FINAL PROSPECTUS
Filed Pursuant to Rule 424(b)(4)
Registration No. 333-38348
_______________
BERENS INDUSTRIES, INC.
RESALE OF 1,692,380 SHARES OF COMMON STOCK
This prospectus relates to the resale of shares of our common stock by the
stockholders listed in this prospectus, which is not being underwritten. We
will not receive any proceeds from the sale of these shares.
Our common stock trades on the OTC Electronic Bulletin Board under the
symbol BEII. On May 22, 2000, the last reported bid price of our common stock
was $1.687.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES
ONLY IF YOU CAN AFFORD A COMPLETE LOSS. WE URGE YOU TO READ THE "RISK FACTORS"
SECTION BEGINNING ON PAGE 6 ALONG WITH THE REST OF THIS PROSPECTUS BEFORE YOU
MAKE YOUR INVESTMENT DECISION.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
___________________________
THE DATE OF THIS PROSPECTUS IS June 12, 2000
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TABLE OF CONTENTS
PAGE
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Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Price Range of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Management Discussion And Analysis Of Financial Condition And Results Of Operations 12
Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Related Party Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Principal Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Description of Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Shares Available For Future Sale. . . . . . . . . . . . . . . . . . . . . . . . . . 33
Selling Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Where You Can Find More Information . . . . . . . . . . . . . . . . . . . . . . . . 39
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
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PROSPECTUS SUMMARY
This summary highlights selected information contained in this prospectus.
to understand this offering fully, you should read the entire prospectus
carefully, including the risk factors beginning on page 6 and the financial
statements. Unless otherwise indicated, this prospectus assumes that no
outstanding options or warrants are exercised.
BERENS INDUSTRIES, INC.
Berens Industries, Inc., through its wholly owned subsidiary,
Artmovement.com, Inc., is a development-stage company focused on delivering one
of the Internet's first private-label auction networks for the art and antique
world.
Our auction software solution, Streaming Auctions, will enable art
galleries, retailers, wholesalers, and antique shops to create their own auction
markets on their own web sites. Our software will allow clients to benefit from
Internet auction commerce without having to utilize large auction sites, and
without having to sacrifice their private label.
Through our web site at Artmovement.com, our Streaming Auctions clients
will be able to take advantage of our networked auction solutions. This will
allow clients to include their inventory on other Artmovement.com client's web
sites. Our goal is to create a community of small to medium sized art
galleries, all of which can benefit from each other's web traffic and promotion.
Business Strategy
Our goal is to become a leading provider of out-sourced, networked
e-commerce services for the art and antique markets. Key elements of our
strategy include:
- expanding the reach and scope of the Artmovement network;
- increasing traffic and transactions across the Artmovement Network;
- continuing to provide new service offerings; and
- leveraging our expertise to further penetrate the
business-to-business market.
Our principal executive offices are located at 701 N. Post Oak, Suite 350,
Houston, Texas 77024, and our telephone number is (713) 682-7400. All
references to we, our, or us refer to Berens Industries, Inc., a Nevada
corporation, and our subsidiaries.
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THE OFFERING
Common stock outstanding 19,684,880 shares.
Common stock to be offered 1,692,380 shares.
Market for our common stock Our common stock currently trades on the
OTC Bulletin Board under the symbol BEII.
The market for common stock is highly
volatile. We can provide no assurance that
there will be a market in the future for
our common stock.
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SUMMARY FINANCIAL DATA
The following table contains historical and operating data of Berens
Industries:
- for the two fiscal years ended December 31, 2000 and 1999, which is
derived from our consolidated audited financial statements; and
- for the three month periods ended March 31, 2000 and 1999, which is
derived from our unaudited financial statements.
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THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
2000 1999 1999 1998(1)
---------- -------- ----------- --------
(UNAUDITED) (AUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenue $ 12,551 $ - $ 2,543 $ -
Website development costs - - 5,263,157 -
Loss from operations (188,384) (1,543) 6,421,988 (2,158)
Net loss (188,384) (1,543) 6,421,988 (2,158)
Basic and dilutive net loss
per share (0.01) (0.01) (1.39) (0.01)
BALANCE SHEET DATA
Total assets $ 490,777 $ - $ 91,886 $ -
Working capital deficit 409,593 (9,307) (101,283) -
Total liabilities 75,370 9,307 185,888 5,606
Stockholders' equity (deficit) 415,407 (9,307) (94,002) (5,606)
<FN>
(1) The recapitalization of Berens Industries, Inc. did not occur until
February 26, 1999. The balance sheet at December 31, 1998 is the balance sheet
of National Air Corporation prior to the recapitalization transaction described
in Management's Discussion and Analysis of Financial Condition and Results of
Operations.
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RISK FACTORS
WE HAVE A LIMITED OPERATING HISTORY AND OUR FUTURE SUCCESS IS UNCERTAIN.
We began our current operations in February 1999, and have a limited
operating history for you to analyze or to aid you in making an informed
judgment concerning the merits of an investment in our securities. Although we
have begun to implement our business strategy, we have to date conducted limited
revenue generating operations. Therefore, we can provide no assurance that we
will be able to generate significant revenue from our proposed operations in the
future.
OUR BUSINESS STRATEGY REQUIRES SIGNIFICANT CAPITAL THAT WE DO NOT CURRENTLY
HAVE.
Our business strategy requires significant capital. We do not currently
have sufficient capital to fully execute our business strategy, and we do not
have commitments for the capital. Although we are actively seeking additional
funding, there is no assurance that we will be able to raise additional funding
in the future. If we are able to raise additional capital, there is no
assurance that we will be able to raise the capital on favorable terms.
WE EXPECT TO CONTINUE TO HAVE LOSSES AND WE MAY NEVER BECOME PROFITABLE.
We cannot assure you that we will ever achieve profitability or, if we ever
achieve profitability, that it will be sustainable. Since inception in February
1999 until March 31, 2000, we generated revenues of $15,094 and incurred a net
operating loss of $6,610,372.
We anticipate increased expenses as we continue to:
- expand and improve our infrastructure;
- expand our sales and marketing efforts; and
- pursue additional industry relationships.
As an early-stage company, we do not have the operating experience to
estimate what the extent of these expenditures will be at this time, but they
will increase as we expand. In order to become profitable in the future, we
will need to substantially increase our revenues.
WE DEPEND ON KEY PERSONNEL IN AN INDUSTRY THAT HAS A SHORTAGE OF QUALIFIED
PERSONNEL.
Our success is substantially dependent on the continued service and
performance of our senior management and key personnel. The loss of the
services of any of our key management could have a negative effect on our
business. If we do lose any of these people, we will be required to hire new
employees, which is time consuming and may not be possible due to the shortage
of qualified personnel in our industry. We maintain life insurance policies for
Marc I. Berens and Yolana Berens. Our future success also depends on our
ability to attract, hire, and retain other highly skilled personnel.
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Competition for personnel in our industry is intense, and we may not be able to
successfully attract, assimilate, or retain qualified personnel.
THE HARDWARE WE USE MAY BE DAMAGED, EITHER PHYSICALLY OR THROUGH COMPUTER
VIRUSES.
Our success largely depends on the efficient and uninterrupted operation of
the computer and communications hardware systems we use. The hardware is
vulnerable to:
- computer viruses;
- electronic break-ins; and
- physical vulnerability to damage or interruption from fire, long-term
power loss, and telecommunications failures.
These events could lead to delays, loss of data, or interruptions in
service, which could subject us to liability and harm our reputation.
WE INTEND TO EXPAND OUR BUSINESS, WHICH WILL PLACE A SEVERE STRAIN ON OUR
LIMITED RESOURCES.
We expect to expand our operations, and anticipate that further significant
expansion will be required to address potential growth in our customer base and
market opportunities. This expansion may place a significant strain on our
limited resources. We expect to hire new employees and increase our
infrastructure as we expand.
IF THE MARKET FOR DYNAMIC COMMERCE DOES NOT CONTINUE TO GROW, OUR BUSINESS MAY
SUFFER.
Our success is highly dependent upon the widespread acceptance and use of
the Internet for dynamic commerce. In particular, the continued adoption by
buyers and sellers of online auctions and other similar pricing models on the
Internet is critical to our continued growth. Use of the Internet for auctions
and other forms of dynamic commerce is still at an early stage of development.
We cannot be certain that acceptance of online auctions and other forms of
dynamic commerce will continue to develop. Any material reduction in the growth
of these markets would harm the growth of our business. The continued growth of
these markets is dependent upon a number of factors, including the following:
- the continued growth in the number of buyers and sellers who use
electronic commerce services;
- the continued market demand for dynamic pricing by buyers and
sellers; and
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- the continued growth in the number of businesses who desire online
auction capabilities.
DIFFICULTIES ASSOCIATED WITH OUR BRAND DEVELOPMENT MAY HARM OUR ABILITY TO
ATTRACT CLIENTS.
We believe that our growth will depend on the strengthening of our brand
which is critical to achieving widespread acceptance of Streaming Auctions and
Artmovement.com, particularly in light of the competitive nature of the online
commerce industry. Promoting and positioning our brand will depend largely on
the success of our marketing efforts and our ability to provide high quality
services. To promote our brand, we will need to increase our marketing budget
and increase our financial commitment to create and maintain brand loyalty among
users. We intend to increase our marketing efforts and budget as our membership
base expands. However, we will be severely limited in our marketing abilities,
if we are not able to raise sufficient capital to fully execute our marketing
strategy. In addition, these brand promotion activities may not yield increased
revenues and any revenues may not offset the expenses incurred by us in
attempting to build our brand.
OUR BUSINESS MAY BE HARMED BY THE LISTING OR SALE BY OUR CLIENTS OF PIRATED
ITEMS.
We may receive communications alleging that items listed or sold through
our service by our clients infringe third-party copyrights, trademarks, trade
names, or other intellectual property rights. An allegation of infringement of
third-party intellectual property rights may result in litigation against us.
Any litigation could be costly for us, could result in increased costs of doing
business through adverse judgment or settlement, or could require us to change
our business practices in expensive ways.
OUR MARKET IS INTENSELY COMPETITIVE AND HAS MANY LARGE WELL FINANCED
PARTICIPANTS.
Currently, we believe that we are one of the first companies using our
business model. However, we may face competition from existing online auction
sites or new person-to-person trading websites that provide similar offerings in
the future. Barriers to entry are relatively low and future competitors could
launch new sites at a relatively low cost using commercially available software.
Likewise, it would not be costly for existing online auction sites to modify
their format to provide similar products or services. Many of the major online
auction sites, if they were to compete with us in the future, have:
- longer operating histories;
- larger user bases;
- longer relationships with consumers;
- greater brand or name recognition; and
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- significantly greater financial, technical and marketing resources
than we do.
Competitive pressures created by any one of these companies, or by new
entries offering our services could harm our business.
OUR BUSINESS IS SUBJECT TO ONLINE COMMERCE SECURITY RISKS.
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. Our security
measures may not prevent security breaches. Our failure to prevent security
breaches could harm our business. Advances in computer capabilities, new
discoveries in the field of cryptography, or other developments may result in a
compromise or breach of the technology used by us to protect customer
transaction data. Any compromise of our security could harm our reputation and,
therefore, our business. In addition, a party who is able to circumvent our
security measures could misappropriate proprietary information or cause
interruptions in our operations or the operations of our clients. We may need
to expend significant resources to protect against security breaches or to
address problems caused by breaches. Security breaches could damage our
reputation and expose us to a risk of loss or litigation and possible liability.
OUR STOCK PRICE IS VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT THE
PRICE YOU PAID.
The market for our securities is highly volatile. The closing price of our
common stock has fluctuated widely since our common stock began trading on the
OTC Bulletin Board as Berens Industries under the symbol BEII. The stock
markets have in general, and technology companies in particular, experienced
extreme stock price volatility. It is likely that the price of our common stock
will continue to fluctuate widely in the future.
A NOTE ABOUT THE FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS
This prospectus, including the sections entitled "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," contains forward-looking statements.
These statements relate to future events or our future financial performance and
involve known and unknown risks, uncertainties and other factors that may cause
our or our industry's 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 the
forward-looking statements. These risks and other factors include those listed
under "Risk Factors" and elsewhere in this prospectus.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or the negative of these terms or other
comparable terminology. These statements are only predictions. Actual events
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or results may differ materially. In evaluating these statements, you should
specifically consider various factors, including the risks outlined under "Risk
Factors." These factors may cause our actual results to differ materially from
any forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of these
forward-looking statements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform our
prior statements to actual results.
USE OF PROCEEDS
We will not receive any proceeds from the resale of the common stock
offered under this prospectus.
PRICE RANGE OF COMMON STOCK
Since August 27, 1999, our common stock has actively traded on the OTC
Electronic Bulletin Board under the symbol BEII. The market for our common
stock is highly volatile. As of April 19, 2000, there were approximately 196
holders of record of our common stock. On
May 22, 2000, the closing price of our common stock was $1.687 per share.
The following table provides the range of high and low bid information of
our common stock since we began trading as Berens Industries as reflected by the
OTC Electronic Bulletin Board. The quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.
FISCAL 2000 HIGH LOW
----------- ------ -------
1st Quarter $ 4.00 $2.0625
FISCAL 1999 HIGH LOW
----------- ------ -------
4th Quarter $2.625 $ 0.90
3rd Quarter (beginning August 27, 1999) $2.875 $ 1.50
DIVIDEND POLICY
We have not declared or paid cash dividends on our common stock to date.
Our current policy is to retain earnings, if any, to provide funds for operating
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and expansion of our business. This policy will be reviewed by our board of
Directors from time to time in light of our earnings and financial position.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
We are a Nevada corporation involved in the development of an online
auction site for exclusive paintings, other art work, and antiques. We are
considered a development stage enterprise because we have not yet generated
significant revenue from our primary business operations. Since inception, we
have devoted substantially all of our efforts to website development activities
and to the search for sources of capital to fund our efforts.
On June 15, 1999, we were acquired by National Air Corporation in a
recapitalization transaction accounted for similar to a reverse acquisition,
except that no goodwill was recorded. National Air Corporation was the acquired
company in the transaction, but remains the surviving legal entity for
accounting purposes. Before the acquisition, National Air Corporation was a
non-operating public shell corporation with no significant assets. Accordingly,
the transaction was treated as an issuance of stock by us for National Air
Corporation's net monetary assets, accompanied by a recapitalization. In
connection with this transaction, we issued 3,755,745 shares of common stock in
exchange for all outstanding shares of National Air Corporation and for
consulting services associated with the transaction. Since this transaction
was, in substance, a recapitalization of and not a business combination,
proforma information is not presented and a valuation of our company was not
performed.
During the period from inception, February 26, 1999 to March 31, 2000, we
have not generated significant revenue from our operations and may not generate
significant revenue during the remainder of 2000 because we plan to use
substantially all our resources for further development of our markets and for
further improvements to our website operations.
We have a limited operating history on which to base an evaluation of our
business and prospects. Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stages of development, particularly companies in new and rapidly evolving
markets such as online commerce. We will encounter various risks in
implementing and executing our business strategy. We can provide no assurance
that we will be successful in addressing the risks, and the failure to do so
could have a material adverse effect on our business.
RESULTS OF OPERATIONS
For the period from inception in February 2000 until December 31, 1999, we
generated service revenues of $2,523 and incurred an operating loss of
$6,421,988. Our operating expenses for the period included of $192,139 of
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salaries, consulting, and professional fees associated with the development of
our business. Operating expenses also included a of $5,263,157 non-cash
charge for website development incurred in connection with our
acquisition of Artmovement.com.
For the quarter ended March 31, 2000, we generated service revenues of
$12,551 and incurred an operating loss of $188,384. Our operating expenses for
the period included primarily $69,525 of salaries, consulting, and professional
fees, and $29,700 in license fees.
In view of the rapidly changing nature of our business, our recent
entrance into the auction market, and our limited operating history, we believe
that period to period comparisons of our revenue and operating results are not
necessarily meaningful and should not be relied upon as indications of our
future performance.
LIQUIDITY AND CAPITAL RESOURCES AND PLAN OF OPERATIONS FOR FISCAL 2000
As of March 31, 2000, we had an accumulated deficit of $6,610,372 incurred
entirely in 1999 and the first quarter of 2000 and funded by paid-in capital,
debt, and use of our common stock in acquisitions. We had cash and cash
equivalents of $429,046 as of March 31, 2000. We do not expect to make any
major capital expenditures in the foreseeable future, but we do expect that
operating losses will continue until our operations generate sufficient revenues
to fund our continuing operations, and we cannot be sure when or if that will
occur.
We have financed our operations mainly through the sale of our common stock
and we have been entirely dependent on outside sources of financing for
continuation of our operations. During the three months ended March 31, 2000,
we raised approximately $503,000 from a private placement of our common stock.
Our acquisition of Artmovement.com for $8,263,157 in exchange for 3,755,745
shares of our common stock on December 31, 1999 was designed to give us a
platform for better market penetration and access to additional capital.
As part of our acquisition of Artmovement, we obtained a $3,000,000
receivable owed to Artmovement, of which $100,000 was received in 1999 and
$161,000 in the first quarter of 2000. The remaining portion of the receivable
is due June 30, 2000 with penalties for late payment. However, the obligation
may be terminated by the debtor on September 1, 2000 without recourse.
Accordingly, there is no assurance that we will be able to collect this
receivable. If collected, it is our belief that the approximately $2,700,000
due under this receivable will be sufficient to fund our operations for at least
two years. Based on our current plan of operation we anticipate that our
monthly operating expenditures will increase and will average approximately
$63,000 per month for the next twelve months. Operating expenditures include
administrative expenses, website development, and professional fees. These
amounts are merely estimates, and we can provide no assurance that unexpected
expenses will not shorten the period of time within which our funds may be
utilized.
If we do not receive the approximately $2,700,000 due under the receivable
acquired with Artmovement and if we are unable to raise alternative funding, we
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may have to limit our operations to an extent that we cannot presently
determine. The effect on our business may include the sale of our assets or the
curtailment of business operations. Based on our current monthly operating
expenditures, and assuming that we are not able to raise additional external
funds, we expect we will be able to use our current working capital until
September 2000. Currently, we do not generate significant revenues from the
services that we provide and do not expect to generate significant revenues for
the foreseeable future. Although we have no commitments for capital, we may
raise additional funds through:
- public offerings of equity securities or convertible debt;
- private offerings of equity or debt securities; or
- other sources.
Stockholders should assume that any additional funding that we obtain will
cause substantial dilution to current stockholders. In addition, we may be
unable to raise additional funds on favorable terms, if at all. Our capital
requirements will depend on numerous factors, including the progress of our
website development and marketing efforts and the economic impact of competing
websites.
Our ability to achieve profitability will depend on our ability to
successfully make the transformation from a development stage enterprise to a
commercially viable Internet business. We can make no assurance that we will be
able to successfully make that transition.
The report from our independent accountants includes an explanatory
paragraph which describes substantial doubt concerning our ability to continue
as a going concern, without continuing additional capital contributions. We may
incur losses for the foreseeable future due to the significant costs associated
with website development and marketing activities which will be necessary for
successful commercialization of our products and services.
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BUSINESS
BUSINESS CONCEPT AND STRATEGY
We are a development-stage company focused on delivering one of the
Internet's first private-label auction networks strictly for the art and antique
world. Through our Streaming Auctions packaged software network solution, we
intend to enable art galleries and antique shops with our custom ready-made
network solutions to expand their market and opportunities. Our Streaming
Auctions solution will provide clients with the software, infrastructure and
technical support necessary to create their own Internet art and antique auction
market.
We intend to offer art galleries and antique shops using our Streaming
Auctions solution, the opportunity to be connected to one of the first Internet
art and entertainment portals at Artmovement.com. We believe that Streaming
Auctions and Artmovement.com are unique in their fundamental ability to enable
clients to explore the commercial and creative limits of the Internet medium,
and that together, they will provide a complete solution for all sectors of the
art and antique market.
Our goal is to become the leading provider of outsourced, networked
e-commerce services for the art and antique markets. The key elements of our
strategy include:
- expanding the reach and scope of the Artmovement network;
- increasing traffic and transactions across the Artmovement network;
- continuing to provide new service offerings;
- expanding into additional international markets; and
- leveraging our expertise to further penetrate the
business-to-business market.
Our primary approach to market penetration is two-fold: (1) attract
business clients who have a long-standing reputation with art and antique
patrons, and (2) develop a portal to become a conduit for Webcast events and
Internet art performances that will attract more patrons. Our primary source of
revenues will be from product and service-related subscriptions fees, service
fees, transaction-related fees and advertising.
OUR CORPORATE HISTORY
We were incorporated in January 1985 as a Nevada corporation under the name
National Air Corporation. From 1985 until 1992, we engaged in the business of
leasing and chartering aircraft to provide air transportation services. These
operations were unsuccessful, and we ceased all activities in 1992. In June
1999, we acquired all of the issued and outstanding shares of capital stock of
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Berensgallery.com, Inc., a Nevada corporation. Subsequent to this transaction,
we changed our name to Berens Industries, Inc. In December 1999, we acquired
all of the issued and outstanding shares of capital stock of Artmovement.com,
Inc., a Nevada corporation in exchange for 12,960,000 shares of common stock to
the shareholders of Artmovement.com. At the present time, Berensgallery.com
does not conduct any significant business operations.
OUR MARKET OPPORTUNITY
We believe the traditional art and antique markets are well suited for
e-commerce because of the wide range of unique items available, the dispersed
locations of potential customers, and the relatively low operating costs. In
addition, we believe demographic trends, a strong economy, and the increase in
home ownership have all contributed to greater spending on private collections
of art, antiques, collectibles, and home decorations.
Industry Overview: Traditional Art Market
The art and antique market has historically been characterized by brick and
mortar gallery and auction businesses organized as single galleries or small art
store chains, each representing different artists and products. Individual art
retailers typically attract customers by offering high quality products at
competitive prices that have consumer appeal and recognized artists.
Traditional business channels of art retailers have historically been
challenged with:
- Inventory costs. The unpredictable appeal and high cost of acquiring
art inventory can create slow inventory cycles.
- Limited selections. Selection is often limited due to scarcity of
original and limited edition art and physical retail space
constraints.
- High operating cost structures. Traditional brick and mortar
galleries typically have a high cost of operations as most leading
galleries are located in expensive shopping locales or in high-cost
retail outlets and malls.
- High cost of customer service. Luxury goods buyers often demand
personalized customer service and sales people must be well trained
and highly educated. Sales people must devote considerable time
to each customer. We believe these factors combine to create a
high cost in time and resources to maintain an effective gallery
sales force.
We believe that the majority of traditional art and antique market
participants face numerous obstacles in establishing an online presence and
generating significant traffic, such as:
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- High barriers to entry. Traditional brick and mortar galleries often
achieve high profit margins, but they have spent little on computer
infrastructure in the past. We estimate that to start a reputable
online auction, they will need to invest heavily in software,
hardware, and bandwidth.
- High cost to market websites. E-commerce companies in every market are
often spending significantly more capital on marketing their online
brand than they are on development costs.
- Must hire outside their core business. To maintain and manage a
successful online presence, art and antique companies will have to
hire IT staff, web designers, and programmers with which they
traditionally have no experience managing.
Industry Overview: Internet Art Market
There are now a number of on-line art galleries and collectibles retailers.
These can be categorized broadly as:
- Upscale auction houses. These retailers are attempting to extend their
reach and margins by offering items for auction on-line and by
encouraging smaller dealers to affiliate with them.
- On-line companies. These companies focus exclusively on Internet sales
of art and art-related items, ranging from high quality original work
to collectibles and posters.
- Brick and mortar companies. These companies are seeking to supplement
store sales with website business or to shift to a full Internet
model.
Since the summer of 1999, eBay and Amazon have partnered with two upscale
auction houses, Butterfield & Butterfield and Sotheby's, respectively. The
eBay/Butterfield partnership resulted in eBay rolling out their "Great
Collections" primary category in the Fall of 1999. The Amazon/Sotheby's
partnership resulted in a co-label auction hall hosted at sothebys.amazon.com.
Both Sotheby's and Butterfield will, or already have, opened private label
efforts of their own at their own websites.
We believe that large auctioneers will not be able to get other smaller
dealers to upload their inventory because of a fundamental characteristic of
this fragmented market. Fragmented markets may have a small number of large
brand names, but a significant portion of the market is divided regionally and
locally among small-to-medium sized enterprises. They each have invested
significant marketing capital in generating regional name recognition and
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reputation, and we believe they have generally shown a strong unwillingness to
co-mingle inventory under another brand.
In fragmented market environments, we expect that mature and profitable art
and antique dealers will show limited interest in listing inventory with large
auctioneers. We believe that these enterprises will remain brick and mortar
companies until they have the option to move to the Internet under their own
private label rather than to co-label with a large auction house.
We believe the leaders in the Internet art and antique market will be the
companies who provide:
- Complete technology solutions. We believe this market is not computer
savvy and requires one-stop shopping for applications, hardware, and
hosting.
- Private-label solutions. We believe this market considers quality and
reputation a key to success, and they have yet to embrace generic
outlets.
- Knowledge and expertise. Few brick and mortar companies have computer
expertise in-house, and may not consider managing teams of consultants
a viable option. We expect that they will show little interest in
trying a solution that requires large capital expenditures on
technology personnel.
- A focus on art and antiques. This market tends to be educated and
refined in their business and ways of doing business and they expect
vendors to be as educated and refined as them in doing business in
this unique marketplace.
OUR SOLUTION
We believe that the demand for art and collectible products through
specialty retail stores presents a significant business opportunity for us. We
believe these markets are largely untapped and provide an opportunity for
focused and quick-maneuvering companies to carve-out market share. We believe
our Streaming Auctions networked auction software and our website at
Artmovement.com will successfully meet the challenges posed to the traditional
art retailing market and offer greater flexibility and control than that offered
by larger Internet auction sites.
Streaming Auctions
Our flagship software product, Streaming Auctions, is currently scheduled
for release by the end of the second quarter of 2000. Streaming Auctions will
be one of the first hosted software products to deliver networked auctions
exclusively to the art and antique market. It will provide a flexible,
ready-made solution providing branded auctions at a low monthly subscription
rate with no up-front costs.
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As a networked auction solution located on the Artmovement network, we
believe Streaming Auctions will be able to leverage the buying and selling power
of the whole networked community by aggregating the inventory of all clients'
auctions so buyers can bid on and purchase items from any client auction site.
We call this Patron Membership reciprocity. We believe that through incentive
revenue sharing agreements, we can increase the number of Streaming Auctions
clients who are willing to "share" their inventory with other clients' who are
participating in the Patron Membership program.
Through Artmovement.com, we will provide services and amenities for
patrons, curators, critics, appraisers, and private sellers. We will focus
exclusively and entirely on the full spectrum of the art and antique market.
The complete solution for clients will meet the following requirements of
operating their own online presence:
- Complete e-commerce solution. Clients receive Internet applications
plus bundled hosting services that include scalable server(s), managed
hosting, and bandwidth.
- Low cost. All our products and services are licensed on a monthly
basis, so clients do not have to invest in ownership of technology.
- Expanding patron membership. All of our products are centrally
networked to allow client inventory to be accessible to patrons
throughout the Artmovement network. Clients may choose to open their
inventories to the entire network, thus accepting inventory listings
from others as well, or they many keep their inventory closed to other
client sites, thus only benefitting from patron referrals coming
through promotion at Artmovement.com.
- Revenue sharing. As an incentive to make inventory available to all
clients on the Artmovement network, we will share our transaction
fees.
- Promotion of customer brand. Our products plug into clients' existing
website so that clients can continue to market their online presence
under their own brand.
- Affinity marketing. Each client will receive affiliate membership into
the Artmovement network. We intend to use the portal location to
attract more patronage for the benefit of affiliate members. All
registered users at Artmovement.com will receive Patron Membership
reciprocity throughout our client locations, meaning they are treated
as fully-registered members throughout the Artmovement network.
- Market information. We have co-exclusive Internet rights to bundle the
prestigious Mayer International Auction Records Index, also known as
"The
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Blue Book." We believe Mayer is the definitive resource for fine art
dealers, appraisers, museums and galleries for works of art that have
sold at auction in the past twelve years. The 1987-1999 database
contains more than 1,200,000 auction records through December 31,
1998. More than 800 auction houses in 40 countries contribute
information to Mayer.
Our clients may take advantage of dynamic pricing throughout the
Artmovement network using progressively more expansive means to gain exposure to
more buyers. The various levels are meant to cater to both prestigious
galleries with no interest in co-mingling inventories and other galleries who
would like the opportunity to generate revenues from additional sources. Our
inventory listing options are as follows:
- Artmovement.com referrals. This is the most protective of client
reputation. Client inventory is accessed through links to their
website prominently displayed in the Artmovement.com auction area, and
is not listed in the Artmovement network. These clients gain traffic
to their websites by click-throughs.
- Artmovement.com auctions. These clients allow inventory to be listed
at Artmovement.com for bidding. These clients gain traffic via
click-throughs and expose their inventory to Artmovement.com
registered users.
- Full participation in the Artmovement network. These clients open
their inventory to all other licensees, and in turn, inventory from
other licensees shows up at their site. As an incentive to do this,
Artmovement shares its transaction fee revenue with the client who
produced the highest bidder.
- Classified ads. Available separately, is the option to turn on a
classified ads area. All classified ads show up at any client site
that has activated the classified ads option. Since these auctions are
not inventory belonging to the licensee, the Artmovement transaction
fee is shared with both the site where the seller started the auction
and the site producing the highest bidder.
BRANDING CONTROL
Our applications will enhance existing websites with no intrusion onto the
client's current web servers. These applications do not require the client to
promote or otherwise make use of Artmovement.com or any other of our branded
services. Our role is to empower the client with Internet solutions that add a
full-function "Click and Brick" department to their existing brick and mortar
enterprise. By added solutions under our client's brand name, we intend to
create a low-cost solution for galleries, museums, and dealers who insist on
advancing their own name recognition while protecting their reputation.
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TECHNOLOGY
All of our products will be hosted by a third-party ASP, or application
service provider. While Streaming Auctions provides many of the benefits of
popular ASP products, there are limitations imposed by Internet browsers, which
is Streaming Auctions delivery platform. Clients who wish to exceed the limits
imposed by browsers and unlock all the possibilities of ASP products and
services can be upsold to several existing solutions without losing any of the
simplicity of Artmovement products.
MARKETING
Artmovement.com is in the early stages of development. We expect
Artmovement.com to become one of the first Internet art and entertainment
portals to have public access, which means that only the front page and site
maintenance is managed by Artmovement staff, with the rest being created and
maintain by registered users. To achieve this, Artmovement will design
sophisticated security layers of user access rights and privileges. The
resulting portal will be similar to a large corporate Intranet portal consisting
of editors, contributors, curators, repositories, and other access control
strategies.
We believe art and entertainment is an established market with a mature
demographic. We believe art and entertainment is also an attraction to many
successful Internet information sites. However, these portals typically do not
allow galleries and museums to maintain their own listings, event calendars, and
discussion groups, much less load-intensive web-casting events.
Our primary marketing effort will consist of promotional give-aways to
foster a global marketing effort or word-of-mouth marketing. We also intend to
launch promotional giveaway campaigns to attract Artmovement.com museum
partners. If we are able to attract partners, we believe they will not only
contribute marketing, patrons, and content for Artmovement.com, but will also
provide sales development channels in their region.
Our ability to implement any of the above marketing efforts is dependent on
receiving significant additional financing. We can provide no assurance that we
will be able to raise additional funds to implement our marketing strategy, and
if we are unable to do so our business and financial condition will suffer.
EMPLOYEES
We currently employ nine full-time employees and six part-time employees.
No employees are covered by a collective bargaining agreement. We consider
relations with are employees to be satisfactory.
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INTELLECTUAL PROPERTY
We rely heavily on various types of intellectual property for our success
and competitive positioning. We use trademarks, copyrights, trade secrets, and
the laws pertaining to them as well as contractual provisions to protect our
intellectual property. Currently, our most important proprietary rights are
those embodied in our auction service offerings. We also license software from
Microsoft for use in our development and production systems. Because our
technology is located on our operating systems and we do not license our
software to any customer or other third party, we believe that the risk of
unauthorized use of our technology is small. However, no combination of
intellectual property protections can guarantee the continued security and
availability of our intellectual property.
Creation and implementation of our technology and proprietary assets are
all protected at their inception and throughout their economic lifetimes by
confidentiality and proprietary rights agreements, which our employees are
required to execute upon entering into employment with us. We also rely on
confidentiality agreements entered into with contractors and vendors. We can
provide no assurance that our employees, contractors, or vendors will abide by
these confidentiality agreements. If these parties do violate the terms of
these agreements, our business would suffer.
We intend to file trademark applications on the service marks Streaming
Auctions and Artmovement.com, although there is no assurance that we will be
successful in obtaining the marks. We will rely on our marks to protect our
domain and brand names. While we continue to evaluate the importance of patents
to our business, we do not believe that our ability to obtain patents is
material to the success of our business and results of operations.
COMPETITION
Competition in the Internet auction market is intense. We see potential
competitors from several fronts, including major brand outlets, co-label
outlets, private labels, and software consultants or do-it-yourself solutions.
Major outlets like eBay and Amazon have budgets to compete through both new
development and merger or acquisition. We believe they have shown little
interest in private labeling offerings for small-to-medium sized enterprises,
although there is no assurance that they will not target these markets in the
future. Co-label outlets such as iCollector and Artnet are Internet specialists
for art and antique auctions and have proven to attract some small-to-medium
sized enterprises, but, at this time, we believe they have no offering for
private label needs.
While we expect private label outlets to increase, to date we know of only
Fairmarket.com. We believe Fairmarket has or is creating a large-scale,
person-to-person version of Streaming Auctions. We believe that currently they
are strictly a technology company, offering no affinity marketing or news and
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entertainment services. In the future, they may begin competing directly with
us.
It should be expected that in the future additional direct competitors will
form to compete in our target market. Many of these competitors will have
greater financial and other resources than we have, and there is no assurance
that we will be able to successfully compete in this market.
LEGAL PROCEEDINGS
To our knowledge, we are not currently the subject of any pending legal
proceedings
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and officers and their ages and positions are as follows:
NAME AGE POSITION
---- --- --------
Marc I. Berens 42 Chief Executive Officer and Director
William Ranshaw 58 Chief Financial Officer and Director
Kevin P. Willcutts 36 Vice President of Marketing
Yolana Berens 75 Director
Marc I. Berens has served as our chief executive officer and as a director
since we commenced our current operations in June 1999. From 1991 until 1998,
Mr. Berens served as chief executive officer of Mercosur Industries, Inc.
William Ranshaw has served as our chief financial officer and has served as
a director since we commenced our current operations in June 1999. Since
November 1998, Mr. Ranshaw has served as the president of McGuffy Industries,
Inc. From January 1997 until March 1998, Mr. Ranshaw served as vice president
and chief financial officer of Superior Wellhead, Inc. From August 1995 until
August 1997, Mr. Ranshaw served as treasurer of Citadel Computer Systems, Inc.
Kevin P. Willcutts has served as our vice-president of marketing since
August 1999. From February 1998 until August 2000, Mr. Willcutts served as
vice-president of marketing of Smilex, Inc. From March 1995 until February
1998, Mr. Willcutts served as director of marketing of Plan 21.
Yolana Berens has served as a director since we commenced our current
Operations in June 1999. From 1989 until 1998, Ms. Berens served as director
of Mercosur Industries, Inc.
Marc I. Berens is the son of Yolana Berens. There are no other family
relationships among the officers or directors. Pursuant to our bylaws, each
director is elected annually by our stockholders at our annual meeting. All our
Executive officers are chosen by the board of directors and serve at the board's
Discretion. Directors are not paid compensation for attending meetings, other
Than reimbursements for expenses incurred in attendance. At this time, we do
Not have an audit, compensation, or nominating committee.
EXECUTIVE COMPENSATION
The following table displays information concerning compensation paid or
accrued for the fiscal year ended December 31, 1999, for the benefit of our
named executive officers.
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<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
---------------------------------
Annual Awards
Compensation
--------------------------------- ---------------------------------
Name and Securities
-------- Restricted Stock Underlying Options/ All Other
Principal Positions Year Salary ($) Award ($) Warrants (#) Compensation ($)
------------------- ---------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Marc I. Berens 1999 $ 37,500 -- -- --
Chief Executive Officer, and
Director
</TABLE>
The table above does not include perquisites and other personal benefits in
amounts of less than 10% of the total annual salary and bonus of the named
executive officer. Mr. Berens was also issued 250,000 shares of our common
stock in exchange for guaranteeing our credit line.
During fiscal years 1997 and 1998, and until June 1999, Jeff D. Jenson was
our president. Mr. Jenson did not receive any compensation for his services as
president, and has not been included in the above table.
EMPLOYMENT AGREEMENTS
In June 1999, Marc I. Berens entered into a three-year employment agreement
with Berensgallery.com, Inc., a wholly-owned subsidiary. The employment
agreement provides for a monthly salary of $7,500 for the first year, $10,000
for the second year, and $12,500 for the third year, plus an annual bonus equal
to 5% of our pretax operating profit. The employment agreement may be
terminated by either party during the term of the agreement.
In August 1999, Kevin P. Willcutts entered into a six-month employment
agreement that was renewed for an additional six months in February 2000. The
employment agreement provides for a monthly salary of $5,000. The employment
agreement also provided for the issuance of options to purchase 50,000 shares of
common stock at a price of $1.00 per share expiring in August 2001.
We do not have employment agreements with any other of our officers or
directors. We maintain life insurance policies for Mr. Berens and Ms. Berens in
the amounts of $500,000 and $250,000, respectively.
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STOCK OPTIONS
During the fiscal 1999 and the first quarter of 2000, we had issued options
to purchase an aggregate of 709,250 shares of common stock at exercise prices
ranging from $.01 to $1.00 per share. Of these options, options to purchase
500,000, 10,000, and 20,000 shares of common stock were issued to Ms. Berens,
Mr. Willcutts, and Mr. Ranshaw at an exercise price of $.01 per share. Mr.
Willcutts was also issued an option to purchase 50,000 shares of common stock at
an exercise price of $1.00 per share. No options were issued to Mr. Berens.
LIMITATION OF DIRECTORS' LIABILITY
Our amended and restated articles of incorporation eliminate, to the
fullest extent permitted by Nevada law, the personal liability of our directors
for monetary damages for breaches of fiduciary duty. However, our amended and
restated articles of incorporation do not provide for the elimination or
limitation of the personal liability of a director for acts or omissions that
involve intentional misconduct, fraud, or a knowing violation of the law, or
unlawful corporate distributions. These provisions will limit the remedies
available to the stockholder who is dissatisfied with a decision of the board of
directors protected by these provisions, and the stockholder's only remedy may
be to bring a suit to prevent the action of the board. This remedy may not be
effective in many situations because stockholders are often unaware of a
transaction or an event before the board's action. In these cases, the
stockholders and the company could be injured by a board's decision and have no
effective remedy.
RELATED PARTY TRANSACTIONS
In June 1999, we completed as reverse merger with Berensgallery.com, Inc.
in which we issued 2,893,250 shares of common stock to the shareholders of
Berensgallery.com, Inc. Of these shares, an aggregate of 2,623,000 shares of
common stock were issued to Ms. Berens, Messrs. Berens and Ranshaw, and a family
member of the Berens'. In December 1999, we acquired Artmovement.com, Inc. for
12,960,000 shares of common stock. Of these shares, an aggregate of 5,340,000
shares of common stock were issued to Ms. Berens, Messrs. Berens, Ranshaw, and
Willcutts, and a family member of the Berens'. In February 2000, Mr. Berens was
issued 250,000 shares of common stock in exchange for his guarantee of our
credit line. In December 1999, Berens Industries loaned an entity affiliated
with Mr. Berens and Ms. Berens $ 48,775, at an interest rate of 10% per annum,
due December 31, 2000.
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PRINCIPAL STOCKHOLDERS
The table below displays, as of May 15, 2000, the beneficial ownership of
common stock of:
- our directors;
- our named executive officers;
- the holders of five percent or more of our common stock; and
- our officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE OF
NAME OF BENEFICIAL OWNERS COMMON STOCK BENEFICIALLY OWNED OWNERSHIP
-------------------------- ------------------------------- ------------------------
<S> <C> <C>
Marc I. Berens 7,813,000 39.8%
Yolana Berens 7,963,000 40.5%
William Ranshaw 140,000 less than 1%
Kevin Willcutts 270,000 1.4%
Petra Group 7,000,000 35.6%
All officers and directors
as a group, (4) persons 8,623,000 43.9%
</TABLE>
Of the shares held by Ms. Berens, 7,000,000 shares are held by a
partnership that is controlled by Ms. Berens, and 563,000 shares are held by a
non-profit corporation of which Ms. Berens is on the board of trustees. Of the
shares held by Mr. Berens, 7,000,000 shares are the same shares held by the
partnership controlled by Ms. Berens, of which Mr. Berens is a partial
beneficiary of a trust established by Ms. Berens that is a partial benficiary of
the 7,000,000 shares. In addition, 563,000 included in the shares for Mr.
Berens, are the same shares that are held by the non-profit corporation
discussed above, of which Mr. Berens is also on the board of trustees. The
shares held by Petra Group have not been fully paid for as of the date of this
prospectus. Although the Petra Group has committed to the purchase of the
shares, there is no assurance that they will do so. If payment is not made, the
shares held will be canceled.
The business address of each person listed is the same as the address of
our principal executive office, except for Mr. Ranshaw whose business address is
18635 Telge Road, Cypress, Texas 77077, and Petra Group whose business address
is Level 20, CP Tower, Jalan Damansara, 46350 Petaling Jaya, Selangor, Darul
Ehsan, Malaysia.
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We have determined beneficial ownership following the rules of the SEC. In
computing the number of shares beneficially owned by a person and the percentage
ownership of that person, we have included the shares of common stock subject to
options or warrants held by that person that are currently exercisable or will
become exercisable within 60 days of the date of this prospectus, but we have
not included those shares for purposes of computing the percentage ownership of
any other person.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
We are authorized to issue 50,000,000 shares of common stock, and
10,000,000 shares of preferred stock.
COMMON STOCK
As of May 31, 2000 there were 19,684,880 shares of common stock issued and
outstanding.
The holders of shares of common stock are entitled to one vote per share on
each matter submitted to a vote of stockholders. If we are required to go into
liquidation, holders of common stock are entitled to share ratably in the
distribution of assets remaining after payment of liabilities. Holders of
common stock have no cumulative voting rights, and the holders of a majority of
the outstanding shares have the ability to elect all of the directors. Holders
of common stock have no preemptive or other rights to subscribe for shares.
Holders of common stock are entitled to dividends as declared by the board of
directors out of funds legally available. The outstanding common stock is
validly issued and non-assessable.
PREFERRED STOCK
Our board of directors has the authority, without action by our
stockholders, to designate and issue preferred stock in one or more series. Our
board of directors may also designate the rights, preferences, and privileges of
each series of preferred stock, any or all of which may be greater than the
rights of the common stock. It is not possible to state the actual effect of
the issuance of any shares of preferred stock on the rights of holders of the
common stock until the board of directors determines the specific rights of the
holders of the preferred stock. However, these effects might include:
- restricting dividends on the common stock;
- diluting the voting power of the common stock;
- impairing the liquidation rights of the common stock; and
- delaying or preventing a change in control without further action by
the stockholders.
We have no present plans to issue any shares of preferred stock.
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NEVADA ANTI-TAKEOVER LAWS AND CHARTER PROVISIONS
NEVADA ANTI-TAKEOVER LAWS.
Nevada law contains a section governing the acquisition of controlling
interests. This law provides generally that any person or entity that acquires
20% or more of the outstanding voting shares of a publicly-held Nevada
corporation may be denied voting rights with respect to the acquired shares,
unless a majority of the disinterested stockholders of the corporation elect to
restore the voting rights.
The law provides that a person or entity acquires control shares whenever
it acquires shares that would bring its voting power within any of the following
three ranges: (1) 20 to 33 1/3%, (2) 33 1/3 to 50%, or (3) more than 50%. A
control share acquisition is generally defined as the direct or indirect
acquisition of either ownership or voting power associated with issued and
outstanding control shares. The stockholders or board of directors of a
corporation may elect to exempt the stock of the corporation from the provisions
of the control share acquisition statute through adoption of a provision to that
effect in the articles of incorporation or bylaws of the corporation. Our
articles of incorporation and bylaws do not exempt our common stock from the
control share acquisition statute.
The control share acquisition statute is applicable only to shares of
"issuing corporations" as defined by the statute. An issuing corporation is a
Nevada corporation, which:
- has 200 or more stockholders, with at least 100 of such stockholders
being both stockholders of record and residents of Nevada; and
- does business in Nevada directly or through an affiliated
corporation.
At this time, we do not have 100 stockholders of record who are residents of
Nevada. Therefore, the provisions of the control share acquisition statute do
not apply to acquisitions of our shares and will not until these requirements
have been met. If this law applies to us in the future, the provisions of the
control share acquisition statute may discourage companies or persons interested
in acquiring a significant interest in or control of Berens Industries,
regardless of whether the acquisition may be in the interest of our
stockholders.
The law contains a section governing combinations with interested
stockholders, which may also have an effect of delaying or making it more
difficult to effect a change in control of Berens Industries. This statute
prevents an interested stockholder and the company from entering into a
combination, unless the conditions described below are met. The statute defines
combination to include any merger, consolidation, or other similar transaction
with an interested stockholder having;
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- an aggregate market value equal to 5% or more of the aggregate market
value of the assets of the corporation;
- an aggregate market value equal to 5% or more of the aggregate market
value of all outstanding shares of the corporation; or
- representing 10% or more of the earning power or net income of the
corporation.
An interested stockholder means the beneficial owner of 10% or more of our
voting shares. A corporation affected by the statute may not engage in a
combination within three years after the interested stockholder acquires its
shares unless the combination or purchase is approved by the board of directors
before the interested stockholder acquired the shares.
If approval is not obtained, then after the expiration of the three-year
period, the business combination may be consummated with the approval of the
board of directors or a majority of the voting power held by disinterested
stockholders, or if the consideration to be paid by the interested stockholder
is at least equal to the highest of:
- the highest price per share paid by the interested stockholder within
the three years immediately preceding the date of the announcement of
the combination or in the transaction in which he became an interested
stockholder, whichever is higher;
- the market value per common share on the date of announcement of the
combination or the date the interested stockholder acquired the
shares, whichever is higher; or
- if higher for the holders of preferred stock, the highest liquidation
value of the preferred stock.
Certificate of incorporation. Our certificate of incorporation provides:
- For the authorization of the board of directors to issue, without
further action by the stockholders, up to 10,000,000 shares of
preferred stock In one or more series and to fix the rights,
preferences, privileges, and Restrictions on the preferred stock; and
- That special meetings of stockholders may be called only by our
chairman of the board, our president, or a majority of the members of
our board Of directors.
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of our board of directors and in the policies
formulated by our board of directors and to discourage transactions that may
involve an actual or threatened change of control. These provisions are
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designed to reduce our vulnerability to an unsolicited proposal for a takeover.
However, these provisions could discourage potential acquisition proposals and
could delay or prevent a change in control. These provisions may also have the
effect of preventing changes in our management.
TRANSFER AGENT
American Registrar and Transfer Company serves as the transfer agent for
Our common stock.
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SHARES AVAILABLE FOR FUTURE SALE
There is a limited market for our common stock. Future sales of
substantial amounts of common stock in the public market could adversely affect
market prices prevailing from time to time. As described below, as of the date
of this prospectus, only a limited number of shares will be available for sale.
Nevertheless, sales of substantial amounts of our common stock in the public
market in the future could hurt the prevailing market price and our ability to
raise equity capital in the future.
- As of May 31, 2000, we have 19,684,880 shares of common stock issued
and outstanding.
- Of these shares, upon the date of this prospectus, 3,432,094 shares
will be freely tradeable without restriction or further registration
under the Securities Act, unless the shares are held by our
affiliates. Affiliates are people that control or are controlled by
us. This includes our officers, directors, and large shareholders.
- The 16,252,786 remaining shares outstanding are eligible for public
sale under Rule 144 once these shares have been held for one year.
SHARES OWNED FOR AT LEAST ONE YEAR MAY BE SOLD UNDER RULE 144.
In general, under Rule 144, a person who has beneficially owned restricted
shares for at least one year, including a person who may be considered to be our
affiliate, would be entitled to sell, within any three-month period, a number of
shares that does not exceed one percent of the number of shares of our common
stock then outstanding. Sales under Rule 144 are also subject to manner of sale
provisions and notice requirements and to the availability of current public
information. We are unable to estimate accurately the number of restricted
shares that will be sold under Rule 144 because this will depend in part on the
market price of our common stock and the personal circumstances of the seller.
SHARES OWNED FOR AT LEAST TWO YEARS MAY BE SOLD UNDER RULE 144(K) BY
NON-AFFILIATES.
Under Rule 144(k), a person who is not considered to have been an affiliate
at any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, would be entitled to sell
shares without complying with the manner of sale, public information, volume
limitation, or notice requirements discussed above. Therefore, unless otherwise
restricted, shares may be sold under Rule 144(k) immediately following
completion of the two year holding period without limitation.
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SHARES ISSUED ON CONVERSION OF OPTIONS ISSUED UNDER OUR STOCK OPTION PLAN MAY BE
SOLD.
We are voting on the adoption of a stock option plan at our annual meeting.
We intend to file one or more registration statements on Form S-8 under the
Securities Act to register shares of common stock issued under our stock option
plan or any other similar plan. These registration statements will
automatically become effective upon filing. Therefore, shares registered under
these registration statements will be available for sale in the open market,
unless the shares are subject to vesting or other restrictions.
34
<PAGE>
SELLING STOCKHOLDERS
This prospectus relates to the resale of 1,692,380 shares of common stock
by the selling stockholders. The table below displays information concerning
the resale of shares of common stock by the selling stockholders. We will not
receive any proceeds from the resale of common stock by the selling
stockholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY AMOUNT SHARES BENEFICIALLY
STOCKHOLDER OWNED BEFORE RESALE OFFERED OWNED AFTER RESALE
----------- ------------------- ------- -------------------
<S> <C> <C> <C>
Estelle Investments, Ltd 400,000 400,000 0
Kevin Joseph Walls 210,084 210,084 0
Basildon Enterprise Pte, Ltd. 175,070 175,070 0
Alex Consulting, Inc 150,000 150,000 0
Hasan Muhammad 140,056 140,056 0
Soedjono
Afterhourtrades.com, Inc 100,000 100,000 0
Berens Foundation 563,000 80,000 483,000
Rajiv Ricky Budhrani 70,028 70,028 0
Michael Sumarijanto S 70,028 70,028 0
John Ferrari 41,000 41,000 0
Hassan A. El-Lahham 40,000 40,000 0
Iiham A. Habibie 35,014 35,014 0
eCard Inc. 30,000 30,000 0
Kevin Willcutts 210,000 30,000 180,000
Kaufman & Associates, Inc. 20,000 20,000 0
William Ranshaw 140,000 17,500 122,500
Paul & Stephanie Gustafson 75,000 10,000 65,000
Manfred Sternberg 75,000 10,000 65,000
Debra Tritt 75,000 10,000 65,000
Jamieson Bryan 50,000 10,000 40,000
35
<PAGE>
SHARES BENEFICIALLY AMOUNT SHARES BENEFICIALLY
STOCKHOLDER OWNED BEFORE RESALE OFFERED OWNED AFTER RESALE
----------------------------- ------------------- ------- -------------------
Melvin See 31,000 5,000 26,000
Kenneth Kalbach 5,000 5,000 0
John Gorski 30,000 4,500 25,500
Alfred Friedman 30,000 4,500 25,500
John Donato 20,000 5,000 15,000
Dale Weir 3,000 3,000 0
Josh Hamilton 2,500 2,500 0
Thomas Arcidiamo 2,500 2,500 0
Jeff Hansen 10,000 1,500 8,500
Clifford Custer 1,500 1,500 0
The Texas IT Company, 1,100 1,100 0
LLC
Bill Garver 6,000 1,000 5,000
Sheronda Holmes 500 500 0
Cathy Weir 1,000 1,000 0
Ernie Wall, Sr. 1,000 1,000 0
Ernie Wall, Jr. 1,000 1,000 0
Audrey Lake 1,000 1,000 0
Felipe Alvarez 1,000 1,000 0
Jason Arcidiamo 1,000 1,000 0
</TABLE>
The Berens Foundation is a non-profit organization that is controlled by
Ms. Berens, Mr. Berens, and Debra Tritt.
Mr. Ranshaw is an executive officer and director of Berens Industries. Mr.
Willcutts is an executive officer of Berens Industries.
Ms. Gustafson is an officer of Berens Industries. Ms. Tritt is a relative
of Marc I. Berens and Yolana Berens and was an officer of Berens Industries.
Mr. Hamilton is an officer of Berens Industries and is a 50% owner of The Texas
IT Company, LLC.
Assuming all of the shares offered by The Berens Foundation are sold, it
will continue to own approximately 2.5% of our common stock after the offering.
Assuming all of the shares offered by the remaining selling stockholders are
sold, none of them will own more than 1% of our common stock after the offering.
36
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders may sell any or all of their shares of common
stock on any stock exchange, market, or trading facility on which the shares are
traded or in private transactions. These sales may be at fixed or negotiated
prices. The selling stockholders may use any one or more of the following
methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution following the rules of the applicable
exchange;
- privately negotiated transactions;
- broker-dealers may agree with the selling stockholders to sell a
specified number of the shares at a stipulated price per share;
- a combination of any these methods of sale; and
- any other method permitted under applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders in amounts to be negotiated. If any
broker-dealer acts as agent for the purchaser of shares, the broker-dealer may
receive commission from the purchaser in amounts to be negotiated.
37
<PAGE>
The selling stockholders and any broker-dealers or agents that are involved
in selling the shares may be considered to be underwriters within the meaning of
the Securities Act for the sales with the result that they may be subject to
statutory liabilities if the registration statement to which this prospectus
relates is defective by virtue of containing a material misstatement or omitting
to disclose a statement of material fact. We have not agreed to indemnify any
of the selling stockholders regarding such liability. An underwriter is a
person who has purchased shares from an issuer with a view towards distributing
the shares to the public. The selling stockholder or dealer effecting a
transaction in the registered securities, whether or not participating in a
distribution, is required to deliver a prospectus.
We are paying all fees and expenses incident to the registration of the
shares.
38
<PAGE>
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the SEC 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 small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
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 small business issuer 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.
EXPERTS
Our financial statements appearing in this Form SB-2 registration statement
have been audited by Ham, Langston, and Brezina, LLP, independent auditors, as
disclosed in their report appearing elsewhere in this registration statement and
are included in reliance on the report given on the authority of Ham, Langston,
and Brezina, LLP, as experts in accounting and auditing.
LEGAL MATTERS
Brewer & Pritchard, P.C., Houston, Texas, will give an opinion that the
offered shares will be validly authorized and issued by Berens Industries and
fully paid and nonassessable. Principals of Brewer & Pritchard, P.C.
beneficially own 50,000 shares of common stock.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2 with the SEC for this
offering. In addition, we are required to file annual, quarterly, and current
reports with the SEC. We furnish our common stockholders with annual reports
containing, audited financial statements certified by an independent public
accounting firm.
This prospectus is part of the registration statement and does not contain
all of the information included in the registration statement and all of its
exhibits. Whenever a reference is made in this prospectus to any material
document of ours, you should refer to the exhibits that are a part of the
registration statement for a copy of the document. We have included all
material information about the exhibits in this prospectus.
39
<PAGE>
You may read and copy our registration statement and all of its exhibits at
the SEC public reference room located at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the SEC public
reference room in Washington, D.C. by calling the SEC at 1-800-SEC-0330. The
registration statement is also available from the SEC's web site at
http://www.sec.gov. The SEC's web site located at www.sec.gov contains reports,
proxy and information statements, and other information about issuers that file
electronically.
40
<PAGE>
1,692,380 Shares
Berens Industries, Inc.
Common Stock
_________________________
PROSPECTUS
_________________________
_________________________
June 12, 2000
_________________________
You should only rely on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling security holders are offering to
sell, and seeking offers to buy, shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of common stock.
41
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
__________
CONSOLIDATED FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT ACCOUNTANTS
FOR THE PERIOD FROM INCEPTION, FEBRUARY 26, 1999,
TO DECEMBER 31, 1999
F-1
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
__________
PAGE
Report of Independent Accountants F-3
Consolidated Financial Statements:
Consolidated Balance Sheet as of
December 31, 1999 F-4
Consolidated Statement of Operations for
the period from inception, February 26,
1999, to December 31, 1999 F-5
Consolidated Statement of Stockholders'
Deficit for the period from inception,
February 26, 1999, to December 31, 1999 F-6
Consolidated Statement of Cash Flows for
the period from inception, February 26,
1999, to December 31, 1999 F-7
Notes to Consolidated Financial Statements F-8
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Stockholders and Directors
Berens Industries, Inc.
We have audited the accompanying consolidated balance sheet of Berens
Industries, Inc. (a corporation in the development stage) as of December 31,
1999, and the related consolidated statements of operations, stockholders'
deficit and cash flows for the period from inception, February 26, 1999, 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 upon 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Berens
Industries, Inc. as of December 31, 1999, and the consolidated results of their
operations and their cash flows for the period from inception, February 26,
1999, to December 31, 1999, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the financial
statements and discussed in Note 3, the Company has incurred a significant loss
from operations since inception and is dependent on outside sources of financing
for continuation of its operations. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans with
regard to this matter are also discussed in Note 3. These financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
March 13, 2000
Houston, Texas
F-3
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
__________
ASSETS
------
Current assets:
Cash and cash equivalents $ 13,316
Accounts receivable, trade. . . . . . . . 1,989
Prepaid license fees. . . . . . . . . . . 69,300
------------
Total current assets. . . . . . . . . . 84,605
Office equipment, net of accumulated
depreciation of $1,618. . . . . . . . . . 6,022
Other assets. . . . . . . . . . . . . . . . 1,259
------------
Total assets. . . . . . . . . . . . . $ 91,886
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Note payable to bank. . . . . . . . . . . $ 150,000
Accounts payable. . . . . . . . . . . . . 18,025
Accrued liabilities . . . . . . . . . . . 17,863
------------
Total current liabilities . . . . . . . 185,888
------------
Commitment and contingencies
Stockholders' deficit:
Common stock, $.001 par value, 50,000,000
shares authorized, 18,108,500 shares
issued and outstanding. . . . . . . . . 18,108
Additional paid-in capital. . . . . . . . 9,258,653
Receivables from stockholders . . . . . . (2,948,775)
Losses accumulated during the development
stage . . . . . . . . . . . . . . . . . (6,421,988)
------------
Total stockholders' deficit . . . . . . (94,002)
------------
Total liabilities and stockholders'
deficit . . . . . . . . . . . . . . $ 91,886
============
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION, FEBRUARY 26, 1999,
TO DECEMBER 31, 1999
__________
<S> <C>
Service revenue $2,543
-----------
Operating expenses:
Common stock and stock option compensation 806,011
Website development costs 5,263,157
Salaries and wages 127,714
Legal and consulting fees 64,425
License fees 49,500
Other 113,724
-----------
Total operating expenses 6,424,531
-----------
Net loss $(6,421,988)
===========
Basic and diluted net loss per common share. $ (1.39)
===========
Weighted average shares outstanding 4,632,881
===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM INCEPTION, FEBRUARY 26, 1999,
TO DECEMBER 31, 1999
__________
LOSSES
ACCUMULATED
COMMON STOCK ADDITIONAL RECEIVABLE DURING THE
----------------------- PAID-IN FROM DEVELOPMENT
SHARES AMOUNT CAPITAL STOCKHOLDERS STAGE TOTAL
---------- ----------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at inception, February 26,
1999 - $ - $ - $ - $ - $ -
Net proceeds from an initial
Capitalization 2,893,250 2,893 198,107 - - 201,000
Recapitalization effective June 15,
1999 737,505 738 (738) - -
Common stock issued as compensation
to consultants 858,495 858 59,142 - - 60,000
Stock options issued as employee
compensation and for payment of
legal fees - - 746,011 - - 746,011
Issuance of common stock upon ex-
ercise of stock options 659,250 659 5,934 - - 6,593
Issuance of common stock for ac-
quisition of Artmovement.com 12,960,000 12,960 8,250,197 (3,000,000) - 5,263,157
Receipt of cash from stockholders
under loan commitment - - - 100,000 - 100,000
Loan to stockholder - - - (48,775) - (48,775)
Net loss - - - - (6,421,988) (6,421,988)
---------- ----------- -------------- ------------ ------------ ------------
Balance at December 31, 1999 18,108,500 $ 18,108 $ 9,258,653 $(2,948,775) $(6,421,988) $ (94,002)
========== =========== ============== ============ ============ ============
See notes to consolidated financial statements.
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION, FEBRUARY 26, 1999,
TO DECEMBER 31, 1999
__________
Cash flows from operating activities:
Net loss $(6,421,988)
<S> <C>
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation expense 1,618
Website development cost 5,263,157
Stock and stock option compensation expense 806,011
Changes in operating assets and
liabilities:
Increase in accounts receivable, trade (1,989)
Increase in prepaid license fees (69,300)
Increase in other assets (1,259)
Increase in accounts payable 18,025
Increase in accrued liabilities 17,863
------------
Net cash used in operating activities (387,862)
------------
Cash flows from investing activities:
Purchase of property and equipment (7,640)
Loan to stockholder (48,775)
------------
Net cash used in investing activities (56,415)
------------
Cash flows from financing activities:
Proceeds from note payable to bank 150,000
Proceeds from sale of common stock 207,593
Proceeds from receivable from stockholder 100,000
------------
Net cash provided by financing
Activities 457,593
------------
Net increase in cash and cash equivalents 13,316
Cash and cash equivalents at beginning of
Period -
------------
Cash and cash equivalents at end of
Period $ 13,316
============
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ -
============
See notes to consolidated financial statements.
</TABLE>
F-7
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------------
Berens Industries, Inc. (the "Company") through its wholly-owned
subsidiary, Artmovement.com, Inc. ("Artmovement), is involved in the
development of an online auction site for sale of exclusive paintings,
antiques and other art works. The Company is a development stage enterprise
because since its inception substantially all its efforts have been devoted
to website development and fund raising activities. Following is a
description of its significant accounting policies:
SIGNIFICANT 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 dates of the
financial statements and the reported amounts of revenues and expenses
during the periods. Actual results could differ from estimates making it
reasonably possible that a change in the estimates could occur in the near
term.
PRINCIPLES OF CONSOLIDATION
-----------------------------
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Artmovement, after elimination of all
significant intercompany accounts and transactions.
CASH AND CASH EQUIVALENTS
----------------------------
The Company considers all highly liquid short-term investments with an
original maturity of three months or less when purchased, to be cash
equivalents.
OFFICE EQUIPMENT
-----------------
Office equipment is recorded at cost and depreciated for financial
statement purposes using the straight-line method over an estimated useful
life of three years. Gains or losses on dispositions are included in the
statement of operations in the period incurred. Maintenance and repairs are
charged to expense as incurred.
Continued
F-8
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
__________
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
-------------------------------------------------------------------------
IMPAIRMENT OF LONG-LIVED ASSETS
----------------------------------
Periodically, the Company evaluates the carrying value of its office
equipment and long-lived assets by comparing the anticipated future net
cash flows associated with those assets to the related net book value. If
an impairment is indicated as a result of such reviews, the Company would
remove the impairment based on the fair market value of the assets, using
techniques such as projected future discounted cash flows or third party
valuations.
INCOME TAXES
-------------
The Company uses the liability method of accounting for income taxes. Under
this method, deferred income taxes are recorded to reflect the tax
consequences on future years of temporary differences between the tax basis
of assets and liabilities and their financial amounts at year-end. The
Company provides a valuation allowance to reduce deferred tax assets to
their net realizable value.
FAIR VALUE OF FINANCIAL INSTRUMENTS
---------------------------------------
The Company includes fair value information in the notes to financial
statements when the fair value of its financial instruments is different
from the book value. When the book value approximates fair value, no
additional disclosure is made.
CONCENTRATIONS OF CREDIT RISK
--------------------------------
Cash and accounts receivable are the primary financial instruments that
subject the Company to concentrations of credit risk. The Company maintains
its cash in banks selected based upon management's assessment of the bank's
financial stability. Cash balances periodically exceed the $100,000 federal
depository insurance limit.
Accounts receivable arise primarily from transactions with customers in the
United States. The Company provides a reserve for accounts where
collectibility is uncertain. Collateral is generally not required for
credit granted.
REVENUE RECOGNITION
--------------------
Revenues from website service are recognized upon performance of the
services.
Continued
F-9
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
__________
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
-------------------------------------------------------------------------
NET LOSS PER COMMON SHARE
-----------------------------
Basic and dilutive net loss per common share for the period ended December
31, 1999 have been computed by dividing net loss by the weighted average
number of shares of common stock outstanding during these periods. All
common stock equivalents were antidilutive in both periods.
COMPREHENSIVE INCOME
---------------------
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No.130, "Reporting Comprehensive Income", which requires a company
to display an amount representing comprehensive income as part of the
Company's basic financial statements. Comprehensive income includes such
items as unrealized gains or losses on certain investment securities and
certain foreign currency translation adjustments. The Company's financial
statements include none of the additional elements that affect
comprehensive income. Accordingly, comprehensive income and net income are
identical.
SEGMENT INFORMATION
--------------------
The Company has adopted SFAS 131, "Disclosures About Segments of an
Enterprise and Related Information". SFAS 131 requires a company to
disclose financial and other information, as defined by the statement,
about its business segments, their products and services, geographic areas,
major customers, revenues, profits, assets and other information. The
Company believes that it operates in only one business segment and does not
have geographically diversified business operations. Accordingly, the
adoption of SFAS 131 did not have a significant impact on the Company.
RECENT PRONOUNCEMENTS
----------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities",
Which establishes accounting and eporting standards for derivative
instruments and hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the balance sheet and
measure those instruments at fair value. Management does not believe this
pronouncement will have an impact on the Company's operations or financial
reporting. Implementation of this standard has recently been delayed by the
FASB for a 12-month period and, accordingly, the Company will adopt SFAS
133 in 2001.
Continued
F-10
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
__________
2. GOING CONCERN CONSIDERATIONS
------------------------------
Since its inception, as a development stage enterprise, the Company has not
generated significant revenue and has been dependent on debt and equity
raised from individual investors to support its operations. During the
period from inception, February 26, 1999, to December 31, 1999, the Company
incurred a net loss of $6,421,988 and negative cash flows from operations
of $387,862. These factors raise substantial doubt about the Company's
ability to continue as a going concern.
In order to address its financial situation, management undertook private
placements of its common stock, recapitalized its operations, and acquired
Artmovement.com, Inc. (See Notes 3 and 4).
There can be no assurances that the Company's current cash reserves will be
adequate to sustain its operations nor that the Company can raise adequate
debt or equity to successfully commercialize its website activities. The
Company's long-term viability as a going concern is dependent upon three
key factors, as follows:
- The Company's ability to obtain adequate sources of debt or equity
funding to meet current commitments and fund the continuation of its
business operations.
- The ability of the Company to successfully make the transformation
from a development stage company to a commercially viable internet
business.
- The ability of the Company to ultimately achieve adequate
profitability and cash flows from operations to sustain its
operations.
3. RECAPITALIZATION
----------------
Effective June 15, 1999, National Air Corporation was acquired by
Berensgallery.com, Inc. in a recapitalization transaction accounted for
similar to a reverse acquisition, except that no goodwill was recorded.
National Air Corporation was the "acquired" company in the transaction, but
remains the surviving legal entity. Prior to the acquisition National Air
Corporation was a non-operating public shell corporation with no
significant assets. Accordingly, the transaction was treated as an issuance
of stock by Berensgallery.com, Inc. for National Air Corporation's net
monetary assets, accompanied by a recapitalization. Since this transaction
is, in substance, a recapitalization of Berensgallery.com, Inc. and not a
business combination, proforma information is not presented.
Continued
F-11
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
__________
3. RECAPITALIZATION, CONTINUED
----------------------------
Subsequent to the recapitalization, the Company's stockholders approved: 1)
changes in the Company's name from National Air Corporation to
Berensgallery.com, Inc. and subsequently to Berens Industries, Inc.; 2) a
change in the number of authorized shares of the Company's common stock
from 20,000,000 to 50,000,000 shares; and 3) a change in the number of
authorized shares of the Company's preferred stock from 2,000,000 shares
with par values of $0.10 to $0.25 to 10,000,000 shares with a par value of
$0.001.
4. ACQUISITION OF ARTMOVEMENT.COM, INC.
---------------------------------------
Effective December 31, 1999, the Company acquired 100% of the common stock
of Artmovement from a company under common control with the Company. The
purchase price of Artmovement was approximately $8,263,157 and was
satisfied entirely through the issuance of 12,960,000 shares of the
Company's common stock. The primary assets of Artmovement acquired in the
transaction were as follows:
Notes receivable from stockholders $3,000,000
Website 5,263,157
----------
$8,263,157
==========
Artmovement was formed in November 1999 and had no significant operating
history. The Company exchanged 12,960,000 newly issued shares for all of
the outstanding shares of Artmovement. Upon acquisition of Artmovement, the
Website was written down to zero because the net realizable value of the
website could not be demonstrated at the date of acquisition (See Note 10).
5. NOTE PAYABLE TO A BANK
--------------------------
The note payable to a bank consists of amounts due under a $150,000
revolving line of credit bearing interest at the bank's prime rate (8.5% at
December 31, 1999) plus 2.0% per year and maturing in June 2000. This note
is collateralized by the guarantees of certain primary
stockholders/officers of the Company.
Continued
F-12
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
__________
6. INCOME TAXES
-------------
The composition of the deferred tax asset and the related tax effects at
December 31, 1999 were as follows:
Asset
-----
Benefit from carryforward of net
operating loss $ 119,959
Less valuation allowance (119,959)
----------
Net deferred tax asset $ -
==========
The difference between the income tax benefit in the accompanying statement
of operations and the amount that would result if the U.S. Federal
statutory rate of 34% were applied to pre-tax loss is as follows:
AMOUNT PERCENT
------------ -------
Benefit for income tax at federal
statutory rate $2,183,476 34.0%
Non-deductible compensation expense (2,063,517) (32.1)
Increase in valuation allowance (119,959) (1.9)
------------ -------
Total $ - $ -%
============ =======
At December 31, 1999, for federal income tax and alternative minimum tax
reporting purposes, the Company has approximately $353,000 of unused net
operating losses available for carryforward to future years. The benefit
from carryforward of such net operating losses will expire in 2019. The
benefit from utilization of such net operating loss carryforwards incurred
prior to December 31, 1999 was significantly limited in connection with the
Company's merger with National Air Corporation, Inc. (See Note 3). The
benefit could be subject to further limitations if significant future
ownership changes occur in the Company.
Continued
F-13
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
__________
7. STOCKHOLDERS' EQUITY
---------------------
STOCK OPTIONS
--------------
The Company periodically issues incentive stock options to key employees,
officers, and directors to provide additional incentives to promote the
success of the Company's business and to enhance the ability to attract and
retain the services of qualified persons. The issuance of such options are
approved by the Board of Directors. The exercise price of an option granted
is determined by the fair market value of the stock on the date of grant.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
FASB Statement No. 123, "Accounting for Stock-Based Compensation", requires
use of option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options is greater than or equals the market price
of the underlying stock on the date of grant, no compensation expense has
been recognized.
Proforma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of
that Statement. The fair value for these options was estimated at the date
of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for the period ended December 31, 1999:
risk-free interest rate of 6%; no dividend yield; weighted average
volatility factor of the expected market price of the Company's common
stock of 70%; and a weighted-average expected life of the options of 3
years.
The Black-Scholes option valuation model was developed for use in
estimating fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require
the input of highly subjective assumptions including the expected stock
price volatility. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
Continued
F-14
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
__________
7. STOCKHOLDERS' EQUITY, CONTINUED
---------------------------------
For purposes of proforma disclosures, the estimated fair value of the
options is included in expense over the option's vesting period or expected
life. The Company's proforma information for the period ended December 31,
1999 follows:
Net loss as reported $(6,421,988)
Proforma net loss $(6,433,854)
Proforma basic and dilutive loss
per share $ (1.39)
A summary of the Company's stock option activity and related information
for the period ended December 31, 1999 follows:
NUMBER OF WEIGHTED-
SHARES AVERAGE
UNDER EXERCISE
OPTIONS PRICE
---------- ----------
Outstanding - at inception,
February 26, 1999 - $ -
Granted 709,250 0.08
Exercised (659,250) 0.01
Forfeited - -
----------
Outstanding - December 31, 1999 50,000 1.00
==========
The weighted-average fair value of options granted during the period ended
December 31, 1999 was $1.05 and all of the options granted expire in 2004.
8. RECEIVABLES FROM STOCKHOLDERS
-------------------------------
Receivables from stockholders at December 31, 1999 represent amounts due
from stockholders of Mercosur Industries, Inc. ("Mercosur"), a company
under common control with the Company. The receivables were acquired in
connection with the Company's acquisition of Artmovement (See Note 4).
Receivables from stockholders are non-interest bearing, have no formal
repayment schedule and arose from sale of Mercosur's common stock (See Note
10).
Subsequent to the acquisition of Artmovement, the Company collected
$100,000 of the receivables from stockholders and made a loan to Mercosur
of $48,775.
Continued
F-15
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
__________
9. DATABASE ACCESS AGREEMENT
---------------------------
In August 1999, the Company entered into a database access agreement with a
foreign corporation. The agreement has a 36 month term and requires monthly
payments through August 2002. At December 31, 1999, the Company had prepaid
$69,300 under this database access agreement.
10. RELATED PARTY TRANSACTIONS
----------------------------
As described in Note 4 to the financial statements, in December 1999 the
Company acquired Artmovement. Artmovement's primary asset is a website that
provides an auction network for buyers and sellers of art and antiques.
Artmovement had previously been spun-off from Mercosur Industries, Inc.
("Mercosur"), a company that is under common control and has common
management with the Company.
Prior to the spin-off of Artmovement, Mercosur received a $3,000,000
investment commitment from certain foreign investors. In connection with
the spin-off of Artmovement, Mercosur entered into an agreement with
Artmovement under which it assigned the $3,000,000 subscription receivable
from such foreign investors to Artmovement.
11. NON-CASH INVESTING AND FINANCING ACTIVITIES
-----------------------------------------------
During the period from inception, February 26, 1999, to December 31, 1999,
the Company engaged in non-cash investing and financing transactions as
follows:
Common stock issued to acquire
Artmovement.com, Inc. $8,263,157
F-16
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
__________
CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND
THE PERIOD FROM INCEPTION, FEBRUARY 26, 1999,
TO MARCH 31, 2000, AND THE PERIOD FROM INCEPTION,
FEBRUARY 26, 1999, TO MARCH 31, 1999
(UNAUDITED)
F-17
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
__________
PAGE
----
Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheet as of March 31,
2000 and December 31, 1999 F-19
Condensed Consolidated Statement of Operations for the
three months ended March 31, 2000, for the
period from inception, February 26, 1999,
to March 31, 1999, and for the period from
inception, February 26, 1999, to March 31,
2000 F-20
Condensed Consolidated Statement of Stockholders' Equity
for the three months ended March 31, 2000 F-21
Condensed Consolidated Statement of Cash Flows for the
three months ended March 31, 2000, the
period from inception, February 26, 1999,
to March 31, 1999, and the period from
inception, February 26, 1999 to March 31,
2000 F-22
Selected Notes to Condensed Financial Statements F-23
F-18
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED CONSOLIDATED BALANCE SHEET
__________
(UNAUDITED)
MARCH 31, DECEMBER 31,
2000 1999
ASSETS (UNAUDITED) NOTE
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 429,046 $ 13,316
Accounts receivable, trade 5,249 1,989
Other receivables 11,068 -
Prepaid license fee 39,600 69,300
------------ ------------
Total current assets 484,963 84,605
Property and equipment, net of accum-
ulated depreciation of $2,254 and
$1,618 at March 31, 2000 and
December 31, 1999, respectively 5,814 6,022
Other assets - 1,259
------------ ------------
Total assets $ 490,777 $ 91,886
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Note payable to bank $ 11,000 $ 150,000
Accounts payable 48,004 18,025
Accrued liabilities 16,366 17,863
------------ ------------
Total current liabilities 75,370 185,888
------------ ------------
Commitment and contingencies
Stockholders' equity:
Common stock, $.001 par value, 20,000,000
shares authorized, 18,901,380 and
18,108,500 shares issued and outstand-
ing at March 31, 2000 and December 31,
1999, respectively 18,901 18,108
Additional paid-in capital 9,794,455 9,258,653
Receivables from stockholders (2,787,577) (2,948,775)
Losses accumulated during the development
stage (6,610,372) (6,421,988)
------------ ------------
Total stockholders' equity 415,407 (94,002)
------------ ------------
Total liabilities and stockholders'
equity $ 490,777 $ 91,886
============ ============
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See accompanying notes.
</TABLE>
F-19
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
__________
(UNAUDITED)
INCEPTION, INCEPTION,
THREE MONTHS FEBRUARY 26, FEBRUARY 26,
ENDED 1999, TO 1999, TO
MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000
-------------- -------------- ------------
<S> <C> <C> <C>
Service revenue $12,551 $- $15,094
-------------- -------------- ------------
Operating expenses:
Common stock and option
compensation 33,600 - 839,611
Salaries and wages 35,203 - 162,917
Legal and consulting fees 34,322 1,543 98,747
License fees 29,700 - 79,200
Website development costs - - 5,263,157
Other 68,110 - 181,834
-------------- -------------- ------------
Total operating expenses 200,935 1,543 6,625,466
-------------- -------------- ------------
Net loss $ (188,384) $ (1,543) $(6,610,372)
============== ============== ============
Basic and dilutive net loss
per common share $ (0.01) $ (0.01)
============== ==============
Weighted average shares out-
Standing 18,749,966 737,505
============== ==============
</TABLE>
See accompanying notes.
F-20
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
__________
(UNAUDITED)
LOSSES
ACCUMULATED
COMMON STOCK ADDITIONAL RECEIVABLE DURING THE
----------------------- PAID-IN FROM DEVELOPMENT
SHARES AMOUNT CAPITAL STOCKHOLDERS STAGE TOTAL
---------- ----------- ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 18,108,500 $18,108 $9,258,653 $(2,948,775) $(6,421,988) $(94,002)
Proceeds from private placements of
common stock 759,280 759 502,236 - - 502,995
Common stock issued as compensation
to consultants 33,600 34 33,566 - - 33,600
Receipt of cash from stockholder
under loan commitment - - - 161,198 - 161,198
Net loss - - - - (188,384) (188,384)
---------- ----------- ------------- ------------ ------------ ----------
Balance at March 31, 2000 18,901,380 $ 18,901 $ 9,794,455 $(2,787,577) $(6,610,372) $ 415,407
========== =========== ============= ============ ============ ==========
</TABLE>
See accompanying notes.
F-21
<PAGE>
<TABLE>
<CAPTION>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
__________
(UNAUDITED)
INCEPTION INCEPTION,
THREE MONTHS FEBRUARY 26, FEBRUARY 26,
ENDED 1999, TO 1999, TO
MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000
-------------- -------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(160,278) $(1,543) $(6,610,372)
Adjustments to reconcile net loss
to net cash used in operating
activities (49,982) 1,543 6,113,475
-------------- -------------- ------------
Net cash used in operating
Activities (210,260) - (496,897)
-------------- -------------- ------------
Cash flows from investing activities:
Purchase of computers and equipment (428) - (8,068)
Loan to stockholder (48,775) - (48,775)
-------------- -------------- ------------
Net cash used in investing
Activities (49,203) - (56,843)
-------------- -------------- ------------
Cash flows from financing activities:
Proceeds from note payable to bank 150,000 - 150,000
Repayment of note payable to bank (139,000) - (139,000)
Proceeds from sale of common stock 502,995 - 710,588
Proceeds from receivable from
Stockholder 161,198 - 261,198
-------------- -------------- ------------
Net cash provided by financing
activities 675,193 - 982,786
-------------- -------------- ------------
Net increase (decrease) in cash and
cash equivalents 415,730 - 429,046
Cash and cash equivalents at
beginning of period 13,316 - -
-------------- -------------- ------------
Cash and cash equivalents at end of
Period $ 429,046 $ - $ 429,046
============== ============== ============
</TABLE>
See accompanying notes.
F-22
<PAGE>
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
__________
(UNAUDITED)
1. BASIS OF PRESENTATION
-----------------------
The accompanying unaudited interim financial statements have been prepared
in accordance with generally accepted accounting principles and the rules
of the U.S. Securities and Exchange Commission, and should be read in
conjunction with the audited financial statements and notes thereto
contained in the Company's Annual Report of Form 10-KSB for the year ended
December 31, 1999. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for the
interim periods presented have been reflected herein. The results of
operations for interim periods are not necessarily indicative of the
results to be expected for the full year. Notes to the financial statements
which would substantially duplicate the disclosure contained in the audited
financial statements for the most recent fiscal year ended December 31,
1999, as reported in the Form 10-KSB, have been omitted.
2. GENERAL
-------
Effective June 15, 1999, Berens Industries, Inc. acquired National Air
Corporation (together the "Company") in a recapitalization transaction
accounted for similar to a reverse acquisition. Berens Industries, Inc. is
currently involved in the development of an online auction site for sale of
exclusive paintings and other art works. The Company is a development stage
enterprise because, since its inception, substantially all its efforts have
been devoted to Web site development and fund raising activities.
3. COMPREHENSIVE INCOME
---------------------
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income, which requires a company
to display an amount representing comprehensive income as part of the
Company's basic financial statements. Comprehensive income includes such
items as unrealized gains or losses on certain investment securities and
certain foreign currency translation adjustments. The Company's financial
statements include none of the additional elements that affect
comprehensive income. Accordingly, comprehensive income and net income are
identical.
F-23
<PAGE>
Continued
BERENS INDUSTRIES, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
SELECTED NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS, CONTINUED
__________
(UNAUDITED)
4. 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
disclosures of contingent assets or liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
5. INCOME TAX
-----------
The difference between the Federal statutory income tax rate and the
Company's effective income tax rate is primarily attributable to increases
in valuation allowances for deferred tax assets relating to net operating
losses.
F-24
<PAGE>
