29, 1999, IDC stated that in 1999 US $109 billion in purchases
were impacted by the Internet. IDC's vice president, Sean Kaldor, indicated that
figure is expected to increase more than ten-fold over the next five years to US
$1.3 trillion in 2003, with $842 million completed directly over the Web. Netco
Investments believes that this dramatic growth presents significant
opportunities for online retailers.
The vitamin, supplement, mineral and alternative health product market. In
recent years, a growing awareness of vitamins, herbs, and other dietary
supplements by the general public has created a whole new segment in the field
of medicine and health care products. According to Jupiter Communications,
online sales of such products are expected to be US $434 million in the year
2003, up from $1 million in 1998. Netco Investments believes 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, favorable consumer attitudes toward alternative health
products and a favorable regulatory statute, the Dietary Supplement Health and
Education Act of 1994.
Competition
The electronic commerce industry is new, rapidly evolving and intensely
competitive, and Netco Investments expects competition to intensify in the
future. Barriers to entry are minimal and current and new competitors can launch
sites at a relatively low cost. In addition, the vitamin, supplement, mineral
and alternative health product market is very competitive and highly fragmented,
with no clear dominant leader and increasing public and commercial attention.
Netco Investments' competitors can be divided into several groups
including:
- traditional vitamins, supplements, minerals and alternative health
products retailers;
- the online retail initiatives of several traditional vitamins,
supplements, minerals and alternative health products retailers;
- online retailers of pharmaceutical and other health-related products
that also carry vitamins, supplements, minerals and alternative health
products;
- independent online retailers specializing in vitamins, supplements,
minerals and alternative health products;
- mail-order and catalog retailers of vitamins, supplements, minerals
and alternative health products, some of which have already developed
online retail outlets; and
- direct sales organizations, retail drugstore chains, health food store
merchants, mass market retail chains and various manufacturers of
alternative health products.
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Many of Netco Investments' potential competitors have longer operating
histories, larger customer or user bases, greater brand recognition and
significantly greater financial, marketing and other resources than Netco
Investments has. 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 Netco Investments does.
Increased competition may result in reduced operating margins and loss of market
share.
Netco Investments believes that the principal competitive factors in its
Market are:
- ability to attract and retain customers;
- breadth of product selection;
- product pricing;
- ability to customize products and labeling;
- quality and responsiveness of customer service.
Netco Investments believes that it can compete favorably on these factors.
However, Netco Investments will have no control over how successful its
competitors are in addressing these factors. In addition, with little
difficulty, Netco Investments' online competitors can duplicate many of the
products or services offered on the Vitamineralherb site.
Netco Investments believes that traditional retailers of vitamins,
supplements, minerals and other alternative health products face several
challenges in succeeding:
- 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.
- 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.
- Lack of Customer Loyalty. Although the larger traditional retailers
often attract customers, many of these customers are only one-time
users. People are often attractive to the name brands, but find the
products too expensive. It is understood that these are quality
products and have value, but the multilevel structure of marketing
often employed by large retailers mandate high prices.
As a result of the foregoing limitations, Netco Investments believes there
is significant unmet demand for an alternative shopping channel that can provide
consumers of vitamins, supplements, minerals and other alternative health
products with a broad array of products and a convenient and private shopping
experience.
Netco Investments hopes to attract and retain consumers through the
following key attributes of its business:
- Broad Expandable Product Assortment. Netco Investments' product
selection is substantially larger than that offered by store-based
retailers.
- Low Product Prices. Product prices can be kept low due to volume
purchases through Netco Investments' affiliation with Vitamineralherb
and other licensees. Product prices will also be lower due to Netco
Investments' lack of need of inventory and warehouse space. All
products are shipped from International Formulation and
Manufacturing's inventory.
- Accessibility to Customized Products. At minimal cost, health and
fitness practitioners may offer their customers customized products.
- Access to Personalized Programs. Health or fitness professional can
tailor vitamin and dietary supplement regimes to their clients.
Regulatory Environment
The manufacturing, processing, formulating, packaging, labeling and
advertising of the products Netco Investments sells in Canada are or may be
subject to regulation by Health Canada which administers the Food and Drugs Act
along with relevant regulation thereto. Regulated products include herbal
remedies, natural health remedies, functional foods and nutraceuticals.
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Health Canada regulates the formulation, manufacture, labeling and distribution
of foods, including dietary supplements, cosmetics and over-the-counter or
homeopathic drugs. Under the Food and Drugs Act, a variety of enforcement
actions are available to Health Canada against marketers of unapproved drugs or
"adulterated" or "misbranded" products. The remedies available to Health Canada
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.
The Consumer Packaging and Labeling Act, as administered by Industry
Canada, requires that certain information labeling be presented in a prescribed
manner on all foods, drugs, dietary supplements and cosmetics. A product may be
deemed an unapproved drug and "misbranded" if it bears improper claims or
improper labeling.
The manufacturing, processing, formulating, packaging, labeling and
advertising of the products Netco Investments sells may also 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, localities and foreign countries
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
pre-approval and without notifying the Food and Drug Administration. In
contrast, a new dietary ingredient, i.e., one not on the market before October
15, 1994, requires proof that it has been used as an article of food without
being chemically altered or evidence of a history of use or other evidence of
safety establishing that it is reasonably expected to be safe. Retailers, in
addition to dietary supplement manufacturers, are responsible for ensuring that
the products they market for sale comply with these regulations. Noncompliance
could result in enforcement action by the Food and Drug Administration, an
injunction prohibiting the sale of products deemed to be noncompliant, the
seizure of such products and criminal prosecution.
The Food and Drug Administration has indicated that claims or statements
made on a company's website about dietary supplements may constitute "labeling"
and thus be subject to regulation by the Food and Drug Administration. With
respect to labeling, the Dietary Supplement Health and Education Act amends, for
dietary supplements, the Nutrition Labeling and Education Act by providing that
"statements of nutritional support," also referred to as "structure/function
claims," may be used in dietary supplement labeling without Food and Drug
Administration pre-approval, 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 Netco Investments' 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 Netco Investments' 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.
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As a result, Vitamineralherb 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 Netco Investments' 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 Netco Investments cannot assure you that all pieces of "third
party literature" that may be disseminated in connection with the products Netco
Investments offers 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's website or the
modification of Netco Investments' selling methods, interfering with Netco
Investments' continued marketing of that product and causing us to incur
significant additional expenses. Given the fact that the Dietary Supplement
Health and Education Act was enacted only five years ago, the Food and Drug
Administration's regulatory policy and enforcement positions on certain aspects
of the new law are still evolving. Moreover, ongoing and future litigation
between dietary supplement companies and the Food and Drug Administration will
likely further refine the legal interpretations of the Dietary Supplement Health
and Education Act. As a result, the regulatory status of certain types of
dietary supplement products, as well as the nature and extent of permissible
claims will remain unclear for the foreseeable future. Two areas in particular
that pose potential regulatory risk are the limits on claims implying some
benefit or relationship with a disease or related condition and the application
of the physical separation requirement for "third party literature" as applied
to Internet sales.
In addition to the regulatory scheme under the Food, Drug and Cosmetic Act,
the advertising and promotion of dietary supplements, foods, over-the-counter
drugs and cosmetics is subject to scrutiny by the Federal Trade Commission. The
Federal Trade Commission Act prohibits "unfair or deceptive" advertising or
marketing practices, and the Federal Trade Commission has pursued numerous food
and dietary supplement manufacturers and retailers for deceptive advertising or
failure to substantiate promotional claims, including, in many instances, claims
made via the Internet. The Federal Trade Commission has the power to seek
administrative or judicial relief prohibiting a wide variety of claims, to
enjoin future advertising, to seek redress or restitution payments and to seek a
consent order and seek monetary penalties for the violation of a consent order.
In general, existing laws and regulations apply fully to transactions and other
activity on the Internet. The Federal Trade Commission is in the process of
reviewing its policies regarding the applicability of its rules and its consumer
protection guides to the Internet and other electronic media. The Federal Trade
Commission has already undertaken a new monitoring and enforcement initiative,
"Operation Cure-All," targeting allegedly bogus 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.
Netco Investments cannot predict the nature of any future Canadian or U.S.
laws, regulations, interpretations or applications, nor can it determine what
effect additional governmental regulations or administrative orders, when and if
promulgated, would have on its business in the future. Although the regulation
of dietary supplements is less restrictive than that of drugs and food
additives, Netco Investments cannot assure you that the current statutory scheme
and regulations applicable to dietary supplements will remain less restrictive.
Further, Netco Investments cannot assure you that, under existing laws and
regulations, or if more stringent statutes are enacted, regulations are
promulgated or enforcement policies are adopted, it is or will be in compliance
with these existing or new statutes, regulations or enforcement policies without
incurring material expenses or adjusting its business strategy. Any laws,
regulations, enforcement policies, interpretations or applications applicable to
Netco Investments' 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.
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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 Netco Investments' sales.
A number of legislative proposals have been made at the federal, state and
local level, and by foreign governments, that would impose additional taxes on
the sale of goods and services over the Internet, and certain states have taken
measures to tax Internet-related activities. Although Congress recently placed
a three-year moratorium on new state and local taxes on Internet access or on
discriminatory taxes on electronic commerce, existing state or local laws were
expressly excepted from this moratorium. Further, once this moratorium is
lifted, some type of federal and/or state taxes may be imposed upon Internet
commerce. Such legislation or other attempts at regulating commerce over the
Internet may substantially impair the growth of commerce on the Internet and, as
a result, adversely affect Netco Investments' opportunity to derive financial
benefit from such activities.
Employees
Netco Investments is a development stage company and currently has no
employees. Netco Investments is currently managed by Michael Jackson, its sole
officer and director. Netco Investments looks to Mr. Jackson for his
entrepreneurial skills and talents. For a complete discussion of Mr. Jackson's
experience, please see "Directors and Executive Officers." Management plans to
use consultants, attorneys and accountants as necessary and does not plan to
engage any full-time employees in the near future. Netco Investments may hire
marketing employees based on the projected size of the market and the
compensation necessary to retain qualified sales employees. A portion of any
employee compensation likely would include the right to acquire stock in Netco
Investments, which would dilute the ownership interest of holders of existing
shares of its common stock.
Available Information and Reports to Securities Holders
Netco Investments has filed with the Securities and Exchange Commission a
registration statement on Form SB-2 with respect to the common stock offered by
this prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the registration
statement or the exhibits and schedules which are part of the registration
statement. For further information with respect to Netco Investments and its
common stock, see the registration statement and the exhibits and schedules
thereto. Any document Netco Investments files may be read and copied at the
Commission'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. Netco Investments' 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, Netco Investments will become subject to
the information and periodic reporting requirements of the Securities Exchange
Act and, accordingly, 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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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis of Netco Investments' 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.
This prospectus contains forward-looking statements, the accuracy of which
involve risks and uncertainties. Words such as "anticipates," "believes,"
"plans," "expects," "future," "intends" and similar expressions are used to
identify forward-looking statements. This prospectus also contains
forward-looking statements attributed to certain third parties relating to their
estimates regarding the potential markets for Vitamineralherb products.
Prospective investors should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus. Netco
Investments' actual results could differ materially from those anticipated in
these forward-looking statements for many reasons, including the risks faced by
Netco Investments described in "Risk Factors" and elsewhere in this prospectus.
The following discussion and analysis should be read in conjunction with Netco
Investments' Financial Statements and Notes thereto and other financial
information included elsewhere in this prospectus.
Results of Operations
During the period from March 15, 2000 through September 30, 2000, Netco
Investments has engaged in no significant operations other than organizational
activities, acquisition of the rights to market Vitamineralherb and write down
of same, and preparation for registration of its securities under the Securities
Act of 1933, as amended. No revenues were received by Netco Investments during
this period.
For the current fiscal year, Netco Investments anticipates 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 its business plan. Netco Investments
anticipates that until these procedures are completed, it will not generate
revenues, and may continue to operate at a loss thereafter, depending upon the
performance of the business.
Netco Investments' business plan is to determine the feasibility of
marketing the Vitamineralherb products in various markets, and, if the products
prove to be in demand, begin marketing and selling Vitamineralherb products.
Liquidity and Capital Resources
Netco Investments remains in the development stage and, since inception,
has experienced no significant change in liquidity or capital resources or
shareholders' equity. Consequently, Netco Investments' balance sheet as of
September 30, 2000, reflects total assets of nil. Organizational expenses of
$8,000 were paid for by the sole shareholder and charged to operations.
Netco Investments' business plan is to determine the feasibility of selling
Vitamineralherb products to targeted markets. Should Netco Investments
determine that its business plan is feasible, it intends to employ salespeople
to call on medical professionals, alternative health professionals, martial arts
studios and instructors, sports and fitness trainers, other health and fitness
professionals, school and other fund raising programs and other similar types of
customers to interest these professionals in selling to their clients
high-quality, low-cost vitamins, minerals, nutritional supplements, and other
health and fitness products. These professionals would sell the products to
their clients via the Internet.
In order to determine the feasibility of its business plan, Netco
Investments plans, during the next six to twelve months, to conduct research
into these various potential target markets. Should Netco Investments determine
that the exploitation of the license is feasible, it will engage salespeople to
market the products. Based primarily on discussions with the licensor, Netco
Investments believes that during its first operational quarter, it will need a
capital infusion of approximately $52,500 to achieve a sustainable sales level
where ongoing operations can be funded out of revenues. This capital infusion
is intended to cover costs of advertising, hiring and paying two salespeople,
and administrative expenses. In addition, Netco Investments will need
approximately $260,000 in the event it determines that its market will not pay
in advance and it will have to extend credit. These expenses will exceed the
funds raised by this offering, and Netco Investments will have to obtain
additional financing through an offering or capital contributions by current
shareholders.
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DESCRIPTION OF PROPERTY
Netco Investments currently maintains limited office space, occupied by
Michael Jackson, for which it pays no rent. Its address is #1502 - 1166 Alberni
Street, Vancouver, British Columbia V6E 3Z3, Canada and its phone number is
(604) 689-3141. Netco Investments does not believe that it will need to obtain
additional office space at any time in the foreseeable future until its business
plan is more fully implemented.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No director, executive officer or nominee for election as a director of
Netco Investments, and no owner of five percent or more of Netco Investments'
outstanding shares or any member of their immediate family has entered into or
proposed any transaction in which the amount involved exceeds $60,000.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
No established public trading market exists for Netco Investments'
securities. Netco Investments has no common equity subject to outstanding
purchase options or warrants. Netco Investments has no securities convertible
into its common equity. There is no common equity that could be sold pursuant to
Rule 144 under the Securities Act or that Netco Investments 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 by Netco Investments.
As of September 1, 2000, there were 4,300,000 shares of common stock
outstanding, held by 1 shareholder of record. Upon effectiveness of the
registration statement that includes this prospectus, all of Netco Investments'
outstanding shares will be eligible for sale.
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To date Netco Investments has not paid any dividends on its common stock
and does not expect to declare or pay any dividends on its common stock in the
foreseeable future. Payment of any dividends will depend upon Netco
Investments' future earnings, if any, its financial condition, and other factors
as deemed relevant by the Board of Directors.
EXECUTIVE COMPENSATION
No officer or director has received any remuneration from Netco
Investments. Although there is no current plan in existence, it is possible that
Netco Investments will adopt a plan to pay or accrue compensation to its
officers and directors for services related to the implementation of Netco
Investments' business plan. Netco Investments has 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.
Netco Investments has no employment contract or compensatory plan or arrangement
with any executive officer of Netco Investments. The director currently does not
receive any cash compensation from Netco Investments for his service as a member
of the board of directors. There is no compensation committee, and no
compensation policies have been adopted. See "Certain Relationships and Related
Transactions."
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Netco Investments Inc.
(A Development Stage Company)
Index
Independent Auditor's Report. . . . . . . . . . . . . . . . . . . . . . . F-1
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Statement of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . F-5
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . F-6
<PAGE>
Independent Auditor's Report
----------------------------
To the Board of Directors
Netco Investments Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of Netco Investments Inc. (A
Development Stage Company) as of September 30, 2000 and the related statements
of operations, stockholders' equity and cash flows for the period from March 15,
2000 (Date of Inception) to September 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 U.S. 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 aforementioned financial statements present fairly, in all
material respects, the financial position of Netco Investments Inc. (A
Development Stage Company), as of September 30, 2000, and the results of its
operations and its cash flows for the period from March 15, 2000 (Date of
Inception) to September 30, 2000, in conformity with U.S. generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has not generated any revenues or conducted any
operations since inception. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also discussed in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Elliott Tulk Pryce Anderson
CHARTERED ACCOUNTANTS
Vancouver, Canada
October 2, 2000
<PAGE>
Netco Investments Inc.
(A Development Stage Company)
Balance Sheet
(expressed in U.S. dollars)
September 30,
2000
$
Assets
License (Notes 3 and 4) -
=============
Liabilities and Stockholders' Equity
Liabilities -
-------------
Stockholders' Equity
Common Stock, 100,000,000 common shares authorized with a par
value of $.0001; 4,300,000 common shares issued and outstanding 430
Additional Paid in Capital 32,320
-------------
32,750
-------------
Preferred Stock, 20,000,000 preferred shares authorized with a
par value of $.0001; none issued -
-------------
Deficit Accumulated During the Development Stage (32,750)
-------------
-
-------------
-
=============
Contingent Liability (Note 1)
Commitment (Note 3)
F-2
(The accompanying notes are an integral
part of the financial statements)
<PAGE>
<TABLE>
<CAPTION>
Netco Investments Inc.
(A Development Stage Company)
Statement of Operations
(expressed in U.S. dollars)
From March 15, 2000
(Date of Inception)
to September 30, 2000
$
<S> <C>
Revenue -
--------------
Expenses
Legal and organizational 8,000
License written-off 24,750
--------------
Net Loss (32,750)
==============
Loss per share (.01)
==============
</TABLE>
F-3
(The accompanying notes are an integral
part of the financial statements)
<PAGE>
<TABLE>
<CAPTION>
Netco Investments Inc.
(A Development Stage Company)
Statement of Cash Flows
(expressed in U.S. dollars)
From March 15, 2000
(Date of Inception)
to September 30, 2000
$
<S> <C>
Cash Flows to Operating Activities
Net loss (32,750)
Non-cash items
Legal and organizational expenses 8,000
License written-off 24,750
--------------
Net Cash Used by Operating Activities -
--------------
Change in cash -
Cash - beginning of period -
--------------
Cash - end of period -
==============
Non-Cash Financing Activities
A total of 800,000 shares were issued
to a company controlled by the sole
director at a fair market value of
0.01 per share for legal and
organizational expenses paid 8,000
A total of 3,500,000 shares were issued
at a fair market value of $0.01 per share
for the acquisition of a License from a
company controlled by the sole director (Notes 3 and 4) 35,000
Less dividend deemed paid (Notes 3 and 4) (10,250)
--------------
32,750
==============
Supplemental Disclosures
Interest paid -
Income tax paid -
</TABLE>
F-4
(The accompanying notes are an integral
part of the financial statements)
<PAGE>
<TABLE>
<CAPTION>
Netco Investments Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
(expressed in U.S. dollars)
Deficit
Accumulated
Additional during the
Common Stock Paid-in Development
Shares Amount Capital Total Stage
# $ $ $ $
<S> <C> <C> <C> <C> <C>
Balance - March 15, 2000 (Date of Inception) - - - - -
Stock issued for legal and organizational
expenses at a fair market value of
0.01 per share 800,000 80 7,920 8,000 -
Stock issued for the acquisition of a license
at a fair market value of $0.01 per share 3,500,000 350 34,650 35,000 -
Dividend deemed paid (Note 4) - - (10,250) (10,250) -
Net loss for the period - - - - (32,750)
----------- ----------- ----------- ----------- ------------
Balance - September 30, 2000 4,300,000 430 32,320 43,000 (32,750)
=========== =========== =========== =========== ============
</TABLE>
F-5
(The accompanying notes are an integral
part of the financial statements)
<PAGE>
Netco Investments Inc.
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
1. Development Stage Company
Netco Investments Inc. herein (the "Company") was incorporated in the State
of Washington, U.S.A. on March 15, 2000. The Company acquired a license to
market and distribute vitamins, minerals, nutritional supplements, and
other health and fitness products in Massachusetts, in which the grantor of
the license offers these products for sale from various suppliers on their
Web Site.
The Company is in the development stage. In a development stage company,
management devotes most of its activities in developing a market for its
products. Planned principal activities have not yet begun. The ability of
the Company to emerge from the development stage with respect to any
planned principal business activity is dependent upon its successful
efforts to raise additional equity financing and/or attain profitable
operations. There is no guarantee that the Company will be able to raise
any equity financing or sell any of its products at a profit. There is
substantial doubt regarding the Company's ability to continue as a going
concern.
The Company will offer 4,250,000 shares at $0.01 per share to raise
$42,500 pursuant to an SB-2 Registration Statement to be filed with the
Securities and Exchange Commission.
2. Summary of Significant Accounting Policies
(a) Year end
The Company's fiscal year end is December 31.
(b) License
The cost to acquire the License was capitalized. The cost will be
amortized on a straight-line basis over twelve months.
The carrying value of the License is evaluated in each reporting
period to determine if there were events or circumstances which would
indicate a possible inability to recover the carrying amount. Such
evaluation is based on various analyses including assessing the
Company's ability to bring the commercial applications to market,
related profitability projections and undiscounted cash flows relating
to each application which necessarily involves significant management
judgment.
(c) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less at the time of issuance to be cash equivalents.
(d) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the periods. Actual results could differ from
those estimates.
F-6
(The accompanying notes are an integral
part of the financial statements)
<PAGE>
3. License
The Company's only asset is a license to market vitamins, minerals,
nutritional supplements and other health and fitness products through the
Grantor's Web Site. The Company desires to market these products to medical
practitioners, alternative health professionals, martial arts studios and
instructors, sports and fitness trainers, other health and fitness
practitioners, school and other fund raising programs and other similar
types of customers in Massachusetts. The license was acquired on March 15,
2000 for a term of three years. The Company must pay an annual fee of $500
for maintenance of the Grantor's Web Site commencing on the anniversary
date. The Grantor of the license retains 50% of the profits.
The Company issued 3,500,000 shares with a fair market value of $0.01 per
share for a total consideration of $35,000. See Note 4.
The License has been written-off to operations as at September 30, 2000 due
to the lack of historical cash flow of Vitaminmineralherb.com. However, it
is the Company's intention to determine if it is economically feasible to
commercially exploit a business plan.
4. Related Party Transaction
The License referred to in Note 3 was assigned to the Company by another
company controlled by the sole director and President of the Company for
consideration of 3,500,000 shares with a fair market value of $35,000. The
estimated cost based on comparable transactions, of the license to a
company controlled by the President of the Company is $24,750. The estimate
is based on an allocation of the cash outlay of $33,000 for common stock of
Texmont, Inc., by virtue of which the company controlled by the President
of the Company obtained the license as well as continued ownership of
Texmont, Inc. The excess of fair market value over predecessor cost, being
$10,250, is treated as a dividend which increased the deficit. The Grantor
of the License is not related to the Company.
F-7
<PAGE>
PART II-INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Netco Investments' Articles of Incorporation provide that it must indemnify
its directors and officers to the fullest extent permitted under Washington law
against all liabilities incurred by reason of the fact that the person is or was
a director or officer of Netco Investments or a fiduciary of an employee benefit
plan, or is or was serving at the request of Netco Investments as a director or
officer, or fiduciary of an employee benefit plan, of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
The effect of these provisions is potentially to indemnify Netco
Investments' 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 Netco Investments. Pursuant to
Washington 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 of Netco Investments, 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 Netco
Investments, absent a finding of negligence or misconduct in office. Netco
Investments' 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 Netco Investments has the power to
indemnify such person against liability for any of those acts.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The amounts set forth are estimates except for the SEC registration fee:
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
-------
<S> <C>
SEC registration fee. . . . . . . . . . . . . . . . . $ 12
Printing and engraving expenses . . . . . . . . . . . --
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 . . . . . . . . . . . . . . . . . . . . . . . . $ 10,977
==========
</TABLE>
The Registrant will bear all expenses shown above.
RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding the issuance and sales of Netco
Investments' 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, Netco Investments issued 3,500,000 shares of common
stock to Michael Jackson in compensation for the license of Vitamineralherb
rights. The issuance of the shares was exempt from registration under Rule 506
of Regulation D, and sections 3(b) and 4(2) of the Securities Act of 1933, as
amended, due to Mr. Jackson's status as the founder and initial management of
Netco Investments, and his status as an accredited investor, and the limited
number of investors (one).
<PAGE>
EXHIBITS
The following exhibits are filed as part of this Registration Statement:
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Articles of Incorporation
3.2 Bylaws
4.1 Specimen Stock Certificate
4.2 Stock Subscription Agreement
5.1 Opinion re: legality
10.1 License Agreement
10.2 Assignment of License Agreement
23.1 Consent of Independent Auditors
23.2 Consent of Counsel (see Exhibit 5.1)
27.1 Financial Data Schedule
_________
UNDERTAKINGS
The Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the Offering of the securities of the securities at that time
to be the initial bona fide Offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the Offering.
(4) Provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
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 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 Securities Act and will be governed by the final adjudication
of such issue.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Vancouver, British Columbia, Canada, on October 5,
2000.
Netco Investments Inc.
By: /s/ MICHAEL JACKSON
---------------------------------
MICHAEL JACKSON
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 stated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ MICHAEL JACKSON
--------------------- President, Secretary, Treasurer, and October 5, 2000
MICHAEL JACKSON Director
<PAGE>
LIST OF EXHIBITS
The following exhibits are filed as part of this Registration Statement:
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Articles of Incorporation
3.2 Bylaws
4.1 Specimen Stock Certificate
4.2 Stock Subscription Agreement
5.1 Opinion re: legality
10.1 License Agreement
10.2 Assignment of License Agreement
23.1 Consent of Independent Auditors
23.2 Consent of Counsel (see Exhibit 5.1)
27.1 Financial Data Schedule
_________
<PAGE>
