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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10SB12G/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B) OR 12(G) OF
THE SECURITIES ACT OF 1934
United Network Marketing Services, Inc.
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(Name of Small Business Issuer in Its Charter)
DELAWARE 13-4024018
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
575 Madison Avenue
7th Floor
NEW YORK, NY 10022
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(Address of Principal Executive Offices) (Zip Code)
212-688-2809
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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NOT APPLICABLE NOT APPLICABLE
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Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.001 PER SHARE
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(Title of Class)
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TABLE OF CONTENTS
PAGE
PART I
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Item 1. Description of Business ...................... 3
Item 2. Plan of Operation ............................ 15
Item 3. Description of Property....................... 16
Item 4. Security Ownership of Certain Beneficial
Owners and Management ...................... 16
Item 5. Directors, Executive Officers, Promoters
and Control Persons ........................ 17
Item 6. Executive Compensation ....................... 18
Item 7. Certain Relationships and Related
Transactions ............................... 19
Item 8. Description of Securities..................... 19
PART II
Item 1. Market Price of and Dividends on the
Registrant's Common Equity and Other
Stockholder Matters ........................ 21
Item 2. Legal Proceedings ............................ 22
Item 3. Changes in and Disagreements With
Accountants ................................ 22
Item 4. Recent Sales of Unregistered Securities ...... 22
Item 5. Indemnification of Directors and Officers .... 23
PART F/S
FINANCIAL STATEMENTS
PART III
Item 1. Index to Exhibits ............................ 24
Item 2. Description of Exhibits ...................... 24
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FORWARD LOOKING STATEMENTS
CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
United Network Marketing Services, Inc. ("UNMS" or the "Company") cautions
readers that certain important factors may affect the Company's actual results
and could cause such results to differ materially from any forward-looking
statements that may be deemed to have been made in this Registration Statement
or that are otherwise made by or on behalf of the Company. For this purpose, any
statements contained in the Registration Statement that are not statements of
historical fact may be deemed to be forward-looking statements. This
Registration Statement contains statements that constitute "forward-looking
statements." These forward-looking statements can be identified in certain cases
by the use of predictive, future-tense or forward-looking terminology, such as
"believes," "anticipates," "expects," "estimates," "plans," "may," "will," or
similar terms. These statements appear in a number of places in this
Registration Statement and include statements regarding the intent, belief or
current expectations of the Company, its directors or its officers with respect
to, among other things: (i) the commercialization of the Company's products and
services; (ii) trends affecting the Company's financial condition or results of
operations for its limited history; (iii) the Company's business and growth
strategies; (iv) the Company's financing plans and (v) the Internet and Internet
commerce.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve significant risks and
uncertainties, and that actual results may differ materially from those
projected in the forward-looking statements as a result of various factors.
Factors that could adversely affect actual results and performance include,
among others, the Company's limited operating history, potential fluctuations in
quarterly operating results and expenses, government regulation, technological
change, market acceptance of the Company's product and services, and
competition.
The accompanying information contained in this Registration Statement,
including, without limitation, the information set forth under the heading "Item
1 - Description of Business - Risk Factors," identifies important additional
factors that could materially adversely affect actual results and performance.
All of these factors should be carefully considered and evaluated. All
forward-looking statements attributable to the Company are expressly qualified
in their entirety by the foregoing cautionary statement. Any forward-looking
statements in this report should be evaluated in light of these important risk
factors. The Company is also subject to other risks detailed herein or set forth
from time to time in the Company's future filings with the Securities and
Exchange Commission.
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ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY
United Network Marketing Services, Inc. ("UNMS" or the "Company") is a
development stage company with minimal operations since inception in September
1998. The Company plans to develop and market internet content for consumer
based websites or to acquire interests in companies with existing websites. We
also intend to enter into strategic alliances and may acquire complementary
business, websites, technologies, content or products.
The Company currently owns a fifty percent (50%) interest in Access: NewAge
Corporation ("Access NewAge"), which owns and operates an Internet website that
was launched in April 1996. The website, AccessNewAge.com, offers a large
selection of "New Age" information, products and services - most of which are
holistic, esoteric, spiritual, metaphysical and/or philosophical in character.
The Company currently has no operations or material business interests
independent of Access NewAge.
Upon formation, the Company was a wholly-owned subsidiary of United Network
Technologies, Inc., a Delaware corporation ("UNTI"). In January 1999, the shares
of the Company were distributed as a dividend to the stockholders of UNTI as of
September 29, 1998.
INDUSTRY BACKGROUND
The rapid adoption of the Internet as a means to gather and provide information,
communicate, interact and be entertained, combined with the vast proliferation
of websites, has made the Internet an important new mass medium. The Internet
enables advertisers to target advertising campaigns utilizing sophisticated
databases of information on the users of various sites and to directly generate
revenues from these users through online transactions. As a result, the Internet
has become a compelling means to advertise and market products and services.
E-commerce and Direct Marketing. The Internet has become a significant
marketplace for buying and selling goods and services. Jupiter Communications
estimates that the amount of goods or services purchased in online consumer
transactions will grow to approximately $37.5 billion in 2002. Improvements in
security, interface design and transaction-processing technologies have
facilitated an increase in online consumer transactions. Early adopters of such
improvements include online merchants offering broad product catalogs (such as
books, music CDs and toys), those seeking distribution efficiencies (such as
PCs, flowers and groceries) and those offering products and services with
negotiable pricing (such as automobiles and mortgages). The Company believes
that as the volume of online transactions
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increases, traditional retailers will offer a wide variety of products and
services online. The Company believes that online sites provide businesses an
attractive environment for selling products and services by providing direct
access to users with like interests.
Advertising. Jupiter Communications estimates that spending on Internet
advertising in the United States will grow to $7.7 billion in 2002. The Internet
has become a compelling advertising vehicle that provides advertisers with
targeting tools not available from traditional advertising media. The
interactive nature of the Internet and the development of "click-through"
advertising banners and other feedback tools enable advertisers to measure
impression levels, establish a dialogue with users and receive "real-time"
direct feedback from their target markets. Such feedback provides advertisers
with an effective means to measure the attractiveness of their offerings among
targeted audiences and make modifications to their advertising campaigns on
short notice.
One indicator of the Internet's popularity as an advertising medium is the
growing number and diversity of Internet advertisers. Most early Internet
advertisers were technology and Internet-related companies. Today, a growing
number of Internet advertisers consist of traditional, consumer product and
service companies. The diverse audience of users accessing community sites has
made such sites especially attractive to consumer product and service companies
advertising on the Internet. The Company believes that this trend should
continue, and that a wide variety of companies outside the technology and
Internet industries, such as financial services, consumer goods, automotive and
pharmaceutical companies, are or will be increasingly using the Internet, and
community sites in particular, to advertise.
ACCESS NEWAGE.COM
Access NewAge.com offers a large selection of "New Age" information,
products, and services - most of which are holistic, esoteric, spiritual,
metaphysical and/or philosophical in character.
The products include aromatherapy products, crystals and minerals,
tapes and CDs, books and gift items. The aromatherapy products are comprised of
a line of over 400 items including healing salves, oils, creams and incense. The
books cover numerous subjects, many dedicated to mind-body-spirit topics, such
as alternative and holistic health, astrology, Eastern religions, philosophy,
inspiration, self-help, mysticism, mythology, music and tarot.
AccessNewAge.com also features an on-line magazine called "Looking
Deeper," which features articles on topics of personal growth, health and
healing, meditation, yoga, spiritual teachings,
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environmental awareness, astrology, mysticism, and other New Age
themes.
The website has received awards for "Website Excellence" from FOREST
MOON METAPHYSICAL CENTER, "Most Informative Site of the Week" from THE NYC
INSIDER, and "Website of the Week" from ASTROPRO.
AccessNewAge.com was initially launched in April 1996. However, there
are currently no on-line links and limited sources of advertising designed to
promote the site and product sales. As a result, revenues of Access NewAge have
been limited (approximately $23,000 during 1999 and insufficient to generate
cash flow distributable to UNMS. A net loss of approximately $2,400 was incurred
in 1999. The Company intends to work with management of Access NewAge to develop
an advertising and marketing strategy designed to increase visits to the site,
purchases of products, and thereby revenues.
Access NewAge does not maintain any inventory of products offered on
its website. Product orders are processed by Access NewAge and then sent to the
product manufacturer/supplier for order fulfillment.
EMPLOYEES
As of October 31, 2000, the Company had no full-time employees and one part-time
employee, Kenneth Levy, who is the President and Chief Executive Officer of the
Company. Commencing on January 1, 2001, Mr. Levy will serve as a full time
employee of the Company.
LEGAL PROCEEDINGS
There are no legal proceedings pending or, to the Company's knowledge,
threatened against the Company.
PUBLIC INFORMATION
Upon this Registration Statement becoming effective, the Company will be subject
to the information requirements of the Securities Exchange Act of 1934, and, in
accordance therewith will file reports, proxy statements and other information
with the United States Securities and Exchange Commission. Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the United States Securities and Exchange
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at the regional offices of the United States Securities and
Exchange Commission located at 7 World Trade Center, Suite 1300, New York, New
York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661.
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Copies of such materials may be obtained from the Public Reference Section of
the Securities and Exchange Commission, Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and its public reference facilities in New
York, New York and Chicago, Illinois upon payment of the prescribed fees.
Electronic registration statements filed through the Electronic Data Gathering,
Analysis, and Retrieval System ("EDGAR") are publicly available through the
United States Securities and Exchange Commission's website (http://www.sec.gov).
Further information on public reference rooms available at the United States
Securities and Exchange Commission is available by contacting the United States
Securities and Exchange Commission at 1-(800) SEC-0330.
RISK FACTORS
RISKS RELATED TO OUR BUSINESS
DEVELOPMENT STAGE COMPANY
Since our incorporation in September 1998, our operating activities have
consisted primarily of start-up activities and raising start-up capital. In May
1999, we acquired a 50% ownership interest in Access NewAge. Through October 31,
2000, Access NewAge has had limited revenues from product sales and advertising,
and we have had no revenues to date. During the year ending December 31, 2000,
we estimate that Access NewAge will generate gross revenues of only
approximately $25,000. There can be no assurance that our proposed operations
will either materialize or prove successful, in whole or in part, or that
websites we develop or are associated with will be successfully commercialized.
Moreover, there can be no assurance that our operations will generate sufficient
revenues to achieve profitability.
We have only a limited operating history upon which an evaluation of our
prospects can be based. Our current and proposed operations are subject to all
of the risks inherent in the establishment of a new business enterprise. The
likelihood of the success of the Company must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered by companies in an early stage of development, particularly
companies engaged in new and rapidly evolving markets, such as an Internet-based
business. We can give no assurance that we will be able to successfully develop
internet technology and content or grow the Access NewAge business.
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HISTORY OF LOSSES; LACK OF REVENUE
During the year ended December 31, 1999 and the nine months ended September 30,
2000, we had no revenues and our operating expenses have resulted in significant
losses. During the remainder of the year ending December 31, 2000 we anticipate
having limited if any revenues and we expect to continue suffering significant
losses for the foreseeable future. We expect to incur additional operating
losses and to experience continued negative cash flow from operations for the
foreseeable future. We can give no assurance that we can achieve, sustain or
increase revenues or profitability in the future.
LACK OF MARKETING EXPERIENCE
We are a development stage enterprise and have only limited marketing
experience. The transition from a start-up operation to an enterprise capable of
effectively marketing a website based business may require additional
management, technical personnel, capital and other resources. Failure to meet
marketing standards could prevent or delay the effective commercialization of
our sites and products, even if successfully developed by UNMS. There can be no
assurance that we or our business partners will be able to effectively market
our products.
DEPENDENCE ON THE INTERNET; UNCERTAIN ACCEPTANCE OF THE INTERNET AS A
MEDIUM FOR COMMERCE
Use of the Internet by consumers is at an early stage of development, and market
acceptance of the Internet as a medium for commerce is subject to a high level
of uncertainty. The Internet may not prove to be a viable commercial marketplace
because of inadequate development of the necessary infrastructure, such as
reliable network backbones, or complementary services, such as high-speed modems
and security procedures for financial transactions or delays in the development
and adoption of new standards and protocols to handle increased levels of
Internet activity or due to increased government regulation. Our future success
will depend on our ability to generate and significantly increase revenue which
will require the development and widespread acceptance of the Internet as a
medium for commerce. We can give no assurance that the Internet will be a
successful retailing channel. If use of the Internet does not continue to grow,
or if the necessary Internet infrastructure or complementary services are not
developed to effectively support growth that may occur, our business, results of
operations, and financial condition could be materially adversely affected. We
can give no assurance that we will not continue to be largely dependent on the
Internet.
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DEPENDANCE ON THE DEVELOPMENT OF THE INTERNET AND THE AVAILABILITY OF
INCREASED BANDWIDTH TO CONSUMERS
The success of our business will depend largely on the development and
maintenance of the Internet infrastructure. This includes maintenance of a
reliable network with the necessary speed, data capacity and security, as well
as timely development of complementary products such as high speed modems, for
providing reliable Internet access and services. Because global commerce on the
Internet and the online exchange of information is new and evolving, we cannot
predict whether the Internet will prove to be a viable commercial marketplace in
the long term. The success of our business will rely on the continued
improvement of the Internet as a convenient means of consumer interaction and
commerce, as well as an efficient medium for the delivery and distribution of
consumer products such as those offered by Access NewAge. The Internet has
experienced, and is likely to continue to experience, significant growth in the
numbers of users and amount of traffic. As the Internet continues to experience
increased numbers of users, increased frequency of use and increased bandwidth
requirements, the Internet infrastructure may be unable to support the demands
placed on it. In addition, increased users or bandwidth requirements may harm
the performance of the Internet. The Internet has experienced a variety of
outages and other delays as a result of damage to portions of its
infrastructure, and it could face outages and delays in the future. These
outages and delays could reduce the level of Internet usage as well as the level
of traffic, and could result in the Internet becoming an inconvenient or
uneconomical source of commerce. The infrastructure and complementary products
or services necessary to make the Internet a viable commercial marketplace for
the long term may not be developed successfully or in a timely manner. Even if
these products or services are developed, the Internet may not become a viable
commercial marketplace for the products or services that we or our business
partners offer.
DEPENDENCE ON THIRD PARTIES FOR INTERNET OPERATIONS
Our ability to advertise on other Internet sites and the willingness of the
owners of such sites to direct users to our websites through hypertext links may
be critical to the success of our Internet operations. We may also rely on the
cooperation of owners of Internet search services and on our relationships with
third party vendors of Internet development tools and technologies. We can give
no assurance that the necessary cooperation from third parties will be available
on acceptable commercial terms or at all. If we are unable to develop and
maintain satisfactory relationships with such third parties on acceptable
commercial terms, or if our competitors are better able to leverage such
relationships, our business, results of operations and financial condition will
be materially adversely affected.
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COMPETITION
The market for users, e-commerce, and Internet advertising is new and rapidly
evolving, and competition for users and advertisers is intense and is expected
to increase significantly. Barriers to entry are relatively insubstantial and
the Company may face competitive pressures from many additional companies both
in the United States and abroad. The Company believes that the principal
competitive factors for companies seeking to create sites on the Internet are
critical mass, functionality of the website, and brand recognition. Other
companies that are primarily focused on creating Internet portal sites such as
Yahoo!, AOL, and Excite and, in the future, Internet sites may be developed or
acquired by companies currently operating Web directories, search engines,
shareware archives, content sites, OSPs, ISPs and other entities, many of which
are likely to have substantially more resources than the Company. Furthermore,
the Company competes for users and advertisers with other content providers and
with thousands of websites operated by individuals, the government and
educational institutions. The Company also faces competitive pressure from
traditional media such as newspapers, magazines, radio and television. The
Company believes that the principal competitive factors in generating e-commerce
revenue and attracting advertisers include the amount of traffic on its website,
brand recognition, customer service, the demographics of the Company's members
and users, the Company's ability to offer targeted audiences and the overall
cost-effectiveness of the distribution and advertising medium offered by the
Company. The Company believes that the number of Internet companies relying on
Internet-based e-commerce and advertising revenue, as well as the number of
advertisers on the Internet and the number of users, will increase substantially
in the future. Accordingly, the Company will likely face increased competition,
resulting in increased pricing pressures on the pricing of its products and its
advertising rates, which could have a material adverse effect on the Company.
The e-commerce market is new and rapidly evolving and competition among
e-commerce merchants is expected to increase significantly. The Company is
relying on e-commerce partners such as Access NewAge to generate e-commerce
revenues. The Company's ability to generate revenues from any of its present or
future e-commerce partners may be adversely affected by competition between any
such partner and other Internet retailers.
The Internet has had a limited effect on the market for "New Age" products and
services. The current marketplace is characterized by small sites with limited
brand recognition, or a focus strictly on simply selling the products that are
currently available.
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RISKS RELATED TO SALES, MARKETING AND COMPETITION
DIFFICULTIES ASSOCIATED WITH BRAND DEVELOPMENT
The importance of brand recognition will increase in the future as the number of
websites providing products and services increases. There are many distributors
of "New Age" related products and other products we may become associated with,
both online and traditional, who enjoy customer brand recognition and compete
with us in the digital distribution and mail order markets. Many of these
distributors have superior financial strength and resources. We believe that
establishing and increasing awareness of brand names --such as "Access NewAge"
-- is a critical aspect of our efforts to continue to attract customers and
content providers. We may need to invest heavily in brand development in order
to establish a market presence. We can give no assurances that our efforts to
build brand awareness will be successful or that we will have sufficient
financing to pursue brand development successfully.
COMPETITION FOR AND EXECUTING STRATEGIC ALLIANCES AND ACQUISITIONS
Our business strategy includes entering into strategic alliances and may include
acquiring complementary businesses, websites, technologies, content or products.
We may be unable to complete suitable strategic alliances and acquisitions on
commercially reasonable terms, if at all. We expect to face competition for
strategic alliance and acquisition candidates and sponsorships. This competition
could impair our ability to successfully pursue these aspects of our business
strategy. Strategic alliances or acquisitions could disrupt our ongoing
business, distract our management and employees and increase our expenses. If we
acquire a company, we could face difficulties assimilating that company's
personnel and operations. In addition, the key personnel of the acquired company
may decide not to work for us. Acquisitions of additional services or
technologies also involve risks of incompatibility and lack of integration into
our existing operations. If we finance the acquisitions by incurring debt or
issuing equity securities, this could dilute our existing stockholders. Any
amortization of goodwill or other assets, or other charges resulting from the
costs of such acquisitions, could adversely affect our operating results.
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RISKS RELATED TO OPERATIONS
NEED TO ENHANCE AND DEVELOP ACCESSNEWAGE.COM TO REMAIN COMPETITIVE
To remain competitive, the Company must continue to enhance and improve the
responsiveness, functionality and features of AccessNewAge.com and expand its
offering of products and services. Enhancements of or improvements to the
website may contain undetected programming errors that require significant
design modifications, resulting in a loss of customer confidence and user
support and a decrease in the value of the Company's brand name recognition.
In addition any failure of the Company to effectively develop and introduce new
features and functions, or the failure of such new features and functions to
achieve market acceptance, could have a material adverse effect on the Company's
business, results of operations and financial condition.
The Company also hopes to introduce new products and services, such as new
content targeted for specific user groups. There can be no assurance that the
Company will be successful in developing or introducing such products and
services or that such products and services will achieve market acceptance or
enhance the Company's brand name recognition. Any failure of the Company to
effectively develop and introduce these products and services, or the failure of
such products and services to achieve market acceptance, could have a material
adverse effect on the Company's business, results of operations and financial
condition.
DEPENDENCE ON KEY PERSONNEL
Our success is dependent, in part, upon key management personnel. In particular,
we are highly dependent upon Kenneth Levy, President and Chief Executive Officer
of UNMS. Mr. Levy is primarily responsible for the Company's day-to-day
strategic planning and financing arrangements. Until January 1, 2001, Mr. Levy
will work for the Company on a part-time basis, with no compensation. Prior to
that time he will continue to engage in other projects unrelated to the Company
which require significant time commitments and might create conflicts of
interest. The loss of his services could have a material adverse effect on us.
Our future performance may be substantially dependent on hiring management and
other key personnel and our ability to retain and motivate them. The loss of the
services of any of our officers or senior managers could harm our business.
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GROWTH MANAGEMENT
If we grow rapidly in the future, such growth will place a significant strain on
our managerial, operational and financial resources. To manage any such growth,
we will be required to implement and improve our managerial controls and
procedures and operational and financial systems. In addition, we will be
required to hire, train, integrate, manage and retain our workforce including
technical support, advertising, sales and business development staff. Locating
and retaining qualified personnel in our business is extremely competitive. We
can give no assurances that we have adequately allowed for the costs and risks
associated with our proposed expansion or that our systems, procedures or
controls will be adequate to support our operations. We can also give no
assurances that we will be able to successfully locate, train and integrate
personnel into our workforce.
ONLINE SECURITY
If the security measures that we use to protect personal information are
ineffective, we may lose visitors and our business would be harmed. We will rely
on security and authentication technology licensed from third parties. With this
technology, we can perform real-time credit card authorization and verification.
We cannot predict whether new technological developments could allow these
security measures to be circumvented. In addition, our software, databases and
servers may be vulnerable to computer viruses, physical or electronic break-ins
and similar disruptions. We may need to spend significant resources to protect
against security breaches or to alleviate problems caused by any breaches. We
cannot assure that we can prevent all security breaches.
A party who is able to circumvent our security measures could misappropriate
proprietary information or cause interruptions in our Internet operations.
Consumer concern over Internet security has been, and could continue to be, a
barrier to commercial activities requiring consumers to send their credit card
information over the Internet. Computer viruses, break-ins, or other security
problems could lead to misappropriation of proprietary information and
interruptions, delays, or cessation in service to our customers. Moreover, until
more comprehensive security technologies are developed, the security and privacy
concerns of existing and potential customers may inhibit the growth of the
Internet merchandising medium. We may be required to expend significant capital
resources to protect against the threat of such security breaches or to
alleviate problems caused by such breaches. We can give no assurance that our
Internet operations are completely secure against potential interruptions or
that we can alleviate the problems should they occur.
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FINANCIAL RISKS
SIGNIFICANT NEED FOR CASH; POSSIBLE LACK OF SUFFICIENT FUNDS
We have significant immediate cash requirements related to the implementation of
our business plan and working capital needs. If we are unable to obtain
financing either from a public or private offering of our securities, a
strategic joint venture or partnership, or otherwise, we will be unable to
implement our business plan or otherwise expand our operations. This would have
a material adverse effect on us. If we raise additional funds by issuing equity
or convertible debt securities, such securities may have rights, preferences or
privileges senior to those of our existing stockholders and the percentage
ownership of our stockholders will be diluted. We can give no assurance that
additional financing will be available on favorable terms or at all. If adequate
funds are not available or are not available on acceptable terms, our ability to
fund our expansion, take advantage of opportunities, develop or enhance services
or products or otherwise respond to competitive pressures would be significantly
limited.
CONTROL BY PRINCIPAL STOCKHOLDERS
Mr. Alan Gelband, a director of the Company, beneficially owns over 61.6% of the
Company's issued and outstanding Common Stock and, therefore, may be able to
influence or control the outcome of substantially all actions requiring
stockholder approval, including the election of the entire Board of Directors,
and the outcome of any stockholder votes concerning a merger, asset sale, or
other major corporate transaction affecting the Company. Such control could also
have the effect of delaying, deterring, or preventing an unsolicited takeover of
the Company. Mr. Gelband has recently subscribed for securities of the Company
that could substantially increase his beneficial ownership of Common Stock.
NO CASH DIVIDENDS
The Company has never paid any cash dividends on its Common Stock and it is
unlikely that the Company will have sufficient profits to pay cash dividends in
the foreseeable future.
NO PUBLIC MARKET; LACK OF LIQUIDITY
There is currently no public market for the Company's Common Stock and there can
be no assurance that such a public market will ever develop, or that if
developed, it will be sustained. In addition, even if a public market for the
Common Stock is developed, the market prices of securities of technology
companies, particularly Internet-related companies, have been extremely
volatile, and have experienced
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fluctuations that have often been unrelated to or disproportionate to the
operating performance of such companies. Moreover, factors such as announcements
by UNMS of quarterly variations in its financial results and changes in general
market conditions, among other things, could cause the market price of the
Shares to fluctuate significantly. In recent years, the stock market has
experienced significant price and volume fluctuations.
OTHER RISKS
POSSIBLE ACQUISITIONS
We may seek out strategic acquisitions, joint ventures, and partnerships of and
with companies that management believes will facilitate our growth and
implementation of our business plan. Various business and financial risks
associated with acquisitions by the Company, if consummated, could result in
significant changes to UNMS's leverage, liquidity and earnings capabilities.
There are currently no agreements or understandings currently in effect related
to any acquisitions. There can be no assurance that any acquisitions will be
made, or that if made, will be of material benefit to UNMS.
PENNY STOCK REGULATION
The Commission recently adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks." Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the Commission that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing before or with the customer's
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from such rules the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for a stock
that becomes subject to the penny stock
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rules. Should a public market for the Company's Common Stock develops and such
stock become subject to the penny stock rules, stockholders may find it more
difficult to sell their shares of Common Stock.
FORWARD LOOKING STATEMENTS
This Memorandum contains certain forward-looking statements within the meaning
of Section 27A of the 1933 Act and Section 21E of the Securities Exchange Act of
1934, as amended, concerning the Company's operations, economic performance and
financial conditions. These statements are based upon a number of assumptions
and estimates which are inherently subject to significant uncertainties and
contingencies, many of which are beyond the control of the Company and reflect
future business decisions which are subject to change. Some of these assumptions
inevitably will not materialize, and unanticipated events will occur which will
affect the Company's results. Consequently, actual results will vary from the
statements contained herein and such variance may be, and is likely to be,
material. Prospective investors should not place undue reliance on this
information.
ITEM 2. PLAN OF OPERATION
As of September 30, 2000, the Company had a cash balance of approximately
$25,000. In November 2000, the Company received subscriptions from its two
executive officers to purchase 11% Promissory Notes of the Company in the
aggregate principal amount of $125,000. The Notes are payable on May 31, 2002.
The Company is issuing warrants to purchase an aggregate of 1,250,000 shares of
Common Stock to the purchasers of the notes. The warrants have a five-year term,
have an exercise price of $.10 per share and have "cashless" exercise features.
Subscriptions for the notes and warrants are payable on or before December 31,
2000. Upon the Company's receipt of payment for such subscriptions, the Company
believes it could maintain its operations as currently conducted and satisfy its
cash requirements for only about nine (9) months. Therefore, the Company will be
required to raise additional funds in the near future. During the next nine
months, the Company will consider raising additional funds through equity or
debt offerings. If successful in raising funds, the Company will endeavor to
expand the marketing and product service offerings of Access NewAge and/or
develop or acquire additional business operations, including new websites
offering consumer products and services. This will likely require the hiring of
one to three full time employees, depending on the scope of our operations. The
Company does not anticipate performing significant product research and
development or purchasing plant or significant equipment during the next twelve
months.
15
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTY
The Company's headquarters are currently located in a facility located at 575
Madison Avenue, New York, New York. The space is leased from an affiliate of
Alan Gelband, a director and principal stockholder of the Company. The space was
provided rent free through October 31, 2000. Commencing November 1, 2000, the
Company is paying rent of $500 per month. The Company does not own or lease any
other real property.
Although the Company does not have any formal investment policies, it has no
present intention to make any investments in, or acquire any interests in, real
estate, real estate mortgages, real estate investment trusts or other real
estate related securities or investments.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of the
Company's Common Stock as of November 22, 2000 by (i) each person known by the
Company to be the beneficial owner of more than five percent of the Company's
outstanding Common Stock, (ii) each director of the Company, (iii) the Company's
Chief Executive Officer (its sole officer), and (iv) all officers and directors
of the Company as a group. The Company believes that the beneficial owners of
the Common Stock listed below, based on information furnished by such owners,
have sole investment and voting power with respect to such shares.
<TABLE>
<CAPTION>
Name and Address of Number of Percent of
Beneficial Owner Shares Class
------------------------------------------------ ------------------------------ ------------------------
<S> <C> <C>
Alan Gelband 3,050,000(1) 70.4%
575 Madison Ave.
New York, NY 10022
Kenneth Levy 361,000(2) 9.8%
575 Madison Avenue
New York, NY 10022
All directors and officers 3,411,000(1)(2) 72.9%
as a group (2 persons)
</TABLE>
(1) Includes (i) 8,000 shares owned of record by a defined pension
plan and trust of which Mr. Gelband is the beneficiary, (ii)
40,000 shares owned by Mr. Gelband's children and (iii) 2,000
shares owned by a charitable foundation of which Mr. Gelband and
his wife are trustees. Also includes 1,000,000 shares issuable
upon exercise of warrants recently subscribed for by Mr.
Gelband. See "Part I -Item 2. Plan of Operation." Does not
include 10,000 shares owned by Mr. Gelband's wife. Mr. Gelband
disclaims beneficial ownership of said shares owned by his wife.
(2) Includes (i) 1,000 shares owned by Mr. Levy's son and (ii)
100,000 shares issuable upon exercise of options held by Mr.
Levy that are currently exercisable or exercisable within 60
days of November 22, 2000. Also includes 250,000 shares issuable
upon exercise of warrants recently subscribed for by Mr. Levy.
See "Part I - Item 2. Plan of Operation." Excludes options to
purchase an additional 150,000 shares held by Mr. Levy that are
not exercisable currently or within 60 days.
16
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS
NAME AGE POSITION WITH THE COMPANY
Kenneth Levy 54 President and Director
Alan Gelband 56 Director
Kenneth Levy has served as President of the Company since January 2000. Since
that date he has also served as Executive Vice President of TrueYou.com Inc., an
internet-based provider of professional and personal growth programs. From March
1996 to January 2000 he served as Senior Managing Director of Janssen/Meyers
Associates, an investment banking and brokerage firm. From October 1994 to March
1996, Mr. Levy served as President of Marshall, Alexander and Marshall, an
investment banking firm. Mr. Levy serves as a Director of Cathay Online Inc.
(OTC), an Investment Service Provider.
Alan Gelband, founder of the Company, has served as President of AGC Investment
Bank for more than the past five years. He has been actively involved in the
development of emerging growth companies and mergers and acquisitions for over
15 years and has completed over 70 investment banking transactions. Since
November 1998, Mr. Gelband has served as Chief Executive Officer of TrueYou.com
Inc. He has served as the president and a member of the board of directors of
the
17
<PAGE>
Association for Corporate Growth International and he is currently a lifetime
director.
ITEM 6. EXECUTIVE COMPENSATION
None of the officers or directors of the Company received compensation from the
Company in excess of $100,000 during any of its fiscal years since its inception
in September 1998. From January 1, 2000 through October 31, 2000, Mr. Alan
Gelband, a director of the Company, was paid (or accrued) consulting fees of
$5,000 per month (an aggregate of $50,000). From January 1, 2000 through June
30, 2000, Mr. Kenneth Levy, President of the Company, was paid compensation of
$5,000 per month (an aggregate of $30,000). No compensation will be paid to Mr.
Levy for the period July 1, 2000 through December 31, 2000. Commencing January
1, 2001, Mr. Levy will be employed on a full-time basis and be compensated at
the rate of $120,000 per annum. On November 1, 2000, Mr. Levy was granted an
option to purchase 250,000 shares. The options have a five year term and an
exercise price of $.10 per share. The options become exercisable as to 70,000
shares on the date of grant and will vest in monthly installments of 15,000
shares each during the next twelve months.
OPTION PLANS AND GRANTS
An aggregate of 500,000 shares of Common Stock are reserved for
issuance or available for grant under the Company's 2000 Stock Option Plan (the
"Option Plan"). Options granted under the Option Plan may either be intended to
qualify as incentive stock options ("ISOs") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code") or as non ISOs. The
Option Plan is administered in all respects by the Board of Directors or a
committee composed of at least two members of the Board of Directors who are
designated by the Board (the "Stock Option Committee"). The Stock Option
Committee may determine the persons to whom options are to be granted and the
number of shares subject to each option. Under the terms of the Option Plan, all
officers, directors, employees and consultants of the Company or subsidiaries of
the Company are eligible for option grants. The option exercise price of options
granted under the Option Plan is fixed by the Stock Option Committee but, in the
case of ISOs must be no less than 100% of the fair market value of the shares of
Common Stock subject to the option at the time of grant, except that in the case
of an employee who possesses more than 10% of the total combined voting power of
all classes of stock of the Company (a "10% Holder"), the exercise price must be
no less than 110% of said fair market value. Options may be exercised by the
payment in full in cash or, at the discretion of the Stock Option Committee, by
the tendering of shares of Common Stock to acquire shares of Common Stock having
a fair market value, as determined by
18
<PAGE>
the Stock Option Committee, equal to the option exercise price. Options granted
under the Option Plan may not be exercised more than ten years after the date of
grant, five years in the case of an ISO granted to a 10% Holder. Options to
purchase 250,000 shares are currently outstanding under the Option Plan, all of
which were granted to Kenneth Levy, President of the Company. Such options,
intended to qualify as ISOs, have a five year term and an exercise price of $.10
per share.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
ITEM 8. DESCRIPTION OF SECURITIES
GENERAL
The Company's authorized capital stock consists of 20,000,000 shares of Common
Stock, par value of which 3,330,000 are presently issued and outstanding, and
1,000,000 shares of Preferred Stock, par value $.001 per share, none of which is
outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voted for the election of directors can
elect al of the directors then up for election. The holders of Common Stock are
entitled to receive dividends when, as and if declared by the Board of Directors
out of funds legally available therefor. In the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining available for distribution
after payment of liabilities and after provision has been made for each class of
stock, if any, having preference over the Common Stock. Holders of shares of
Common Stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the Common Stock.
All of the outstanding shares of Common Stock are, and the shares of Common
Stock offered hereby, when issued against receipt of the consideration set forth
in this Prospectus, will be, fully paid and nonassessable.
The Company plans to retain any future earnings for use in its business and,
accordingly, does not anticipate paying dividends in the foreseeable future.
Payment of dividends is within the discretion of the Company's Board of
Directors and will depend, among other factors, upon the Company's earnings,
financial condition and
19
<PAGE>
capital requirements. There can be no assurance that dividends will
ever be declared and paid.
PREFERRED STOCK
The Board of Directors of the Company, without action by the stockholders, is
authorized to issue the shares of Preferred Stock in one or more series and,
within certain limitations, to determine the voting rights (including the right
to vote as a series on particular matters), preferences as to dividends and in
liquidation, conversion, redemption and other rights of each such series. The
Board of Directors could issue a series with rights more favorable with respect
to dividends, liquidation and voting than those held by the holders of any class
of Common Stock.
The authority of the Board to issue the Preferred Stock could have the effect of
discouraging attempts to obtain control of the Company by means of merger,
tender offer, proxy contests or otherwise or could delay and make more costly
any such attempt. The voting and conversion rights provided to such shares could
adversely affect the voting power of the holders of Common Stock. There are
presently no agreements or understandings, and the Board of Directors currently
has no intention, to issue any shares of Preferred Stock.
DELAWARE LAW AND CERTAIN CORPORATE PROVISIONS
As a Delaware corporation, the Company is subject to Section 203 of the Delaware
General Corporation Law which generally prevents an "interested stockholder"
(defined generally as a person owning 15% or more of a corporation's outstanding
voting stock) from engaging in a "business combination" (as defined in Section
203) with a Delaware corporation, the shares of which are listed on a national
securities exchange or quoted on Nasdaq or are held of record by at least 2,000
stockholders, for a period of three years following the date such person became
an interested stockholder unless (i) before such person became an interested
stockholder, the Board of Directors of the corporation approved the transaction
in which the interested stockholder became an interested stockholder or approved
the business combination; (ii) upon consummation of the transaction that
resulted in the interested stockholder's becoming an interested stockholder, the
interested stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by certain employee stock
plans); or (iii) following the transaction in which such person became an
interested stockholder, the business combination is approved by the Board of
Directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote of the holders of 66-2/3 of the outstanding voting stock of the
corporation not owned by the interested stockholder. The provisions of Section
203 requiring a
20
<PAGE>
super majority vote to approve certain corporate transactions could enable a
minority of the Company's stockholders to exercise veto power over such
transactions.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Registrar and
Transfer Company, Salt Lake City, Utah.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS
ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Company's Common Stock.
As of November 22, 2000, the Company had 3,330,000 shares of Common Stock issued
and outstanding and approximately 318 holders of record of its shares of Common
Stock. In addition, the Company has (i) outstanding options to purchase an
aggregate of 250,000 shares of Common Stock and (ii) executed subscriptions to
purchase 11% Promissory Notes of the Company in the principal amount of $125,000
and Warrants exercisable for 1,250,000 shares of Common Stock with an exercise
price of $.10 per share.
All of the 3,330,000 issued and outstanding shares of Common Stock are eligible
for sale under Rule 144 promulgated under the Securities Act of 1933, as
amended, subject to the satisfaction of certain conditions, including manner of
sale limitations and, with respect to affiliates of the Company, volume
limitations under Rule 144.
No shares of the Company are presently proposed to be publicly offered by the
Company or are subject to registration rights of any third party. However, the
Company may voluntarily file a registration statement that covers the resale of
such shares as well as other shares currently outstanding.
The Company has not paid any cash dividends and does not anticipate that it will
pay any cash dividends on its Common Stock in the foreseeable future. Payment of
dividends is within the discretion of the Company's Board of Directors and will
depend, among other factors, upon the Company's earnings, financial condition
and capital requirements.
21
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings which could have a material
adverse effect on its business.
ITEM 3. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Described below is information regarding all securities that have been issued by
the Company during the past three years.
Following its formation, on September 15, 1998, 2,230,000 shares of the
Company's Common stock were issued for $.001 per share to United Network
Technology, Inc. ("UNTI"), which became the sole stockholder of the Company.
On or about September 29, 1998, the Board of Directors of UNTI declared a
dividend of all of its UNMS shares. Pursuant to the dividend, on January 15,
1999 each stockholder of UNTI as of September 28, 1998 (other than UNMS, which
owned 6,533 shares of UNTI common stock on said date, but waived its right to
receive the dividend) received, on a ten for one basis, such number of shares of
UNMS as such stockholder held (at such date) in UNTI. No consideration was paid
by stockholders of UNTI with respect to the divider.
On April 7, 1999, the Company sold 1,100,000 shares of Common Stock to Alan
Gelband for $100,000.
On November 8, 2000, Kenneth Levy, an officer and director of the Company, and
Alan Gelband, a director and principal stockholder of the Company, entered into
Subscription Agreements to purchase 11% Promissory Notes in the aggregate
principal amount of $125,000 and Warrants to purchase an aggregate of 1,250,000
shares of Common Stock. The subscriptions are payable on or before December 31,
2000.
The transactions on September 15, 1998, April 7, 1999 and November 8, 2000 were
private transactions not involving a public offering and were exempt from the
registration provisions of the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof. No underwriter was engaged in connection with the
foregoing sales of securities.
22
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by the person in
connection with specified actions, suits, proceedings whether civil, criminal,
administrative, or investigative (other than action by or in the right of the
corporation--a "derivative action"), if they acted in good faith and in a manner
they 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 their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such action, and the statue requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statue provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, by-laws, disinterested director vote, stockholder vote, agreement, or
otherwise.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) payment of unlawful dividends or unlawful
stock purchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit. The Company has provided for such a
provision in its Certificate of Incorporation.
23
<PAGE>
PART F/S
Please see the Consolidated Financial Statements appearing in this Registration
Statement following the signature page hereof.
PART III
ITEM 1. INDEX TO EXHIBITS
See Index to Exhibits.
ITEM 2. DESCRIPTION OF EXHIBITS
Exhibit
NO. DESCRIPTION
------- -----------
2.(a)* Certificate of Incorporation
(b)* By-Laws
6.(a)* 2000 Stock Option Plan
(b)* Form of Stock Option Agreement under the
2000 Stock Option Plan
(c)* Form of Unit Purchase Agreement
(d)* Form of 11% Note
(e)* Form of Common Stock Purchase Warrant
----------
* Previously filed.
24
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNITED NETWORK MARKETING SERVICES, INC.
By: /s/ Kenneth Levy
----------------------------------
Kenneth Levy, President
Dated: December 13, 2000
25
<PAGE>
UNITED NETWORK MARKETING
SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
(WITH SUPPLEMENTARY INFORMATION)
DECEMBER 31, 1999
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS:
Balance Sheet 2
Statements of Operations 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6 - 7
SUPPLEMENTARY INFORMATION:
Independent Auditor's Report on Supplementary Information 8
Schedule of General and Administrative Expenses 9
</TABLE>
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS:
Balance Sheet 2
Statements of Operations 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6 - 7
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders of
United Network Marketing Services, Inc.
We have audited the accompanying balance sheet of United Network Marketing
Services, Inc. (a development stage company) as of December 31, 1999, and the
related statements of operations, stockholders' equity, and cash flows for the
year then ended and the cumulative amount for the period from September 15, 1998
(inception) to December 31, 1999. 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 United Network Marketing
Services, Inc. (a development stage company) as of December 31, 1999 and the
results of its operations and its cash flows for the year then ended and the
cumulative amount for the period from September 15, 1998 (inception) to December
31, 1999 in conformity with generally accepted accounting principles.
GOLDSTEIN GOLUB KESSLER LLP
April 26, 2000
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1999
ASSETS
<S> <C>
Current Assets:
Cash $ 108,355
Other current assets 2,082
---------
TOTAL CURRENT ASSETS 110,437
Property and Equipment - net 5,202
Investments in Affiliates 167,001
Note Receivable 8,000
=========
TOTAL ASSETS $ 290,640
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities - accounts payable and accrued expenses $ 28,974
---------
Commitment
Stockholders' Equity:
Preferred stock - $.001 par value; authorized 1,000,000 shares; none issued
Common stock - $.001 par value; authorized 20,000,000 shares; issued and
outstanding 3,330,000 shares 3,330
Additional paid-in-capital 489,710
Deficit accumulated during the development stage (231,374)
---------
STOCKHOLDERS' EQUITY 261,666
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 290,640
=========
</TABLE>
See Notes to Financial Statements
2
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
(a development stage company)
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 15,
YEAR ENDED 1998 (INCEPTION)
DECEMBER 31, TO DECEMBER 31,
1999 1999
--------------------------------------------------------------------------------
<S> <C> <C>
General and administrative expenses $ 163,866 $ 212,127
--------- ---------
Loss from operations (163,866) (212,127)
Interest and dividend income 9,494 10,752
Impairment loss on investment (29,999) (29,999)
--------- ---------
Net loss accumulated in the development stage $(184,371) $(231,374)
========= =========
</TABLE>
See Notes to Financial Statements
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
PERIOD FROM SEPTEMBER 15, 1998 (INCEPTION) TO DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE TOTAL
NUMBER PAR PAID-IN DEVELOPMENT STOCKHOLDERS' PRICE
DATE OF SHARES VALUE CAPITAL STAGE EQUITY PER SHARE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock
upon distribution from UNTI 9/29/98 2,230,000 $2,230 $390,810 $ 393,040 $.176
Net loss $ (47,003) (47,003)
-------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 2,230,000 2,230 390,810 (47,003) 346,037
Issuance of common stock 4/07/99 1,100,000 1,100 98,900 100,000 .091
Net loss (184,371) (184,371)
===================================================================================================================
Balance at December 31,1999 3,330,000 $3,330 $489,710 $(231,374) $ 261,666
===================================================================================================================
</TABLE>
See Notes to Financial Statements
4
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 15,
YEAR ENDED 1998 (INCEPTION)
DECEMBER 31, TO DECEMBER 31,
1999 1999
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(184,370) $(231,374)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 3,195 4,499
Uncollectible note receivable 30,000 30,000
Impairment loss on investment 29,999 29,999
Changes in operating assets and liabilities:
Increase in other current assets (153) (966)
Decrease in due from affiliate 300,000
Increase in accrued expenses (96) (14,076)
------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 178,575 (181,918)
------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in note receivable (8,000) (8,000)
Purchase of investments (197,000) (197,000)
Proceeds from sale of common stock 100,000 100,000
Issuance of common stock open distribution from UNTI 395,273
------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (105,000) 290,273
----------------------------------------------------------------------------------------------------------------------
Net increase in cash 73,575 108,355
Cash at beginning of period 34,780
======================================================================================================================
Cash at end of period $ 108,355 $ 108,355
======================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes $ 2,680 $ 2,680
======================================================================================================================
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITY:
Net liabilities over assets acquired upon distribution from UNTI $ 2,233
======================================================================================================================
</TABLE>
See Notes to Financial Statements
5
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
--------------------------------------------------------------------------------
1. PRINCIPAL United Network Marketing Services, Inc. (a development stage
BUSINESS company) (the "Company"), was formed on September 14, 1998
ACTIVITY AND under the laws of the State of Delaware. The Company has
SUMMARY OF been in the development stage since its inception on
SIGNIFICANT September 15, 1998. The Company plans to develop internet
ACCOUNTING technology and content. The Company was a wholly owned
POLICIES: subsidiary of United Network Technologies, Inc. ("UNTI")
and, on September 28, 1998, certain assets of UNTI (mainly
cash of approximately $400,000 and miscellaneous other
assets) were distributed to the Company.
Depreciation of property and equipment is provided for by
the straight-line method over the estimated useful lives of
the assets.
The Company maintains cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company
has not experienced any losses on these accounts.
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of
estimates by management. Actual results could differ from
these estimates.
Investments in affiliates are recorded on either the cost
method or on the equity method of accounting. The equity
method of accounting is used for investments of 20% to 50%
and where the Company does not have the ability to exercise
effective control. The cost method of accounting is used for
investments of less than 20%.
The Company accounts for impairment of long-lived assets in
accordance with Statement of Financial Accounting Standards
("SFAS") No. 121, Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of.
The Company periodically evaluates the recoverability of its
long-lived assets for any possible impairment of value (see
Note 3).
2. PROPERTY AND Property and equipment, at cost, consists of the following:
EQUIPMENT:
Estimated
Useful Life
------------------------------------------------------------
Computer equipment $7,694 2 to 3 years
Furniture and fixtures 2,007 5 years
------------------------------------------------------------
9,701
Less accumulated depreciation 4,499
------------------------------------------------------------
$5,202
============================================================
3. INVESTMENTS IN The Company's investments in affiliates consist of a
AFFILIATES: minority interest in TrueYou.com Inc. ("TY"), a 50% interest
in Access: New Age ("ANA") and a 50% interest in My Health
Power ("MHP").
6
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
--------------------------------------------------------------------------------
During 1999, the Company purchased 100,000 shares of TY at a
cost of $150,000. The Company owns approximately 4% of TY
and therefore the investment is being accounted for on the
cost method.
During 1999, the Company also purchased 50% of ANA at a cost
of $17,000. Earnings of ANA during 1999 were immaterial and
therefore no adjustment was made to the investment.
During 1999, the Company also purchased 50% of MHP at a cost
of $30,000. In accordance with SFAS No. 121, this investment
was deemed worthless at December 31, 1999 and was written
down to $1, resulting in a noncash charge of $29,999 to
operations.
4. NOTE The Company has a note receivable from ANA (see Note 3) in
RECEIVABLE: the amount of $8,000. The note becomes due on May 15, 2002
and bears interest at the rate of 8% per annum, payable
semiannually.
5. COMMITMENT: As of December 31, 1999, the Company has consulting
agreements with two consultants which provide for consulting
fees of $100,000 per year in the aggregate to be paid
provided that Alan Gelband (majority stockholder of the
Company) remains a director or officer of the Company.
7
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION
To the Stockholders of
United Network Marketing Services, Inc.
We have audited the basic financial statements of United Network Marketing
Services, Inc. (a development stage company) for the year ended December 31,
1999 and the cumulative amount for the period from September 15, 1998
(inception) to December 31, 1999, and those statements, together with our
opinion thereon, are presented in the preceding section of this report. Our
audit was conducted for the purpose of forming an opinion on those financial
statements taken as whole. The supplementary information, as listed in the table
of contents, is the responsibility of management, and although not considered
necessary for a fair presentation of financial position, results of operations,
and cash flows is presented for additional analysis and has been subjected to
the auditing procedures applied in the audit of the basic financial statements.
In our opinion, the supplementary information is fairly stated in all material
respects, in relation to the basic financial statements taken as a whole.
GOLDSTEIN GOLUB KESSLER LLP
April 26, 2000
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
SUPPLEMENTARY INFORMATION
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 15,
YEAR ENDED 1998 (INCEPTION)
DECEMBER 31, TO DECEMBER 31,
1999 1999
-----------------------------------------------------------------------------------
<S> <C> <C>
General and administrative expenses:
Consulting fees $126,716 $132,966
Professional fees 23,655 62,810
Depreciation 3,195 4,499
Stock transfer expense 2,367 3,177
Facility management 1,500 1,500
Taxes 1,501 2,163
Office expense 1,774 1,854
Advertising 1,243 1,243
Miscellaneous 1,915 1,915
-------- --------
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES $163,866 $212,127
======== ========
</TABLE>
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
---------------------------------------
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
--------------------
AS OF SEPTEMBER 30, 2000
------------------------
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
---------------------------------------
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
-------------
SEPTEMBER 30, 2000
------------------
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets - cash and cash equivalents $ 25,012
Investments in affiliates (Notes 2 and 3) 167,066
Note receivable (Notes 3 and 4) 8,000
Fixed assets (net of accumulated depreciation of $17,665) 3,415
-------
TOTAL ASSETS $ 203,493
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 23,930
-------
TOTAL CURRENT LIABILITIES 23,930
-------
Commitments and contingencies (Note 5)
Stockholders' equity:
Preferred stock - $.001 par value; authorized
1,000,000 shares; none issued
Common stock - $.001 par value; authorized
20,000,000 shares; issued and outstanding
3,330,000 shares 3,330
Additional paid-in-capital (Notes 1 and 3) 489,710
Deficit accumulated during the development stage (313,477)
-------
TOTAL STOCKHOLDERS' EQUITY 179,563
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 203,493
=======
</TABLE>
See Accountants' Compilation Report and Notes to Financial Statements.
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
---------------------------------------
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
-----------------------
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
September 15, 1998
Nine months ended (inception) to
September 30, 2000 September 30, 2000
------------------ ------------------
<S> <C> <C>
Income:
Interest and dividend income $ 2,780 $ 13,532
-------- --------
Expenses:
Advertising 0 1,243
Facility management 31,731 33,231
Consultants 47,117 180,083
Professional fees 2,165 64,975
Stock transfer expenses 405 3,582
General and administrative expenses 227 3,997
Corporate taxes 1,450 3,613
Depreciation 1,787 6,286
-------- --------
Total expenses 84,882 297,010
-------- --------
Net (loss) from operations (82,102) (283,478)
-------- --------
Impairment loss on investment 0 (29,999)
-------- --------
Net (loss) accumulated in the development
stage $ (82,102) $(313,477)
======== ========
</TABLE>
See Accountants' Compilation Report and Notes to Financial Statements.
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
---------------------------------------
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY
---------------------------------
FOR THE PERIOD FROM SEPTEMBER 15, 1998 (INCEPTION) TO SEPTEMBER 30, 2000
------------------------------------------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During The Total
------------ Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----- ------
<S> <C> <C> <C> <C> <C>
Split of common stock
from PanAgra during
October 1998 2,230,000 $ 2,230 $ 390,810 $ 393,040
Net loss for the period
from September 15, 1998
(inception) to
December 31, 1998 $ (47,004) (47,004)
--------- --------- ------- ------
Balance,
December 31, 1998 2,230,000 2,230 390,810 (47,004) 346,036
Issuance of common stock 1,100,000 1,100 98,900 100,000
Net loss for the year
ended December 31, 1999 (184,371) (184,371)
--------- --------- ------- ------- -------
Balance,
December 31, 1999 3,330,000 3,330 489,710 (231,375) 261,665
Net loss for the
nine months ended
September 30, 2000 (82,102) (82,102)
--------- ------ ------
Balance,
September 30, 2000 3,330,000 $ 3,330 $ 489,710 $(313,477) $ 179,563
========= ========= ========= ======= =======
</TABLE>
See Accountants' Compilation Report and Notes to Financial Statements.
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
---------------------------------------
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
-----------------------
(UNAUDITED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Period from
September 15, 1998
Nine months ended (inception) to
September 30, 2000 September 30, 2000
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (82,102) $(313,477)
Adjustments needed to reconcile net (loss) with
net cash used by operating activities:
Depreciation expense 1,787 6,286
Uncollectible note receivable -0- 30,000
Impairment loss on investment -0- 29,999
Changes in operating assets and liabilities:
Increase in other current assets -0- (966)
Decrease in accounts payable and accrued
expenses (4,529) (18,603)
-------- --------
Net cash used by operating activities (84,844) (266,761)
-------- --------
Cash flows from financing activities:
Increase in note receivable -0- (8,000)
Purchase of investments -0- (197,000)
Proceeds from sale of common stock -0- 100,000
Issuance of common stock upon distribution
from UNTI -0- 395,273
Decrease in interest receivable 1,500 1,500
-------- --------
Net cash provided by financing activities 1,500 291,773
-------- --------
Net decrease/increase in cash and cash equivalents (83,344) 25,012
-------- --------
Cash and cash equivalents - Beginning of period 108,356 -0-
-------- --------
Cash and cash equivalents - September 30, 2000 $ 25,012 $ 25,012
======== ========
Supplemental disclosures:
Income taxes paid $ 1,432 $ 4,112
======== ========
Supplemental schedule of noncash financing activity:
Net liabilities over assets acquired distribution
from UNTI $ 2,233
========
</TABLE>
See Accountants' Compilation Report and Notes to Financial Statements.
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
---------------------------------------
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
SEPTEMBER 30, 2000
------------------
(UNAUDITED)
(1) ORGANIZATION AND PRINCIPAL BUSINESS ACTIVITY
--------------------------------------------
United Network Marketing Services, Inc. (a development stage company) (the
"Company"), was formed on September 14, 1998 under the laws of the State
of Delaware. The Company has been in the development stage since its
inception on September 15, 1998. The Company plans to develop internet
technology and content. The Company was a wholly owned subsidiary of
United Network Technologies, Inc. ("UNTI") and, on September 28, 1998,
certain assets of UNTI (mainly cash of approximately $400,000 and
miscellaneous other assets) were distributed to the Company.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
CASH AND CASH EQUIVALENTS
-------------------------
The Company considers cash equivalents to be highly liquid investments
with original maturities of three months or less. The carrying amount
approximates fair value due to the short-term nature of these cash
equivalents.
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,
the disclosure of contingent assets and liabilities at year-end and the
reported amounts of revenues and expenses during the year. Actual results
could differ from these estimates.
INCOME TAXES
------------
The Company utilizes the accrual basis of accounting for both financial
statement and income tax reporting purposes. Income tax expense is based
on reported earnings before income taxes.
FIXED ASSETS AND DEPRECIATION
-----------------------------
The equipment and furniture and fixtures are stated at cost. Major
expenditures for property and those which substantially increase useful
lives are capitalized. Maintenance and repairs are charged directly to
expense as incurred. When assets are retired or otherwise disposed of,
their costs and related accumulated depreciation are removed from the
accounts and resulting gains or losses are included in income.
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
---------------------------------------
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
SEPTEMBER 30, 2000
------------------
(UNAUDITED)
Generally accepted accounting principles require that assets be
depreciated over their estimated useful lives. The Company has elected to
use the modified accelerated cost recovery system ("MACRS") provided by
the Internal Revenue Code to depreciate the equipment and furniture and
fixtures. This method generally provides for a faster write-off of certain
asset's costs than would be allowed by generally accepted accounting
principles. Accordingly, the equipment and furniture and fixtures are
being depreciated over periods ranging from 5 to 7 years, on an
accelerated basis.
INVESTMENTS IN AFFILIATES
-------------------------
Investments in affiliates are recorded on either the cost method or on the
equity method of accounting. The equity method of accounting is used for
investments of 20% to 50% and where the Company does not have the ability
to exercise effective control. The cost method of accounting is used for
investments of less than 20%.
The Company accounts for impairment of long-lived assets in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of. The Company periodically evaluates the recoverability
of its long-lived assets for any possible impairment of value (see Note
3).
(3) RELATED-PARTY TRANSACTIONS AND INVESTMENTS IN AFFILIATES
--------------------------------------------------------
Pursuant to the terms of a merger agreement between PanAgra and United
Network Technologies, Inc. ("UNTI"), UNTI established the Company prior to
the effective date of the merger (October 2, 1998) and declared a dividend
of all the shares of the Company to the pre-merger shareholders. UNTI
transferred to the Company cash, the rights to the software known as the
"Emotions Manager", 32,665 shares of post-split common stock of PanAgra as
well as other assets and liabilities. The shares of the Company's common
stock, originally held by PanAgra were subsequently distributed as
described above.
The Company's investments in affiliates consist of a minority interest in
TrueYou.com Inc. ("TY"), a 50% interest in Access: New Age ("ANA") and a
50% interest in My Health Power ("MHP").
During 1999, the Company purchased 100,000 shares of TY at a cost of
$150,000. The Company owns approximately 4% of TY and, therefore, the
investment is being accounted for on the cost method.
-2-
<PAGE>
UNITED NETWORK MARKETING SERVICES, INC.
---------------------------------------
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
SEPTEMBER 30, 2000
------------------
(UNAUDITED)
During 1999, the Company also purchased 50% of ANA at a cost of $17,000.
Earnings of ANA have been immaterial and therefore no adjustment has been
made to the investment.
During 1999, the Company also purchased 50% of MHP at a cost of $30,000.
In accordance with SFAS No. 121, this investment was deemed worthless at
December 31, 1999 and was written down to $1, resulting in a noncash
charge of $29,999 to operations during 1999.
(4) NOTE RECEIVABLE
---------------
The Company has a note receivable from ANA (see Note 3) in the amount of
$8,000. The note becomes due on May 15, 2002 and bears interest at the
rate of 8% per annum, payable semiannually.
(5) COMMITMENTS AND CONTINGENCIES
-----------------------------
As of September 30, 2000, the Company has a consulting agreement which
provides for consulting fees of $60,000 per year in the aggregate to be
paid provided that Alan Gelband (majority stockholder of the Company)
remains a director or officer of the Company.
-3-
