As filed with the Securities and Exchange Commission on December 8, 1999
Registration Statement No. 333-88279
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Amendment 1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Internet Stock Market Resources, Inc.
(Name of Small Business Issuer in its Charter)
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Delaware 67770 76-0246940
<S> <C> <C>
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
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405 Central Avenue, Suite 102 Lobby Level
St. Petersburg, Florida 33701
727-896-9696
(Address and telephone number of principal executive offices)
Mr. Anastasios Kyriakides
Internet Stock Market Resources, Inc.
405 Central Avenue, Fifth Floor
St. Petersburg, Florida 33701
727-896-9696
(Name, address and telephone number of agent for service)
With a copy to:
Thomas R. Todd, Jr., Esq.
P.O. Box 88519
Atlanta, Georgia 30356
(404) 630-7100
Approximate date of commencement of proposed sale to the public: As soon as
practicable subsequent to the effective date.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities
Act registration number of the earlier registration statement for the same
offering. [ ]
If delivery of this Prospectus is expected to be made pursuant to Rule 434,
please check the following box [ ].
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CALCULATION OF REGISTRATION FEE
Title of Amount to be Proposed Maximum Aggregate Registration
Shares to be Registered Maximum Price Amount Fee
Registered (2) Price Per of Offering
Share (1) Price (1)
($) ($) ($)
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Common Stock, 3,333,332 1.50 4,999,998.20 $1,390
$0.0001 par
value per share
3,333,332
Preferred Stock, 833,333
$0.01 par value
per share
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Internet Stock Market Resources, Inc.
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Cross Reference Sheet for Prospectus Under Form SB-2
Form SB-2 Item No. and Caption Caption or Location in Prospectus
- ------------------------------ ---------------------------------
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1. Forepart of Registration Cover Page; Cross Reference
Statement and Outside Sheet; Outside Front Cover
Front Cover of Prospectus Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus SAME
3. Summary Information and Summary;
Risk Factors SAME
4. Use of Proceeds SAME
5. Determination of Offering Price SAME
6. Dilution SAME
7. Selling Security Holders SAME
8. Plan of Distribution Outside Front Cover Page of
Prospectus;
Plan of Distribution
9. Legal Proceedings SAME
10. Directors, Executive Officers,
Promoters and Control Persons SAME
11. Security Ownership of Certain
Beneficial Owners and Management SAME
12. Description of Securities SAME
13. Interest of Named Experts and Legal Matters;
Counsel Interest of Named Experts and
Counsel
14. Disclosure of Commission Position
on Indemnification for Securities SAME;
Act Liabilities Undertakings
15. Organization within Last Five
Years SAME
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16. Description of Business SAME
17. Management's Discussion and
Analysis or Plan of Operation Management's Discussion and Analysis
18. Description of Property SAME
19. Certain Relationships and Related SAME
20. Market for Common Equity and
Related Stockholder Matters SAME
21. Executive Compensation SAME
22. Financial Statements SAME
23. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure SAME
24. Indemnification of Officers and
Directors SAME
25. Other Expenses of Issuance and
Distribution SAME
26. Recent Sales of Unregistered
Securities SAME
27. Exhibits SAME
28. Undertakings SAME
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
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Prospectus
A Maximum of 833,333 Units
$6.00 PER UNIT
This is a secondary public offering of Internet Stock Market Resources, Inc.
("ISMR") securities.
* Each Unit offered by this Prospectus consists of four shares of ISMR's
Common Stock and one share of ISMR's Class A Preferred Stock.
* For $2.00, each share of the Preferred Stock can be exchanged for two
shares of the ISMR's Common Stock, as long as the exchange is made within one
year of the issue date; after that, the
* Preferred shares are convertible at the market bid price of two shares of
the Common Stock.
* A subscription must be for at least 100 Units.
* ISMR has set the price of the Units arbitrarily.
* This offering will terminate no more than 180 days after the date of this
Prospectus.
Internet Stock Market Resources' Common Stock trades on the Over-the-Counter
Electronic Bulletin Board Service of the National Association of Securities
Dealers under the symbol "ISMR." On December 3, 1999, the bid price for the
stock was about $.69 and the ask price was about $1.03.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this document is truthful or complete. Any statement to the contrary is a
criminal offense. This Prospectus and the information sources referred to in
it are the only reliable resources about Internet Stock Market Resources. No
one has been authorized to give any more, other, or different information.
Investment in Units of Internet Stock Market Resources, Inc. is very risky and
speculative (see the section titled "Risk Factors," starting on Page 5) and
should be considered only by those who are able to bear the loss of part or
all of the money they invest.
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Offering Price Underwriting Discounts Proceeds to
and Commissions Company
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<S> <C> <C> <C>
Per Unit $6.00 $0.60 $5.40
- ----------------------------------------------------------------------------
Maximum 833,333 $4,999,998.00 $499,999.80 $4,499,998.20
- ----------------------------------------------------------------------------
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Internet Stock Market Resources, Inc.
405 Central Avenue * 102 Lobby Level
St. Petersburg, Florida 33701
(727) 896-9696
The date of this Prospectus is XXXX XX, 19XX
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[THIS PAGE IS INTENTIONALLY BLANK]
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SUMMARY
The Company
Internet Stock Market Resources, Inc. provides Internet-based business and
advertising information about emerging companies. Client companies provide
their own content, which may include information about goods and services they
offer, new corporate developments, and hyperlinks to their own Websites. (A
hyperlink is a word or "button" on the computer screen that takes the user
to that destination when clicked.) Through ISMR's Website, Internet users are
also able to go to other information services that carry other data about
clients, including hyperlinks to the Securities and Exchange Commission's
EDGAR database, PR Newswire, stock quotation services, etc. By providing a
platform for Internet users to access information about emerging companies,
ISMR makes its Website an Internet "portal" for people and institutions
interested in emerging companies. Recently, the Company activated a hyperlink
on the Website to the on-line brokerage service called "NowTrade," which is
owned by ISMR's controlling shareholder.
Internet Stock Market Resources is also negotiating to acquire companies: ISMR
has signed a letter of intent with one company, Delcor Industries, Inc. Such
acquisitions will require either cash, debt, and/or stock. The cash part of
any acquisition will come from proceeds of this offering. Therefore, the
success of this offering is critical to moving forward with the acquisition
part of ISMR's overall business plan.
How to Contact Internet Stock Market Resources
The executive officers of the Company may be reached by any of these ways:
* in the offices at 405 Central Avenue, 102 Lobby Level, St. Petersburg,
Florida 33701;
* by telephone number is (727) 896-9696;
* via facsimile number is (727) 822-9516; or
* on the World Wide Web at http://www.InternetStockMarket.com.
The Offering
Internet Stock Market Resources is offering by this Prospectus a maximum of
833,333 Units of its securities.
* Each Unit consists of four (4) shares of ISMR Common Stock and one share
of ISMR Class A Preferred Stock.
* Each of the Preferred shares can be exchanged (converted) for one year
from the issue date for two shares of ISMR Common Stock for two dollars
($2.00). After a year, the conversion price will be the market bid price of
two shares of the Common Stock.
* The minimum amount of a subscription is 100 Units.
* Internet Stock Market Resources has set the price of the Units arbitrarily
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* Common Stock shares outstanding before the offering 719,777
* Units offered 833,333
* Common Stock - shares outstanding after the offering 4,053,109 If all
* Preferred Stock - shares outstanding after the offering 833,333 833,333
* Common Stock - shares outstanding if all Preferred are sold
shares are converted to Common shares (2 for 1) 5,719,775 by ISMR
* Use of Proceeds:
Offering expenses $ 80,000
Marketing 500,000
Salaries & Wages 490,000
Software & Equipment 75,000
Acquisitions 3,600,000
Working Capital 254,998
Total proceeds of the offering $ 4,999,998
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The proceeds would be $1,666,666 higher if all Preferred shares are converted
within the one-year conversion period. This would result in a total of
$6,666,664 raised during the year after and including the offering. The
Company cannot forecast how many shares, if any, will be converted during this
one-year period.
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RISK FACTORS
Investment in the Common Stock of Internet Stock Market Resources, Inc. is
very speculative and very risky and should be considered only by those who are
able to bear the risk for a long period. Prospective investors should read and
carefully consider the following risk factors having to do with the Company
and its operations.
Risk Factors Related to the Company
1) Internet Stock Market Resources has not been an operating company for very
long.
The Company resulted from the 1989 merger between the Texas public corporation
Trans America Enterprises, Inc. and the private company Sea Venture Cruises,
Inc. From that time until 1998, when it became involved in Internet-related
activities, Internet Stock Market Resources was unable to launch any
revenue-making business. While other business ventures involving the Internet
have shown dramatic and rapid growth in revenues, ISMR has not. At the end of
the Company's fiscal year May 31, 1999, it was unable to generate enough
revenues to pay for continuing operations: the net loss of $127,880 on
revenues of $214,175. Although the for the three-month period ended August 31,
1999, the (unaudited) net income was $56,967 on revenues of $147,892, the
Company's management does not know whether future operations will meet
expectations in terms of sales and growth, or whether the Company will ever be
able to operate profitably on a sustained basis. The results from the
most-recent quarter may not be repeatable.
2) The high technology sector in which ISMR operates is risky.
Internet Stock Market Resources faces a variety of business risks generally
associated with young and rapidly growing companies in the business of high
technology. Among these risks are the following:
* inability to achieve consistent profitability;
* variability in the number of competitors;
* competitors' pricing of their services;
* rapid evolution of hardware and software technologies driving the Internet.
As an example, for more than a year, Internet Stock Market Resources has
been utilizing a very basic software framework for its Website called HTML
(hypertext mark-up language, the basic text code for Websites) in combination
with JAVA and JAVA Script (coding languages that make end users feel like
there is an interactivity between their computers and the Website). While this
software design base has served the Company well, the design is, or will very
soon become, obsolete as new design bases (like the so-called PUSH" engine)
become accepted and used. ISMR has shown no recent ability to quickly embrace
emerging standards, and its ability to do so in the future is unknown.
The corporate information storage and retrieval aspect of the Internet is
intensely competitive, with firms of all sizes offering Internet exposure for
corporate clients and offering Internet users a variety of types of
information. The well-known search engine companies like Yahoo! and AltaVista
(service and trademarks of their respective companies) offer access to company
information by hyperlinks to the companies' own Websites, as well as
hyperlinks to private and public repositories of corporate information. The
result of this competition is that the Internet end user has a huge selection
of sources for information readily available. ISMR has to offer features so
good that Internet users will be attracted to its Website in such numbers that
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prospective clients will pay to be profiled there. This is difficult, and at
any time, competitors offering similar - or possibly even better - corporate
information access at lower prices could overwhelm the ISMR. The Internet is
growing at a staggering rate. The number of new Websites appearing every month
has been estimated at about 10,000. Internet Stock Market Resources' services
may be good and reliable, but with the almost incalculable number of Websites
available for Internet users to visit, it will become more difficult for ISMR
to make InternetStockMarket.com a destination for even occasional visits by
web surfers.
3) ISMR's expansion plans depends heavily on selling all 833,333 Units.
The Company's Board of Directors wants to embark on an ambitious growth plan.
To be fully implemented, the plan will use the maximum net proceeds of this
offering. (See the section "USE OF PROCEEDS" on Page 13 for a breakdown of how
the proceeds may be spent.) If less than the maximum amount of money - almost
$5,000,0000 - is raised, ISMR will have to delay or modify its plans. In the
competitive environment of the Internet, such a delay will almost surely be
detrimental if not catastrophic. Specifically, Internet Stock Market
Resources plan to grow from its present position, at least in one direction,
by acquiring other businesses whose revenues will enhance the Company's, and
whose technology and/or business synergies will help ISMR grow. If the
offering does not raise enough money from for acquisitions, this area of
potential growth will be negatively impacted.
4) The equity position of this offering's investors may be diluted
significantly in the future.
ISMR may have to raise more money. If or when such additional funds are
needed, the Company might not be able to obtain the additional financing at
all, or on acceptable terms. Even if additional financing is obtained, the
effect on stock value cannot be determined at this time. The Board of
Directors has the authority to issue up to 50,000,000 shares of Common Stock.
Even if all 833,333 Units offered in this Prospectus are sold, and even if all
of the Class A Preferred shareholders convert their shares to Common Stock,
ISMR would still have about 95,000,000 shares of Common Stock it could sell or
otherwise issue in the future. The result of such possible future sales would
be dilution of existing shareholder's equity, and given the amount of
additional Common Stock that could be sold in the future, that dilution
could be very large. Further, because ISMR could use its Common Stock as part
of what it pays for one or more of its planned acquisitions, investors in this
offering could find their equity positions diluted without the Company even
doing a public offering in which they could participate. The possibility of
Common Stock being used as part (or all) of the consideration paid for an
acquisition is very real, so prospective investors in this offering are warned
to expect dilution.
5) ISMR faces state and federal scrutiny because of the business it's in.
The Internet itself is largely unregulated; however, ISMR's operations have
certain aspects that intersect with state and federal securities laws:
* Client companies may be trying to raise funds through sales of their
securities, and those
clients may use their own Websites, with hyperlinks from their displays on
ISMR's Website, to promote their offerings. This could bring Internet Stock
Market Resources into conflict with federal and state securities laws.
* At the state level, ISMR may find it difficult to prevent viewing of
solicitation scripts by Internet users in states where the offerings are not
"blue skied."
* At the federal level, unless a specific exemption applies, an offering of
a client's securities via the Internet might constitute a "general
solicitation" that would have to be the subject of an applicable, effective
registration statement.
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* Internet Stock Market Resources may find that certain clients, in their
efforts to raise funds via the powerful medium of the Internet, may violate
securities laws. By making their literature available to the public or by
facilitating access to that information, ISMR could find itself accused by
state or federal regulators of being a promoter of the offerings, which
could lead to regulatory sanctions. The Company has specific language in its
client contracts to avoid such situations; it also monitors the activities of
clients with respect to matters involving descriptions of their securities and
any securities they might be selling, but it is still possible that ISMR could
end up in a situation where it has unintentionally allowed the ISMR Website to
be used for a client's defective offering. In such an event, Internet Stock
Market Resources may face severe penalties for having been associated in
securities law violations.
The Company's controlling shareholder has acquired a brokerage firm -
called "NowTrade" on its hyperlink - for on-line trading. The regulatory
environment in which broker/dealers operate is heavily regulated at the state
and federal levels. In the latter case, the National Association of Securities
Dealers (NASD) strictly monitors and enforces compliance with complex
regulations governing the operations of broker/dealers. Even though ISMR will
not be involved in the brokerage firm's business, there are still securities
laws the Company could violate just because of its controlling shareholder's
relationship with the broker/dealer. ISMR expects to face some aspects of the
huge, complicated, and evolving regulatory scrutiny imposed on brokerage firms
as it becomes more involved in on-line brokerage operations through the
hyperlink to NowTrade and through the Company's controlling shareholder's
ownership. Since ISMR has no control over the activities of the broker/dealer,
there will be virtually no ability to scrutinize daily trading activities,
leaving open the real possibility of problems that might result in fines and
penalties, or even in suspension of the broker/dealer's license. Further,
ISMR's controlling shareholder also being a principal of the brokerage house
makes the two companies have what is called "interlocking directorships,"
meaning that certain claims (such as civil lawsuits) against one could draw
the other in through the common ownership and control.
6) ISMR's declared use of the proceeds from this offering is deliberately
vague.
The planned use of the funds the Company raises from this offering - detailed
in the section "USE OF PROCEEDS," on Page 13, below - is vague, and gives the
management of ISMR complete discretion to determine how the proceeds will
actually be spent. The disclaimer at the beginning of the "USE OF PROCEEDS"
section explicitly reserves to the Company the right to decide how to actually
use the funds raised by this offering. This means that investors in this
offering must rely on the will, wisdom, and insight of ISMR's officers and
directors to determine the use of funds that they believe will most likely
enhance the value of the Company's Common stock. For example, Internet Stock
Market Resources does not have firm commitments for acquisitions and does not
know with any degree of precision the final cost of fully implementing future
operational and development plans. With respect to acquisitions, beyond the
direct costs involved, there will likely be direct and indirect costs of
integrating the acquisition targets' operations into the ISMR's own. These
costs could be minor, or they could be very large, and management of the
Company does not have a sufficiently detailed business model on which it can
rely to predict an acquired company's potential post-acquisition drain (or
contribution) on cash flow.
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7) ISMR faces both industry and macroeconomic dangers.
Internet Stock Market Resources is currently a "price setter" in its business.
That means it can establish fees charged to its clients without regard to the
prevailing fees charged by large numbers of competitors; instead, it can now
set fees by considering the charges that clients are willing and able to bear.
In other words, in microeconomic terms, ISMR faces a"downward-sloping demand
curve." This will probably not remain the case for much longer, particularly
if ISMR, and its relatively few competitors, are viewed as being profitable.
Success would undoubtedly draw entry by more competitors, some of which will
be small and very efficient, others of which will be large and willing to bear
losses for a long time to gain market share.
The Company's management will have to plan for maintaining a high level of
cost efficiency while staying on the technological frontier. Moreover, ISMR
must right now be highly concerned with cultivating loyalty in its current
client base to ensure that these companies will stay even in the face of
aggressive efforts by competitors to draw them away. At the same time,
Internet Stock Market Resources has to start establishing strategic alliances
with dominant forces on the Internet, forces that could either enter into
business relationships with ISMR or simply offer their own alternatives. Right
now, the Company has no links from major portals such as NetCenter, MSN,
Yahoo!, Excite, AltaVista, etc., and has yet to develop a strategy to increase
its exposure on the Internet through alliances. A large risk is that Internet
Stock Market Resources has not yet developed the industry contacts or the
necessary skills to enter into such strategic alliances.
Beyond these microeconomic and marketing considerations, the Company is
not prepared for economy-wide downturns. While management firmly believes that
the Internet as a business tool will endure and ultimately become an integral
part of the way companies conduct their business affairs, the Company's
personnel do not believe that clients' level of expenditures on
Internet advertising and exposure will be stay the same during recessions. In
fact, Internet spending might become the first casualty of bad economic times
as firms attempt to minimize their losses by reducing advertising in
non-traditional media (like the Internet). Worse, no industry analyst knows
how expenditures on Internet advertising and exposure will be affected
by recessions since one has not occurred (of any meaningful depth) since the
Internet has become a business tool. The impact at ISMR's level could be
adverse:
* major price discounts may have to be offered to clients;
* the costs of many factors of service production would not fall;
* cash flow and profitability could be seriously eroded.
If a recession lasts for any length of time, Internet Stock Market Resources
might find that it does not have the financial resources to weather the
losses.
8) Internet Stock Market Resources could lose the services of its Chairman.
as ISMR's Board of Directors is currently constituted, Chairman Anastasios
Kyriakides is the entrepreneurial force. His untimely loss or unavailability
would very likely harm the Company's business prospects and future earnings.
The Board's vulnerability subsequent to this offering makes Mr. Kyriakides
long-term relationship uncertain. Because of his unique understanding of the
usefulness of the Internet to growing businesses and his understanding of
the full scope of the Company's mission, technologies, and structure, his
removal, departure, or loss of control over ISMR's strategic direction might
seriously reduce the chances for long-term success. Mr. Kyriakides is
particularly instrumental in negotiating with prospective
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acquisition targets. If the Company loses the services of Mr. Kyriakides,
ISMR's plans may never be realized, and even if they are, they will not take
the shape he had intended.
Currently, ISMR has no employment agreements with any of its officers or
directors and has no 'key man' life insurance policies on any of their lives.
9) The Company has no dividend policy and does not plan to develop one.
Internet Stock Market Resources has never paid a dividend on its Common Stock
and may not declare or pay a dividend for a long time, if ever. This
no-dividend policy might be to retain earnings for future growth or some other
business reason. The only way investors in this offering are likely to make
any money from investing in this offering is through stock price appreciation.
However, stock appreciation may not be likely in the next several years in
light of the stock price's recent performance and the history of the majority
of companies like ISMR whose securities trade on "thin" markets such as the
Over-the-Counter (OTC) service.
10) Internet Stock Market Resources Common Stock may be hard to sell.
As well as being regulated at the federal level by the Securities Exchange
Act of 1934, the resale of securities is regulated at the state level through
the so-called "blue sky" laws.
* A company's stock may be listed on a national exchange and have been the
subject of a federally qualified registration statement, but it still might
not be salable by the resident of a state in which ISMR has not met the
applicable "blue-sky" requirements.
* Various methods are available to brokers who want to fill buy or sell
orders for a resident of such a state, but the willingness to do this depends
heavily on the particular state or states involved and on the aggregate value
of the transaction. It also depends on the brokers involved. The compliance
departments of some brokerage firms routinely disallow trading in certain
stocks, particularly those with inadequate levels of public disclosure, low or
suspiciously volatile prices, or market makers of less than sterling
reputation.
There are federal regulations that can also influence a broker's
willingness or ability to be involved in sales of certain "low price stocks"
like ours. The Securities and Exchange Commission has adopted rules that
regulate broker-dealer practices in connection with transactions in "penny
stocks." Generally speaking, penny stocks are equity securities with a
price of less than $5 per share (other than securities listed on certain
national exchanges, or quoted on the NASDAQ system, provided that current
price and volume information with respect to transactions in such securities
is provided by such exchange or system).
Before executing a transaction (not otherwise exempt) in a penny stock, a
broker dealer must do the following:
* Deliver a standardized risk disclosure document prepared by the Commission
that provides information about penny stocks and the nature and level of risks
in the penny stock market.
* Provide the customer with bid and offer quotations for the penny stock,
the compensation of the broker-dealer and the salesperson in the transaction,
and monthly account statements showing the market value of each penny stock
held in the customer's account.
* Make a special, written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to
the penny stock rules. If ISMR Common Stock is or becomes subject to the penny
stock rules, shareholders may find it more
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difficult to sell their Units because of the regulatory and paperwork burden a
broker has to deal with. Considering that it is unlikely that a broker will
make much money off such transactions, a shareholder might find it hard to get
a broker to execute trades of Internet Stock Market Resources stock.
Finally, the Units offered here have been qualified with the Commission
pursuant to the amended Securities Act of 1933 and Regulation S-B. (Note that
the word "qualified" does not mean that the Commission believes the offering
is good or worthy, or that the price is fair, or that stock is an appropriate
investment; all it means is that the offering has met the rules and
requirements in the applicable federal laws.) Because the Units of this
offering were registered, the Common Stock within the Units is "freely
tradable" under federal securities laws. However, just because unrestricted
trading in the stock is allowed does not mean that unrestricted trading
is possible. ISMR Common Stock trades on the Over-the-Counter (OTC) Electronic
Bulletin Board Service of the National Association of Securities Dealers
(NASD). The OTC can be a notoriously "thin" market on any given day due to one
of the following factors:
* there may be no buyers or sellers at all for a particular OTC stock; or
* only one side of the market might have activity.
In the latter case, the market makers in the stock (that is, those NASD-
qualified broker/dealers that post bids and offers for that stock) would have
every reason to move the stock price up (in the case of a buy side-only
market) or down (in the case of a sell side-only market). In the month of
November 1999 (the month in which this is being written), Internet Stock
Market Resources' Common Stock has fallen more than 25% on a single sell order
of fewer than a thousand shares. This was probably because there was no buy
side against which the sell order could be matched. Dropping the price heavily
and instantly - in other words, there were no intermediate prices a
shareholder could have sold at - was the only way the market maker involved
could get a buyer to acquire the stock being sold. This situation is not
unusual. Commonly, a selling shareholder may find, on any given day, that a
sell order cannot be executed at the bid price being quoted. In fact, a
selling shareholder might not be able to sell the stock at all, at least for a
period of days, and very likely not at a price anywhere near the one quoted,
much less at one near the price at which the stock was purchased.
The Company's long-term plan for providing better liquidity for its
stockholders is to develop the public market for ISMR Common Stock by
soliciting securities brokers to become market makers of the stock. This will
help by making the stock available to more potential buyers (and sellers).
Unfortunately, though, as long as ISMR Common Stock remains listed on the OTC,
the market for it will be thin, especially because large-scale market
participants like institutional investors tend not to trade in Bulletin Board
stocks. Internet Stock Market Resources has no concrete, immediate plans to
move stock listing to another service like the Small Cap of the NASD or to the
American Stock Exchange (AMEX) because these markets have criteria for listing
that the Company just cannot meet at the present time and probably will not
meet for some time to come.
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USE OF PROCEEDS
If all of the Units of this offering are sold, the net proceeds to Internet
Stock Market Resources from the sale of the Units will be at least $4,919,998
after deducting estimated offering expenses of $80,000. If ISMR retains the
services of an underwriter, or if qualified broker-dealers sell Units, they
will be paid a commission of as much as 10% on their sales. The most these
commissions could amount to would be $500,000 (that is, 10% of $4,999,998),
meaning that the least amount the Company could raise from this offering,
after commissions and all other expenses, would be $4,419,998.
The table below shows how proceeds from this offering would be used for
scenarios where Internet Stock Market Resources sells various amounts of the
Units. Although the Company intends to use the proceeds of this offering in
the manner presented below, management may spend the funds differently if it
so chooses.
<TABLE>
<CAPTION>
Percent of Total Units Offered 25% 50% 75% 100%
<S> <C> <C> <C> <C>
Units Sold 208,334 416,667 625,000 833,333
Gross Proceeds from Offering $1,250,004 $2,500,002 $3,750,000 $4,999,998
Less: Offering Expenses 20,000 40,000 60,000 80,000
Net Proceeds from Offering $1,230,004 $2,460,002 $3,690,000 $4,919,998
Use of Net Proceeds
Salaries $ 124,000 $ 247,000 $ 369,000 $ 492,000
Equipment & Software 75,000 75,000 75,000 75,000
Acquisitions 900,000 1,876,000 2,813,000 3,750,000
Marketing 123,000 246,000 369,000 492,000
Working Capital 8,004 16,002 64,000 110,998
Total Use of Proceeds $ 1,230,004 $2,460,002 $3,690,000 $4,919,998
</TABLE>
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DETERMINATION OF OFFERING PRICE
Internet Stock Market Resources set the price of the Units in this offering
arbitrarily. There is no relationship between the price of these Units and any
standard or accepted method of valuation. The offering price bears no
relationship to the Company's assets, sales, book value, or other generally
accepted criteria of value.
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DILUTION
The following table shows the difference between the shareholders' equity
before and after this offering. The table assumes that various percentages of
the Units offered in this Prospectus are sold, and calculates net book value
per share from the basis of May 31, 1999 (the date of last audit).
<TABLE>
<CAPTION>
Shares Ownership Net Book Dilution
Percentage Value
<S> <C> <C> <C> <C>
If 25% of the Units are sold
Existing Shareholders 719,777 17.8% $ (631,639)
New Investors 3,333,333 82.2% $4,999,998 $ 0.44
Offering Costs $ (580,000)
Total 4,053,109 100.0% $3,788,359 $ 0.44
If 50% of the Units are sold
Existing Shareholders 719,777 17.8% $ (631,639)
New Investors 3,333,333 82.2% $4,999,998 $ 0.44
Offering Costs $ (580,000)
Total 4,053,109 100.0% $3,788,359 $ 0.44
If 75% of the Units are sold
Existing Shareholders 719,777 17.8% $ (631,639)
New Investors 3,333,333 82.2% $4,999,998 $ 0.44
Offering Costs $ (580,000)
Total 4,053,109 100.0% $3,788,359 $ 0.44
If 100% of the Units are sold
Existing Shareholders 719,777 17.8% $ (631,639)
New Investors 3,333,333 82.2% $4,999,998 $ 0.44
Offering Costs $ (580,000)
Total 4,053,109 100.0% $3,788,359 $ 0.44
</TABLE>
As the table above shows, each share offered here would be immediately diluted
in net book value from $1.11, or 74.0%, if 25% of the Units are sold, on down
to $0.44, or 29.3%, if all of the Units are sold. In aggregate, if 25% of the
Units are sold, the adjusted book value per share of Common Stock will be
about $0.77; if all the Units of this offering are sold, the adjusted book
value per share of Common Stock will be about $1.06. Net book value per share
is total assets minus total liabilities, divided by the number of shares
outstanding. The following table shows the dilution another way:
<TABLE>
<S> <C> <C> <C> <C>
Percent of Total Units Sold
Offering price $1.50 $1.50 $1.50 $1.50
Net book value per share
as of May 31, 1999 ($0.88) ($0.88) ($0.88) ($0.88)
Net book value per share
after the offering $0.39 $0.77 $0.95 $1.06
Per share dilution to new
investors $1.11 $0.73 $0.55 $0.44
</TABLE>
The calculations above all start with the number of Common shares of 719,777
that were outstanding on November 17, 1999.
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SELLING SECURITY HOLDERS
There are no selling security holders in this offering.
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PLAN OF DISTRIBUTION
Internet Stock Market Resources intends through this offering to sell up to
833,333 Units at $6.00 per Unit.
* A Unit is four shares of Common Stock of plus one Class A Preferred Stock
share.
* Each Preferred share may be exchanged for two shares of Common Stock for a
payment of $2 for one year from the issue date.
* After one year, the conversion price will be the bid price for two shares
of ISMR Common Stock.
This offering is made on a basis sometimes called "best efforts." This means
that the Company (and any participating broker/dealers who agree to help) will
do its best to sell all 833,333 Units during the offering period, which will
be 180 days from the date on the cover of this Prospectus. However,
even if all of the Units do not get sold during the 180 days, the Company will
keep the proceeds raised. (This basis is different from the one where a
company has to sell a specific amount of its securities during an offering
period.) Since no minimum number of Units have to be sold in this offering
before ISMR can use proceeds, there is no escrow account for the deposit of
investors' funds, and no funds will be returned just because all of the Units
offered are not sold.
As of the date of this Prospectus, the Company plans to sell the Units of this
offering through its own officers and directors. In other words, Internet
Stock Market Resources will be acting as its own selling agent for the
offering. This is called a "self-underwritten" offering. No broker or dealer
has been retained or is under any obligation to buy or to sell any Units. ISMR
officers and directors will contact prospective investors through direct,
personal meetings and telephone calls to people they know. All such meetings
and other contacts will include an invitation to receive a copy of this
Prospectus. The Company does not plan to do any general solicitations and will
not accept any subscription unless the subscriber has already received a
Prospectus.
After the Securities and Exchange Commission grants Internet Stock Market
Resources an effective date, the Company may find an underwriter for this
offering. If one is found, ISMR will file a post-effective amendment to the
registration statement of which this Prospectus is a part. Such an amendment
would include the necessary information about the underwriter, what the
underwriter will do, and what it will charge as far as commissions and other
fees. If an amendment of this kind is filed, the Company will have to stop the
offering until the Commission has given its permission to proceed under the
new underwriting arrangement.
Internet Stock Market Resources' own officers and directors cannot be paid any
commissions or special fees for the Units they sell. The Company will allow
selected broker-dealers who are members of the National Association of
Securities Dealers to sell Units, too; if any Units are actually sold by such
broker-dealers, or by an underwriter if one is retained, then ISMR will pay
commissions of up to 10% of the gross proceeds from the sales of those Units.
In addition, for each 83,333 Units sold by an underwriter or broker-dealer,
that underwriter or broker-dealer will receive 10,000 shares of Class A
Preferred Stock. Any stock issued for commissions would be "restricted,"
meaning that it would not be freely tradable because it is not part of an
effective registration statement or a qualifying exemption. Eventually, the
stock could become freely tradable, but only when it had met specific
conditions laid out in Rule 144 of the amended Securities Act of 1933 or
when it was included in a future registration statement. Commissions will be
paid only after each investor's three-day rescission period has passed.
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The proceeds table in the "Use of Proceeds" section of this Prospectus is
based on the assumption that no commissions will be paid; that will be the
case only if the Company itself sells all of the Units. Should brokers sell
all 833,333 Units, the Company will receive $4,499,998.20 in proceeds from
this offering (833,333 Units at $6.00 per Unit - $0.60 per Unit commission).
Should the Company sell some, but not all of the Units on its own, with the
remainder being sold by others, ISMR's net proceeds will be more than
$4,499,998.20 but less than $4,999,998.
To subscribe for Units, an investor must complete, execute, date, and deliver
to the Company a subscription agreement including the purchase price in check
or money order payable to "Internet Stock Market Resources, Inc." A copy of
the subscription agreement is provided with this Prospectus.
The Company reserves the right to reject any subscription in its entirety, or
to allocate Units among subscribers. If any subscription is rejected, the
funds included for that subscription would be returned to the subscriber
without interest or deduction. Internet Stock Market Resources might reject a
subscription in its entirety for one or more reasons:
* If a subscriber were a resident of a state in which this offering has not
been registered, the Company would reject the subscription;
* ISMR may determine that a subscription - either on its own or in
conjunction with subscriptions from related investors - constitutes an
acquisition of a controlling interest that has not been executed in the manner
prescribed by applicable securities laws; or
* The Company may deem that the investment is not suitable for the investor,
or that the manner in which the investor was solicited was in some way
inappropriate.
The above reasons are not the only ones ISMR might have for rejecting a
subscription in its entirety, but they are the ones the Company believes are
the most likely to occur.
As stated above, Internet Stock Market Resources might have to allocate shares
among subscribers. As far as the Company can foresee, there are two reasons
this might happen:
* The issue might get "oversubscribed;" that is, at some point during the
offering, subscriptions for more than 833,333 Units are received. If that
happens, the Company will take the subscriptions that have arrived on the
business day that oversubscription occurs and allocate remaining Units
available, on a pro rata basis, among these last subscribers; or
* If separate but related persons subscribe, and the Company determines they
are a "control" entity when considered as a group, ISMR might allocate a
limited number of Units among the individual investors of the group.
Internet Stock Market Resources Common Stock is listed on the Over-the-Counter
(OTC) Electronic Bulletin Board Service of the National Association of
Securities Dealers under the trading symbol "ISMR." Firms making a market in
ISMR Common Stock include Sharp Capital, Weinn Securities, Hill Thompson
Securities, and Paragon Securities.
Internet Stock Market Resources is a "reporting company" and is required to
make periodic filings on Forms 10-KSB and 10-QSB with the Securities and
Exchange Commission. The Company's filings are current, but failure to stay
current, or to make required filings when they're due, would constitute
grounds for being de-listed. In general, ISMR must comply with all applicable
provisions of the Securities Exchange Act of 1934 to maintain its stock
listing. The Company voluntarily sends its shareholders annual reports.
Internet Stock Market Resources is also published in the Corporation Record of
Standard & Poor's.
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LEGAL MATTERS
No legal proceedings are pending or threatened to which Internet Stock Market
Resources, Inc. is a party. An opinion with regard to this offering is
provided by the Company's special counsel, Thomas R. Todd, Jr., Esq., P.O. Box
88519, Atlanta, Georgia 30356; telephone number (404) 630-7100. The Company's
Registered Agent is Anastasios Kyriakides, 405 Central Avenue, 102 Lobby
Level, St. Petersburg, Florida 33701.
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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Internet Stock Market Resources' Directors and executive officers are as
follows:
Internet Stock Market Resources' Directors and executive officers are as
follows:
<TABLE>
<CAPTION>
Term Period
Name Age Other Office Held (Years) Served
- --------------------- -- ----------------------------- ------- ---------
<S> <S> <S> <S> <S>
Anastasios Kyriakides 54 Chairman/Director/Secretary One 12 years
Budd Morris 53 President/Director One 11 months
Caroline Latta 45 Vice President/Director One 11 months
Chad Morris 26 Asst. Vice President/Director One 11 months
</TABLE>
The members of the Board of Directors are elected for a one-year term by the
shareholders at each annual meeting. Officers are appointed by the Directors
for a one-year term at each annual meeting, or until otherwise replaced by the
Board of Directors. No director of currently receives compensation from, or
has a compensation agreement with, the Company in his or her capacity as
a Director. Below is more information about the officers, directors, and other
key employees.
BUSINESS EXPERIENCE OF OFFICERS AND DIRECTORS
Experience during the last five years Anastasios Kyriakides is the Chairman
and Secretary of the Board of Directors of the Company. Mr. Kyriakides
received the degree Bachelor of Science in business from Florida International
University in 1989; in 1997, he received a degree in investment banking from
the American Institute of Banking. Mr. Kyriakides has extensive experience in
the field of investment banking and venture capital.
* From 1989 to the present, Mr. Kyriakides has consulted for numerous
companies in the areas of banking, travel, and electronics.
* In 1994, Mr. Kyriakides became the Chairman of Montgomery Ward Travel, a
company created to provide full travel services to eight million Montgomery
Ward customers and credit card holders; he served in this capacity from 1994
to 1996.
* Mr. Kyriakides had previously organized the successful start-up of Seawind
Cruise Line in 1990; there, he was the founder, and later, the Chairman, CEO,
and Secretary until 1994.
* In 1984, Mr. Kyriakides founded Regency Cruise Line and served as its
Chairman and Secretary until 1987.
* In 1983, Mr. Kyriakides founded the Mylex Corporation to develop and
produce the world's first hand-held optical scanner and VGA card for personal
computers. As the President and Chairman, Mr. Kyriakides guided Mylex from its
beginning as a private company to its becoming a public company traded on the
NASDAQ under the stock symbol MYLX.
Mr. Kyriakides divides his working time between his duties to Internet Stock
Market Resources and certain other business ventures in which he is engaged.
The majority of his business hours are spent either at the offices of ISMR
doing Company business or are spent working on Company matters outside of the
office. He estimates that he spends on average approximately sixty hours per
week engaged in work for Internet Stock Market Resources, Inc. He receives no
compensation for his efforts although he has been the beneficiary of Company
stock.
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Mr. Kyriakides is the owner of the Common Stock of the on-line brokerage firm
NowTrade, Inc.
Budd Morris is the President, Treasurer, and Chief Executive Officer. He is a
member of the Board of Directors. Budd Morris attended Southern Colorado State
College during the late 1960s.
* Budd Morris was employed by American Stores, Inc. where he served in upper
management; from 1987 to 1992, Jewel Osco of Florida, a subsidiary of American
Stores employed Mr. Morris as its Executive Vice President and Officer.
* In 1993, Budd Morris left American Stores to become Director of Marketing
for Cellular One, a division of McCaw Telecommunications, Inc.
* From 1995 to 1997, Mr. Morris was Regional Sales and Operations Manager of
LIM Imports Corporation.
* In February of 1997, he was appointed President of Internet Stock Exchange
Corp. (the former name of Internet Stock Market Resources, Inc.). Initially,
his primary responsibilities were to develop sales collateral, staffing,
material, marketing, and alliances, as well as to carry out other managerial
duties. In January of 1999, Mr. Morris was appointed Chief Executive Officer
and Treasurer while retaining the office of President. His duties now include
monitoring strategic operations, controlling marketing alliances and expenses,
and other duties traditionally performed by the President and Chief Executive
Officer of a public company.
Budd Morris is a full-time employee and his compensation is entirely
commission-based. There is no written compensation or employment agreement
with him.
Caroline Latta is a Vice President and Chief Financial Officer. She is a
member of the Board of Directors. Ms. Latta attended Drury College in
Springfield, Missouri until 1970.
* Before her current position, Ms. Latta co-owned and operated Passport
Gateway Magazine, an upscale tourist publication.
* For three years, she was a mortgage broker consultant for Northern Funding
Group, a not-for-profit funding organization.
* Most recently, Ms. Latta served as a consultant for Internet Stock Market
Resources, Inc. from March of 1997 until her appointment to the office of Vice
President of Sales and Marketing. Her duties include marketing the Website and
consulting with principals of public companies needing
Internet exposure.
Ms. Latta was promoted to the office of CFO in January of 1999; her duties
now include budgeting, disbursements, and accounting procedures, as well as
such other duties as she has carried since she began her professional
relationship with ISMR.
Ms. Latta is a full-time employee and her compensation is entirely
commission-based. There is no written compensation or employment agreement
with Ms. Latta.
Chad Morris is an Assistant Vice President and Chief Operating Officer. He is
a member of the Board of Directors. Chad Morris is a recent graduate of the
Florida State University, having earned the degree Bachelor of Science in
Social Sciences.
* Chad Morris was the Financial Officer for a not-for-profit organization,
Kappa Alpha Order, from January of 1995 through May of 1997.
* A private technology company, Aerotek Inc., employed Chad Morris in the
capacity of Technical Contracts Manager from 1997 through December of 1998.
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* Internet Stock Market Resources employed Chad Morris in January of 1999 as
Chief Operating Officer; his duties include sales, marketing, and operations.
Chad Morris is a full-time employee and his compensation is entirely
commission-based. There is no written compensation or employment agreement
with him.
None of the Company's officers and directors serves as an officer or director
of another public corporation.
FAMILY RELATIONSHIPS AMONG OFFICERS AND DIRECTORS
Caroline Latta and Budd Morris are married. Chad Morris is their son.
CERTAIN SIGNIFICANT EMPLOYEES
The Company currently has no non-officer employees.
PROMOTERS
There are, at the date of this Prospectus, no promoters of this Issue. The
Company may, however, retain the services of an underwriter. Such a
relationship would be the subject of an amendment to this Prospectus.
CONTROL PERSONS
M.C.K. Marine Enterprises, Inc., a Liberian corporation, is a "control person"
of Internet Stock Market Resources, Inc. Anastasios Kyriakides has a
controlling interest in M.C.K. Marine Enterprises, Inc.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table displays the security ownership of Internet Stock Market
Resources beneficial owners and managers as of November 17, 1999.
<TABLE>
<CAPTION>
Name and Address Amount and Nature
Title of Class of Beneficial Owner Beneficial Ownership Percent
- -------------- -------------------------- -------------------- -------
<S> <S> <C> <C>
Common M.C.K. Marine Enterprises*
c/o Anastasios Kyriakides
204 37th Ave., Suite 332
St. Petersburg FL 33704 49,333 6.85%
Common Anastasios Kyriakides
204 37th Avenue, Suite 302
St. Petersburg FL 33704 222,223 30.87%
------- ------
271,556 37.73%
</TABLE>
* Anastasios Kyriakides controls M.C.K. Marine Enterprises.
As a group, the officers and directors beneficially own approximately 271,556
shares at November 17, 1999.
There have been no changes in control of the Company during the past two
years.
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DESCRIPTION OF SECURITIES
Common Stock
Internet Stock Market Resources has authorized 50,000,000 shares of Common
Stock, with a par value of $0.0001 per share, and has also authorized
10,000,000 shares of Preferred Stock, with a par value $0.01 per share. There
are 777,719 shares of Common Stock issued and outstanding, and there are no
shares of Preferred Stock are issued.
Preferred Stock
The Board of Directors has designated 933,333 of the Company's Preferred Stock
as "Class A Preferred Stock." Of these, 833,333 Class A Preferred Stock shares
are included in the Units offered in this Prospectus. (The remaining 100,000
of the 933,333 designated as Class A Preferred Stock are reserved as
additional compensation for broker-dealers who sell Units of this offering.)
The main features of the Class A preferred shares are as follows:
* Each Class A Preferred Stock share is convertible into two shares of ISMR
Common Stock.
* For one year from the issue date, the conversion price is $2.
* After one year, the conversion price is the market bid price for two
shares of ISMR Common Stock.
* The market bid price to be used otherwise in calculation of conversion
price is the bid price at 4:00 p.m. on the previous business day on the
national exchange on which ISMR Common Stock trades.
* The "previous day" will be the day prior to notification via United States
Postal Service.
* Class A Preferred Stock has no voting rights.
* Other than liquidation rights to the extent of par value, which is $0.01
per share Preferred, the Class A Preferred Stock has no preemptive or other
special rights unless granted by law or statute.
* Class A Preferred Stock has no rights to dividends of any kind
* The Board of Directors can declare a Class A Preferred Stock dividend if
it wishes to, but if it does declare such a dividend, that does not mean the
Class A Preferred Stock has any right to dividends after that.
* If any part of the designation of the Class A Preferred Stock is held
invalid (by a court, for example), the rest of the class's designation is
still valid.
Units
The Units in this offering are each composed of four shares of Common Stock
and one share of Class A Preferred Stock.
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INTEREST OF NAMED EXPERTS AND COUNSEL
None of the experts named in this Prospectus owns any of Internet Stock Market
Resources' securities.
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DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
Internet Stock Market Resources has no insurance or other instrument of
indemnity against liability under the amended Securities Act of 1933. The
Company has taken the general position that the Securities and Exchange
Commission considers such indemnification not in the public interest.
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ORGANIZATION WITHIN THE LAST FIVE YEARS
Operating under the name Trans America Enterprises, Inc., the Company became a
public entity when, in 1989, it filed with the United States Securities and
Exchange Commission a registration statement on Form S-18. On February 9,
1989, it was merged with Sea Venture Cruises, Inc., a close, Delaware
corporation, in a tax-free reorganization that resulted in the re-domiciling
of the corporation from Texas to Delaware. Trans America Enterprises, Inc.,
the surviving corporation of the merger, changed its name to Sea Venture
Cruises, Inc., and conducted business under that name until early 1998.
Because the Company was unsuccessful in the cruise business, it started
looking for a merger partner in a new line of enterprise. After determining
that substantial opportunities existed in the burgeoning area of Internet
information services, ISMR's controlling shareholder began to develop a
separate, private, Florida corporation called Internet Stock Market Corp.,
which was engaged in providing information on the World Wide Web through a
Website with the URL (Universal Resource Locator, or "Web address")
http://www.InternetStockExchange.com. That Web address was later revised to
www.InternetStockMarket.com. On March 26, 1998, the Company's name was changed
to Internet Stock Exchange Corp. by an amendment to the Articles of
Incorporation. On April 14, 1998, ISMR executed a reverse-split of all shares
of its Common Stock on a one-for-one-thousand (1-for-1000) basis, with
fractional shares being canceled. This reverse-split resulted in the total
number of shares issued and outstanding becoming 487,001.
On August 17, 1998, the Company changed its name to Internet Stock Market
Resources, Inc. and subsequently announced that it had merged with the
private, closely held Florida corporation Internet Stock Market Corp. The
financial statements of the Surviving Corporation presented in this
Prospectus (and in periodic filings with the S.E.C.) reflect the financial
effect of the merger as if it were similar to a "pooling of interests" because
of common ownership and control. The effective date of the merger coincides
with the first day (September 1, 1998) of the second quarter of ISMR's fiscal
year that began on June 1, 1998 and ended on May 31, 1999.
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DESCRIPTION OF BUSINESS
PRINCIPAL PRODUCTS OR SERVICES AND THEIR MARKETS
Internet Stock Market Resources is in the business of providing business and
advertising information on the Internet about client companies. The
information posted is provided by the companies, and may include information
about their goods and services as well as other information. End users are
also able, through the Website, to hyperlink to other information services
that carry data about a specific client company; these hyperlinks include the
Securities and Exchange Commission's EDGAR database, PR Newswire, the client
company's own Website, etc.
DISTRIBUTION METHODS OF PRODUCTS OR SERVICES
ISMR provides its primary service by taking information provided by client
companies and preparing it in such a manner that it is viewable by Internet
users with industry-standard Internet browsers like Microsoft Internet
Explorer and Netscape Navigator. The preparation process generally entails
translating the client company's information into hypertext markup language
(HTML). In the case of a client that elects for the more expensive "banner
listing," the HTML will be supplemented with client company-provided graphics
formatted in one of the industry standards of GIF or JPEG. All client
companies are presented, alphabetically by industry, in the "Listed Members"
section of the ISMR Website, where end users visit to review a company by name
and by graphic (when applicable) and then hyperlink to more detailed
information if desired.
The more detailed information consists of a selection including a core,
summary profile, as well as (again, where applicable) EDGAR database
information, PR Newswire press releases from ISMR, etc. Internet Stock Market
Resources supports its Website complex with its own server.
STATUS OF ANY NEW PUBLICLY ANNOUNCED PRODUCT OR SERVICE
ISMR has not publicly announced any new services, although the Website's front
page has a hyperlink button to an on-line trading service.
SOURCES AND AVAILABILITY OF RAW MATERIALS AND THE NAMES OF PRINCIPAL SUPPLIERS
Internet Stock Market Resources' business does not rely on raw materials in
the traditional sense, other than the human resources required for maintenance
of the Website complex; it does, however, depend upon access to telephonic
communications lines for the transmittal of data, primarily under hypertext
transfer protocol ("http"), as well as for communications by voice and data
with customers. The Company's primary long distance carrier is AT&T.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS OR
LABOR CONTRACTS, INCLUDING DURATION
Internet Stock Market Resources holds no patents, licenses, franchises,
concessions, or royalty agreements, and has no labor contracts. The Company
has applied to the U.S. patent Office for a trademark on the name "Internet
Stock Market" (Application No. 75/422259).
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NEED FOR ANY GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS OR SERVICES
Government approval for the Company's products and services is not currently
required.
COMPETITION
The corporate information storage and retrieval aspect of the Internet is
intensely competitive, with entities of all sizes offering Internet exposure
for corporate clients, and offering end users a variety of types of
information. The well-known search engine companies like Yahoo! and AltaVista
offer end users access to company information via hyperlinks to the companies'
own Websites. There are also hyperlinks to private and public repositories of
corporate information such as, in the private case, the National Association
of Securities Dealers' Website complex, which consists of pages for
Disclosure, Inc., OTC, etc., and, in the public case, the Securities and
Exchange Commission's massive EDGAR database. Further, a number of Websites
featuring corporate information profiles, stock guides and tips, and
investment advice are appearing each month. The result of this competition is
that end users of the Internet have available to them a huge array of
information resources from which to select. The result for ISMR, which is and
has been attempting to carve out a profitable niche in the business, is that
it must offer to interested Internet users features of such magnitude as to
attract them in such numbers that prospective clients will pay ISMR to be
profiled on the Website complex. There is no assurance that Internet Stock
Market Resources will not be overwhelmed by competitors offering similar, or
possibly even better, corporate information access, and at prices to clients
below what ISMR charges.
EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS ON THE
BUSINESS
The Internet itself is largely unregulated. The Company expects that federal
and state regulations might be enacted in the future, but the extent and type
of such regulations are unknown. Also see Risk Factor Number 5.
AMOUNT SPENT DURING EACH OF THE LAST TWO FISCAL YEARS ON RESEARCH AND
DEVELOPMENT ACTIVITIES
Internet Stock Market Resources does not generally become involved in research
and development.
COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS (FEDERAL, STATE AND
LOCAL)
Environmental laws do not materially affect the Company.
NUMBER OF TOTAL EMPLOYEES AND NUMBER OF FULL TIME EMPLOYEES
Internet Stock Market Resources currently has four individuals who receive
compensation:
* President and chief executive officer Budd Morris,
* Vice President and chief financial officer Caroline Latta,
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* Vice President and chief operating officer Chad Morris.
These officers earn compensation through commissions; presently, they are all
paid as independent contractors, although the Company will convert them to
statutory employees on January 1, 2000.
Anastasios N. Kyriakides, the only director who is not currently an officer,
receives no monetary compensation from ISMR; however, the Company will begin
paying him a salary as an employee at some time in the near future.
CYCLICALITY OF THE INDUSTRY
General public use of the Internet has developed within the past five years.
As such, the industry has not experienced a recession yet. Hence, there is no
empirical data on the industry's sensitivity to the business cycle.
Nevertheless, management of ISMR assumes that the Internet industry in
general, and Internet Stock Market Resources in particular, will experience a
decline in revenues during a recessionary phase of the economic cycle. To the
extent that the Company is dependent on payments from its business clients,
many of which are in other industries, ISMR's revenues may be eroded, possibly
severely, by any economic downturn's effect on clients' revenues. Further, the
Company has not experienced any cyclical nature in the business as yet.
ECONOMIC DEPENDENCE
Internet Stock Market Resources has no single source for 10% or more of its
revenues and does not expect any such relationship to develop in the near
future.
RECENT DEVELOPMENTS
Through the end of the current fiscal year, Internet Stock Market Resources
had largely conducted business in the normal course, having added three to
four new clients per month to its "listed members" service. The Company has
also been laying the groundwork for the acquisition of several closely held,
going concerns with the intent of making them wholly- or partially-owned
subsidiaries. Subsequent to the May 31, 1999, fiscal year end, ISMR had
entered into a letter of intent to acquire a company, described below and in
the Notes to the Financial Statements presented later in this Prospectus.
YEAR 2000 ISSUES
The year 2000 (Y2K) issue results in certain computer systems and software
applications that use only two digits (rather than four) to define the
applicable year. Consequently, such systems and applications may recognize a
date of "00" as the year 1900 instead of the intended year 2000; this could
directly result in a system failure or miscalculations causing disruption of
operations, including, among other things, a temporary inability to process
clients' transactions, order supplies, or engage in similar, normal business
activities. Internet Stock Market Resources has conducted an initial
assessment of its computer system and software applications and believes that
the systems will be Year 2000 compliant. The Company has been communicating
with key suppliers, financial institutions, and clients during 1999 to
identify, coordinate, and resolve any Y2K issues that might arise from these
constituencies. Based on Company management's initial assessment, the Company
39
<PAGE>
believes the cost of addressing the Y2K issue will not have a material impact
on ISMR's financial position or results of operations.
The Securities and Exchange Commission has asked public companies to disclose
four general types of information related to Year 2000 preparedness:
* State of readiness;
* Costs;
* Risks; and
* Contingency plans.
Accordingly, the Company is including the following discussion in this
Prospectus, in addition to the Year 2000 disclosures previously filed in
Internet Stock Market Resources' periodic S.E.C. reports.
State Of Readiness
All equipment and computer systems currently used in-house are believed to be
Y2K compliant. Most of ISMR's vendors are large companies and ISMR expects
that these companies will be Y2K compliant, too. However, ISMR has not
received written notification from all vendors affirming their Year 2000
compliance. Therefore, there is no assurance that the systems of other
companies with which ISMR does business are or will be Y2K compliant. None of
the Company's systems interface directly with any third-party vendors, except
for Internet services, and Company management has been informed that those
systems are Year 2000 compliant. None of ISMR's services is believed to be
subject to Year 2000 compliance, and the Company does not expect to incur any
liability in this area; however, the failure on the part of vendors, or other
companies with whom ISMR transacts or may transact business, to be Y2K
compliant on a timely basis may have an adverse impact on ISMR's operations.
Costs
The total cost to Internet Stock Market Resources of Year 2000 compliance
activities has not been and is not anticipated to be material to the Company's
financial position or results of operations in any given year. Company
management estimates the total costs of addressing the Year 2000 issue to be
less than $10,000. These total costs are based on management's best estimates.
There are no guarantees that these estimates are realistic: actual results
could be different, possibly higher. ISMR plans to inventory sufficient
quantities of supplies from outside suppliers to be capable of operating for
several months should third parties incur Y2K problems. The cost of increasing
the supply levels is not expected to exceed $5,000, and any excess purchases
will be paid from available cash, or will simply not be purchased. Any costs
associated with the Year 2000 issue will be expensed as incurred. The amount
expensed to date has been immaterial.
Risks
Internet Stock Market Resources uses computers and software in various aspects
of its business, principally Internet access, billing and accounting. The
Company's management believes that its computers and software comply with the
Y2K standards. ISMR does not expect any material adverse impact on operations
because of Y2K-related problems. However, as discussed above, ISMR is also
exposed to the risk that one or more of its clients, suppliers, or vendors
could experience Year 2000 problems that could affect the ability of such
clients to transact business or such suppliers or vendors to provide goods and
services. Although this risk is lessened by the availability of alternate
suppliers,
40
<PAGE>
the disruption of certain services, such as utilities, could - depending on
the extent of the disruption - potentially have a material adverse impact on
ISMR's operations.
Contingency Plans
Internet Stock Market Resources is in the process of identifying and
developing contingency plans for any problems that might be experienced by
suppliers, clients, or vendors. This includes identifying alternate suppliers.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
For Internet Stock Market Resources' Fiscal Year Ending May 31, 1999 ISMR's
revenues for the 12 months ending May 31, 1999 ("fiscal 1999") were $214,175
against revenues of $382,775 for the 12 months ending May 31, 1998 ("fiscal
1998"), representing a decline of 44%. Much of the better results for fiscal
1998 were because of revenues earned from some one-time services ISMR
performed during fiscal 1998 and to virtually no revenue being earned during
part of the third quarter of fiscal 1999. That collapse of revenues was the
result of the Company's suspension of sales activities during a regulatory
investigation that resulted in no findings adverse to the Company. This
temporary halt to new business development was overcome in fiscal 1999's
fourth quarter as continuing clients remained with ISMR while new clients were
being added at the rate of approximately three to four per month. From fiscal
'98 to fiscal '99, operating expenses declined by only 13.3%, reflecting
certain fixed costs of operations that did not drop when revenues
did. Company management believes that, as operating revenues grow, total
expenses will also do so, but at a lower rate.
Total cash balances declined 22.1% from their year-previous levels. At fiscal
year-end 1998, almost one-third of ISMR's total cash was in restricted form
(i.e., earmarked for a specific purpose, and not available for general use);
therefore, considering only cash available for general purposes, the
Company's cash balances increased by 14.2% over fiscal year-end-previous
levels, meaning somewhat better liquidity for day-to-day needs at the end of
fiscal year 1999. The elimination of the restricted cash balance was the main
cause of the decline of 22.4% in current assets from the level at the end of
the Company's previous fiscal year, and this single, dominating effect carried
over to the total assets, as well.
With respect to current liabilities, a sharp decline in the current portion of
a note payable to a stockholder contributed a lot to a drop of 55% from the
level at the end of the previous fiscal year. Management is encouraged by the
improvement in the Company's current ratio (current assets divided by current
liabilities, used as a measure of ability to cover short-term obligations with
liquid assets) to 0.58 at fiscal year-end 1999 from 0.34 at fiscal year-end
1998. Coupled with continuing retirement of the outstanding long-term note
payable, total liabilities have fallen year-over-year by
34.3%, marking what Company management feels is a significant reduction in
overall risk.
From fiscal year-end 1998 to fiscal year-end 1999, ISMR's total deficiency in
assets fell by approximately 37%, giving management reason to believe that the
entirety of that asset deficiency can continue to decrease.
With respect to cash flows, the Company's operating activities used net cash
of more than $102,000 during the fiscal year 1999, while operating activities
provided almost $96,000 during the preceding fiscal year. This is the result,
among other, lesser factors, of ISMR's aggressive reduction in accrued
liabilities, as well as a $136,000 rise in deferred income, the second factor
being the result of changes in the recognition of sales revenues.
Internet Stock Market Resources has embarked on an aggressive plan of
expansion involving two separate, but related, parts. First, it is fully the
intention of management to continue to develop new clients for the Company's
flagship business information Website while maintaining the existing "listed
members" base. This component of Management's plan requires the active,
on-going efforts of the executive officers acting in their capacities as
producers, making prospective new clients aware of the benefits of the ISMR
Website portal at the same time as providing a high level of service and
responsiveness to current clients. The second part of Internet Stock Market
Resources'
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business model involves acquiring other going concerns to become subsidiaries.
Although management is looking for acquisitions within the Company's areas of
expertise, ISMR has made overtures to a variety of potential holdings. It is
management's intention to use a group of financing vehicles to acquire
subsidiaries: among these may be Company cash, debt, and/or equity securities.
To the end of having cash available for acquisitions, Internet Stock Market
Resources is making this offering of securities.
EFFECTS OF INFLATION
Company management believes that ISMR's revenues and results of operations
have not been significantly affected by inflation during the three years ended
May 31, 1999. The economy's overall low inflation rates at both the producer
and consumer levels have been reflected in Internet Stock Market Resources'
business and its industry.
GOING CONCERN
Internet Stock Market Resources has suffered recurring losses from operations
and at May 31, 1999, had a working capital deficit and a deficiency in assets.
These and other factors raise doubt about the Company's ability to continue as
a going concern without additional capitalization. The attached
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
LIQUIDITY AND CAPITAL RESOURCES
Management has decided to address the Company's financial situation by the
following:
* A sale of $72,000 additional shares of Common Stock, as part of ISMR's
foreign private placement, was completed in July of 1999.
* A note payable to a stockholder has been restructured and will not be
satisfied until the Company has an acceptable level of working capital.
* This offering is expected to generate up to $5,000,000 from the public.
* Acquisition of at least two, possibly four, additional companies in the
computer and Internet fields for a better vertical integration and to spread
general and administrative costs over a broader base. In that regard, letters
of intent have been signed, and ISMR is in the process of drafting agreements
and performing its due diligence.
* Increased promotional expenditures in an effort to increase revenues.
Subsequent to the end of the May 31, 1999 fiscal year, Internet Stock Market
Resources announced that it had entered into a letter of intent with the
private, close corporation Delcor Industries, Inc., which manufactures and
assembles electronic components. The proposed acquisition involves the
use of both cash and long-term debt of ISMR. Consummation of this acquisition
is based on raising sufficient capital from this offering.
Management further notes that negotiations for the acquisition of other firms
are on going at this time.
44
<PAGE>
For Internet Stock Market Resources' Three-Month Period Ending August 31, 1999
First, readers of this Prospectus are cautioned that, while the Management
Discussion and Analysis above was based on audited financial statements, the
discussion below is for financial statements that are unaudited. While Company
management does not believe that the quarterly financials are
unreliable, they have not been subject to the independent review of ISMR's
auditing firm.
Revenues for Internet Stock Market Resources' first quarter (June 1 to August
31) of fiscal 2000 (the year from June 1, 1999 to May 31, 2000) were 151,091;
this is an increase of 210% over revenues for the first quarter of
the previous fiscal year. Company management attributes the majority of this
increase to ISMR's aggressive strategy of acquiring new clients for the core
business as an Internet portal for displaying information about emerging
companies. Additions to the Company's book of business have given ISMR a
number of opportunities to provide news releases about clients; these, in
turn, have brought the Company's services to the attention of even more
prospective clients.
While revenues increased by more than 200% over the prior year's first
quarter, expenses grew by less than 4.55%, reflecting the previous dominance
of fixed costs of operation that have now been overcome by increasing revenues
and by the relatively modest impact of the Company's variable costs. The
Company's management believes that - provided revenues can be sustained and
increased quarter over quarter - increases in expenses will not be enough to
decrease profitability for the near future. Year over year, the most
significant changes in expenses came in the two distinguishable categories:
the first includes bad debts, which rose from no recognition to almost $4,900,
and interest, which rose 53% on service load to the note payable; the second
includes variable costs typically associated with increasing corporate
activity. In this latter category, commissions rose by almost 31%, payroll
taxes rose by 236%, salaries and wages rose by 145%, supplies rose by 1048%,
and telephone expense rose by 42%. The component of these variable costs
attributable to increased compensation to ISMR personnel rose by $13,916; this
was offset by a decline of $20,978 in professional fees as the Company used
its own personnel to carry out some duties previously handled by outside
professionals. ISMR management knows this trade-off can be carried only to a
certain extent, but believes that this gives clear evidence of the success of
aggressive expense management policies being instituted internally.
Although net income for the fourth quarter of ISMR's previous fiscal year was
positive, this was entirely the result of tax credit effects. The net income
for the period just ended is entirely the result of revenues exceeding
expenses. Company management sees this as a watershed. Whereas for the
fiscal year-previous first quarter, ISMR had a net loss of more than $26,000,
it has now achieved a net income of almost $58,000. On an earnings-per-share
basis (and adjusting the year-previous earnings for the effect of a June, 1999
one-for-nine reverse split of all Common Stock shares), ISMR earned $0.089
cents per share for the quarter just ended against a loss of $0.095 for the
fiscal year-previous first quarter.
From the previous fiscal year's fourth quarter to the first quarter ended
August 31, 1999, total assets decreased from $192,301 to $120,952, a decline
of 37%. This drop was almost entirely due to a large decline in net cash from
more than $120,000 to a slight overdraft, offset to some extent by a
rise of almost $44,000 in accounts receivable. Management is closely
monitoring this very tight cash position, and is instituting cash management
policies to prevent such short-term illiquidity from showing up again. Current
liabilities declined from the previous quarter by 61%, although a
substantial portion of this decline, $113,550, is the result of the previous
quarter's recognition of the current portion of a note payable; excluding this
item, current liabilities declined by slightly less than 31%, although
accounts payable rose by almost 80%, to more than $20,000.
45
<PAGE>
As previously noted, ISMR's current ratio continues to improve, rising to 0.80
from the quarter-previous value of 0.58. Nevertheless, the slightly negative
cash level at August 31, 1999 should be considered a warning sign on the
otherwise-improving current ratio.
From the previous quarter, ISMR's deficiency in assets declined by almost 18%,
confirming for the quarter Company management's previous assessments, stated
in periodic S.E.C. filings, that the asset deficiency would be steadily
decreased, quarter over quarter, until gone. Although at the current rate, the
deficiency would be eliminated in approximately five quarters, Company
management cautions that a deficiency may remain somewhat longer.
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<PAGE>
DESCRIPTION OF PROPERTY
Until July 31, 2000, Internet Stock Market Resources is committed to lease
approximately 1,200 square feet of office space for $1,050 per month at 405
Central Avenue in St. Petersburg, Florida. The office building is
approximately 7 years old, and in good condition.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 15, 1990, the Company issued 49,333 restricted common shares to
M.C.K. Marine Enterprises, Inc. in exchange for cancellation of a $1,605,800
loan. M.C.K. Marine Enterprises, Inc. was, and still is, owned and controlled
by Company Director, Chairman, and Secretary Anastasios Kyriakides.
As a result of the merger of Internet Stock Market Resources, Inc. and
Internet Stock Exchange Corp. - effective on September 1, 1998 (see
"DESCRIPTION OF BUSINESS," above) - Company Director, Chairman, and Secretary
Anastasios Kyriakides, through affiliate parties, received consideration of
222,222 shares of ISMR's Common Stock plus a $1,000,000 note payable. The
terms of repayment of that loan have recently been restructured (described in
the Notes to the Financial Statements in the "FINANCIAL STATEMENTS" section,
below).
49
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50
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The principal United States market in which Internet Stock Market Resources
Common Stock is and has been traded is the Over the Counter (OTC) Electronic
Bulletin Board Service of the National Association of Securities Dealers
(NASD). ISMR Common Stock began trading in 1989 under the symbol "SVCR"
(subsequently changed to "ISMR"). Through December 1, 1999, the high sales
price was $5.00 (adjusted for all stock splits) and the low sales price was
$0.0001. Market makers in ISMR Common Stock include Sharp Capital, Weinn
Securities, Hill Thompson Securities, and Paragon Securities.
The Company's common stock, under the symbol "ISMR," has experienced sales of
stock at a high of $3.50 and a low of $0.25.
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1999 May 31, 1998
High Low High Low
-------------- --------------
<S> <C> <C> <C> <C>
First Quarter* 2.25* 1.50* ** **
Second Quarter* 3.50* .87* ** **
Third Quarter* 1.25* .56* ** **
Fourth Quarter* .75* .25* ** **
</TABLE>
*The prices presented above are bid prices which represent prices between
broker-dealers and do not include retail marketups and markdowns or any
commission to the dealer. These prices may not reflect actual transactions.
** Bid prices during this time period were insignificant.
On November 17, 1999, there were approximately 419 holders of record of
Internet Stock Market Resources Common Stock. This number does not include any
adjustment for stockholders owning ISMR Common Stock in "street" name.
The stock transfer records of the corporation indicate that, as of November
17, 1999, there were 719,777 Common shares outstanding, of which 496,483 were
"free trading" and 223,294 were "restricted."
Internet Stock Market Resources has never paid dividends, and it does not
anticipate paying any dividends in the near future; instead, ISMR intends to
retain earnings, if any, to provide funds for general corporate purposes and
the expansion of business. Florida law restricts the payment of dividends for
corporations with a deficiency in assets; however, the $1,000,000 note issued
in connection with the merger described above was treated as a distribution.
51
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<PAGE>
EXECUTIVE COMPENSATION
The following table shows the compensation of officers, directors, and other
key personnel for the fiscal years (ending on May 31, respectively) 1997,
1998, and 1999.
Summary Compensation Table
Long Term Compensation
____________________________
Annual compensation | Awards |Payouts|
_________________________________________|__________________|_______|
(a) (b) (c) (d) (e) | (f) (g) | (h) | (i)
Name Other |Restrctd Securtis | |All Other
and Annual | Stock Underlying| LTIP | Compen-
Principal Compen- |Award(s) Options/ |Payouts| sation
Position Year Salary($)Bonus($)sation($) | ($) SARs (#)| ($) | ($)
_________________________________________|__________________|_______|_________
CEO | | |
Budd | | |
Morris 1999 0 0 27,628 | 0 0 | 0 | 0
1998 0 0 64,587 | 0 0 | 0 | 0
1997 0 0 N/A | 0 0 | 0 | 0
---- | | |
Anastas- 1999 0 0 0 | 0 0 | 0 | 0
ios 1998 0 0 0 | 0 0 | 0 | 0
Kyriak- 1997 0 0 0 | 0 0 | 0 | 0
ides | | |
- ------------- | | |
CFO | | |
Caroline | | |
Latta 1999 0 0 10,068 | 0 0 | 0 | 0
1998 N/A N/A 938 | N/A N/A | N/A | N/A
1997 N/A N/A N/A | N/A N/A | N/A | N/A
- ------------- | | |
COO | | |
Chad | | |
Morris 1999 0 0 10,350 | 0 0 | 0 | 0
1998 N/A N/A N/A | N/A N/A | N/A | N/A
1997 N/A N/A N/A | N/A N/A | N/A | N/A
- ------------- | | |
Secretary | | |
Anastas- 1999 0 0 0 | 0 0 | 0 | 0
ios 1998 0 N/A N/A | N/A N/A | N/A | 25,000
Kyriak- 1997 0 N/A N/A | N/A N/A | N/A | 0
ides(1) | | |
| | |
- ------------- | | |
Other Officers/Directors | | |
John 1999 0 0 0 | 0 0 | 0 | 0
Bramis 1998 0 0 0 | 0 0 | 0 | 0
(2) 1997 0 0 0 | 0 0 | 0 | 0
---- | | |
John 1999 0 0 0 | 0 0 | 0 | 0
Karava- 1998 0 0 0 | 0 0 | 0 | 0
siles(3) 1997 0 0 0 | 0 0 | 0 | 0
- ------------- | | |
(1) Anastasios Kyriakides had the title of President until Budd Morris was
appointed to the capacity, and had held that title for ISMR's predecessor,
Internet Stock Exchange Corp.
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(2) John Bramis served as an uncompensated officer and director for
approximately the first two quarters of fiscal year 1999, and served similarly
for the Company's predecessor, Internet Stock Exchange Corp. In that latter
role, he served as uncompensated President.
(3) John Karavasiles served as an uncompensated officer and director for
approximately the first two quarters of fiscal year 1999, and served similarly
for the Company's predecessor, Internet Stock Exchange Corp. In that latter
role, he served as uncompensated President.
Internet Stock Market Resources executive officers currently earn their
compensation as independent contractors through commissions on sales. There
are currently no contracts with any of the executive officers; moreover, no
compensation is provided to any person in his or her capacity as a director,
and there is no reimbursement for expenses incurred by directors in their
capacities as such.
54
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INTERNET STOCK MARKET RESOURCES, INC.
FINANCIAL STATEMENTS
MAY 31, 1999 and 1998 (audited)
and August 31, 1999 and 1998 (unaudited)
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56
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Contents Page
- ------------------------------------- -----------
INDEPENDENT AUDITOR'S REPORT F-1
FINANCIAL STATEMENTS
Balance Sheets F-2
Statements of Operations F-3
Statements of Deficiency in Assets F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 to F-11
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58
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Dohan and Company 7700 North Kendall Drive, #204
Certified Public Accountants Miami, Florida 33156-7564
A Professional Association Telephone: (305) 274-1366
Facsimile: (305) 274-1368
Independent Auditor's Report
Stockholders and Board of Directors
Internet Stock Market Resources, Inc.
St. Petersburg, Florida
We have audited the accompanying balance sheets of Internet Stock Market
Resources, Inc., as of May 31, 1999 and 1998, and the related statements of
operations, deficiency in assets and cash flows for the years then ended.
These financial statements are the responsibility of the Company's Management.
Our responsibility is to express an opinion on these financial Statements
based on our audits.
We conducted our audits 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Internet Stock Market
Resources, Inc. at May 31, 1999 and 1998, and the results of our operations
and our cash flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has suffered recurring losses from
operations, has a working capital deficit and has a deficiency in assets that
raise substantial doubt about our ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 9.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Dohan and Company, P.A., CPA's
July 9, 1999
Miami, Florida
Member:
Florida Institute of Certified Public Accountants
American Institute of Certified Public Accounts - Private Companies and SEC
Practice Sections
SC International - Offices in Principal Cities World-Wide
[Page F-1]
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Internet Stock Market Resources, Inc.
Balance Sheets
<TABLE>
<CAPTION>
May 31, August 31,
1999 1998 1999
(Unaudited)
---------- ---------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 122,786 $ 107,653 $ -
Restricted cash - 50,000 -
Accounts receivable, less allowance for
doubtful accounts of $37,320 and
$19,493 at May 31, 1999 and 1998, and
$4,983 at August 31, 1999 22,343 32,193 76,649
Recoverable income taxes 5,928 - 5,928
Accrued interest receivable from
stockholder - 4,920 -
--------- ---------- ---------
TOTAL CURRENT ASSETS 151,057 194,766 82,577
PROPERTY AND EQUIPMENT 40,244 49,973 37,375
DEFERRED TAX ASSET, LESS VALUATION
ALLOWANCE OF $1,030,376 AND $995,651
AT MAY 31, 1999 AND 1998,
AND $995,651 AT AUGUST 31, 1999 - - -
DEPOSITS 1,000 1,000 1,000
--------- --------- ---------
TOTAL ASSETS $ 192,301 $ 245,739 $ 120,952
========== ========== =========
LIABILITIES AND DEFICIENCY IN ASSETS
CURRENT LIABILITIES
Bank overdraft $ - $ - $ 2,820
Accounts payable 11,197 8,995 20,152
Accrued and other liabilities 20,998 57,096 4,454
Deferred income 112,084 124,444 76,235
Current portion of note payable to
stockholder 113,550 385,385 -
Other 1,146 - -
---------- ---------- ---------
TOTAL CURRENT LIABILITIES 258,975 575,920 103,661
NOTE PAYABLE TO STOCKHOLDER, 6%, DUE
JUNE 1, 2000 564,965 678,515 535,991
---------- ---------- ---------
TOTAL LIABILITIES 823,940 1,254,435 639,652
---------- ---------- ---------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
DEFICIENCY IN ASSETS
Convertible Preferred Stock, $.01 par
value; 10,000,000 shares authorized;
none issued and outstanding - - -
Common Stock;$.0001 par value;
50,000,000 shares authorized; 586,444
and 275,333 shares issued and out-
standing at May 31, 1999 and 1998
and 719,777 shares issued and out-
standing at August 31, 1999 59 28 72
Additional paid-in capital 505,126 3,458,278 560,074
Deficit (1,136,824) (4,467,002) (1,078,846)
---------- ---------- ----------
TOTAL DEFICIENCY IN ASSETS (631,639) (1,008,696) (518,700)
---------- ---------- ----------
TOTAL LIABILITIES AND DEFICIENCY IN
ASSETS $ 192,301 $ 245,739 $ 120,952
========== ========== ==========
</TABLE>
See accompanying notes.
[Page F-2]
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Internet Stock Market Resources, Inc.
Statements Of Operations
<TABLE>
<CAPTION>
Years ended Three months
May 31, August 31,
1999 1998 1999 1998
(Unaudited)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $ 214,175 $ 382,775 $ 151,091 $ 48,681
---------- ---------- ---------- ----------
EXPENSES
Bad debts 35,763 19,493 4,893 -
Depreciation and amortization 11,307 5,553 2,870 2,791
Office rent 13,482 12,359 4,420 3,370
General and administrative 43,801 105,909 50,867 37,162
Interest 34,947 - 8,729 5,696
Promotion 3,375 21,386 - -
Professional fees 82,405 51,518 13,759 34,737
Compensation & related taxes 97,890 156,709 - -
Telephone 20,668 23,470 7,575 5,319
---------- ---------- --------- ----------
TOTAL EXPENSES 343,638 396,397 93,113 89,075
---------- ---------- --------- ----------
INCOME (LOSS) FROM OPERATIONS (129,463) (13,622) 57,978 (40,394)
OTHER INCOME 1,583 5,332 - -
---------- ---------- --------- ----------
INCOME (LOSS) FROM OPERATIONS
BEFORE INCOME TAXES (127,880) (8,290) 57,978 (40,394)
PROVISION FOR INCOME TAXES - - 19,368 (14,137)
TAX BENEFIT FROM UTILIZATION
OF NET OPERATING LOSS
CARRYFORWARDS - - (19,368) -
---------- ---------- --------- ----------
NET INCOME (LOSS) $ (127,880) $ (8,290) $ 57,978 $ (26,257)
---------- ---------- --------- ----------
BASIC NET INCOME (LOSS) PER
SHARE $ (0.32) $ (0.03) $ .09 $ (.10)
========== ========== ========= ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 398,045 275,333 653,111 275,333
========== ========== ========= ==========
</TABLE>
See accompanying notes.
[Page F-3]
63
<PAGE>
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64
<PAGE>
Internet Stock Market Resources, Inc.
Statements Of Deficiency In Assets
For the years ended May 31, 1999 and 1998
<TABLE>
<CAPTION>
Additional
Paid-in
Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C>
Balances May 31, 1997 53,111 $ 5 $ 3,454,707 $ (3,458,712) $ (4,000)
Stock issued for merger 222,222 23 977 1,000
Debt issued in con-
nection with merger (1,000,000) (1,000,000)
Cancellation of shares 2,594 2,594
Net loss for 1998 (8,290) (8,290)
Balances May 31, 1998 275,333 $ 28 $ 3,458,278 $ (4,467,002) $(1,008,696)
Private stock placement 311,111 31 504,906 - 504,937
Recapitalization of
deficit (3,458,058) 3,458,058 -
Net loss for 1999 (127,880) (127,880)
Balances May 31, 1999 586,444 $ 59 $ 505,126 $ (1,136,824) $ (631,639)
</TABLE>
See accompanying notes.
[Page F-4]
65
<PAGE>
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66
<PAGE>
Internet Stock Market Resources, Inc.
Statements Of Cash Flows
<TABLE>
<CAPTION>
Years ended Three months ended
May 31, August 31,
1999 1998 1999 1998
(Unaudited)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $(127,880) $ (8,290) $ 57,978 $ (26,257)
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 11,307 5,553 2,870 2,791
Changes in assets and
liabilities:
Decrease (increase) in
restricted cash 50,000 (50,000) - -
Decrease (increase) in
accounts receivable 9,850 (32,193) (54,307) (205)
Decrease in other current
assets - - - 13,612
Increase in recoverable
income taxes (5,928) - - -
Decrease (increase) in
accrued interest
receivable 4,920 (4,920) - -
Increase in accounts
payable 2,202 8,995 8,956 13,513
Increase (decrease) in
accrued and other
liabilities (36,098) 53,096 (19,144) 3,200
Increase (decrease) in
deferred income (12,360) 124,444 (35,848) -
Increase in other
liabilities 1,146 - 1,454 -
--------- --------- --------- ---------
NET CASH (USED) PROVIDED
BY OPERATING ACTIVITIES (102,841) 96,685 (38,041) 6,654
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Common Stock issuance
(rescinded) 504,937 3,594 54,960 100,000
Loan to stockholder - - (19,107) (60,000)
Proceeds of stockholder
loan - 63,900 - -
Principal payments on
note payable stockholder (385,385) - (123,418) -
--------- --------- --------- ---------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 119,552 67,494 (87,565) 40,000
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of equipment (1,578) (55,526) - (482)
Security deposits - (1,000) - -
--------- --------- --------- ---------
NET CASH USED BY
INVESTING ACTIVITIES (1,578) (56,526) - (482)
--------- --------- --------- ---------
(DECREASE) INCREASE IN
CASH 15,133 107,653 (125,606) 46,172
CASH, beginning 107,653 - 122,786 107,653
--------- --------- --------- ---------
CASH, ending $ 122,786 $ 107,653 $ (2,820) $ 153,825
========== ========== ========== =========
SUPPLEMENTAL DISCLOSURES
Interest received $ 6,503 $ 412
Interest paid $ 36,363 $ -
Income taxes paid $ - $ 5,928
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING TRANSACTIONS:
In connection with the merger of a commonly controlled affiliate, the Company
issued 222,222 shares of Common Stock in exchange for 1,000 shares outstanding
of the non-surviving corporation and $1,000,000 of debt, recorded
as "Note payable to stockholder."
See accompanying notes.
[Page F-5]
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68
<PAGE>
Internet Stock Market Resources, Inc.
Notes To Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
BUSINESS ACTIVITY Internet Stock Market Resources, Inc., (the Company)
provides business and advertising information and design on behalf of our
clients (generally smaller, growing public companies) to end users using the
Internet. The Company's "portal" includes hyperlinks to other financial
Websites.
Effective September 1, 1998, Internet Stock Market Resources, Inc. (formerly,
Internet Stock Exchange Corp.) acquired 100% of the shares authorized, issued,
and outstanding, consisting of 1,000 shares of Common stock, $1.00 par value
per share, of Internet Stock Market Corp., a closely-held Florida corporation,
under an Agreement and Plan of Merger. The shareholders of Internet Stock
Market Corp. were compensated with 222,222 restricted shares of the Company's
common stock and a promissory note in the amount of $1,000,000.
The Surviving Corporation is duly organized under General Corporation Law of
the State of Delaware, is in good standing, and is qualified to conduct
business in any lawful jurisdiction. The Surviving Corporation has completed
all aspects of our merger/acquisition with the Non-surviving Corporation.
ACCOUNTING BASIS These financial statements reflect the merger as if it were
a "pooling of interests" of the two entities under common control in
accordance with Accounting Interpretations of the Accounting Principles Board
Opinion No. 16, "Transfers and Exchanges Between Companies Under Common
Control," which requires the assets and liabilities so transferred to be
accounted for at historical cost in a manner similar to that used in pooling
of interests accounting. Accordingly, financial information for periods prior
to the merger reflect retroactive restatement of the companies' combined
financial position and operating results.
UNAUDITED FINANCIAL STATEMENTS The unaudited financial statements as of August
31, 1999 and for the three months ended August 31, 1999 and 1998 have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of Management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three-month
period ended August 31, 1999 are not necessarily indicative of the results
that may be expected for the year ending May 31, 2000.
[Page F-6]
69
<PAGE>
RECLASSIFICATIONS AND RESTATEMENTS Amounts in the prior year financial
statements have been reclassified for comparative purposes to conform with the
presentation of the current year financial statements. Additionally, amounts
in the prior year financial statements have been restated to give retroactive
effect to the merger for purposes of comparative financial statement
presentation. Also, issued and outstanding common stock shares reported for
prior periods have been adjusted for a June, 1999, one-for-nine reverse split
of all outstanding common stock shares.
CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the
Company considers all highly liquid debt securities purchased with a maturity
of three months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK Financial instruments, which potentially subject
the Company to a concentration of credit risk, are cash and cash equivalents
and accounts receivable. The Company currently maintains its day-to-day
operating cash balances at a single financial institution. At times, cash
balances may be in excess of the FDIC insurance limits. The amounts in excess
were $21,851 and $8,672 at May 31, 1999 and 1998, respectively.
As of May 31, 1999 and 1998, the Company had outstanding trade receivables,
which carrying value of these receivables was reduced for estimated
uncollectibility to estimated fair market value by an allowance for doubtful
accounts. The Company's clients are typically smaller publicly-traded
organizations. Consequently, the Company's ability to collect the amounts due
from clients may be affected by economic fluctuations in their industries and
geographical location, as well as fluctuations in the financial and stock
markets in general.
PROPERTY AND EQUIPMENT Property and equipment, consisting of furnishings and
equipment used in our current operations, is stated at cost, less accumulated
depreciation. Depreciation is begun when the assets are placed in service and
computed using the straight-line method over the estimated useful lives of the
assets, which range from five to seven years.
LONG-LIVED ASSETS Long-lived assets to be held and used are reviewed for
impairment whenever events or changes in circumstances indicate that the
related carrying amount may not be recoverable. When required, impairment
losses on assets to be held and used are recognized based on the fair value of
the asset. Long-lived assets to be disposed of, if any, are reported at the
lower of carrying amount or fair value less cost to sell.
SALES REVENUE Revenues from sales are recorded as the services are rendered,
when the collection of sales proceeds is reasonably assured and all other
material conditions of the sales are met. Services paid in advance on
contracts in excess of one month are deferred and recognized monthly,
pro-rata, over the term of the agreement.
ADVERTISING Advertising and business development costs are charged to
operations in the period incurred.
[Page F-7]
70
<PAGE>
BASIC NET LOSS PER SHARE Basic net loss per common share is computed by
dividing the net income or loss available to common stockholders by the
weighted average number of common shares outstanding during each period. There
were no common stock equivalents as of the years ended May 31, 1999 and May
31, 1998.
INCOME TAXES Income taxes are computed under the provisions of the Financial
Accounting Standards Board (FASB) Statement No. 109 (FAS No. 109), Accounting
for Income Taxes. SFAS 109 is an asset and liability approach that requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of the difference in events that have been recognized in the
Company's financial statements compared to the tax returns.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS In accordance with the requirements of
Statement of Financial Accounting Standards No. 107, the fair value amounts of
financial instruments have been determined based on available market
information and appropriate valuation methodology. The carrying amounts and
estimated fair values of the Company's financial assets and liabilities
approximate fair value due to the short maturity of the instruments. The fair
value of the note payable stockholder is estimated based on an annual interest
rate of 6% and the anticipated dates of payment and has not been increased
accordingly. Fair value estimates are subjective in nature and
involve uncertainties and matters of significant judgment; therefore, fair
value cannot be determined with precision.
2. RELATED PARTY TRANSACTIONS
COMPENSATION AND CONVERSION OF SHARES The compensation to a Non-surviving
Corporation (Internet Stock Market Corp.) shareholder for his equity in that
business was $1,000,000 in the form of a promissory note payable with 6%
interest per annum, issued by the Surviving Corporation (Internet Stock Market
Resources, Inc.) This note was due upon demand by the holder, but subsequently
changed to allow the Company to accumulate sufficient working
capital. The shareholder is an officer and director of the Company.
[Page F-8]
71
<PAGE>
3. RESTRICTED CASH
In May 1998, the Board of Directors authorized the Company to offer and sell
shares of our Common stock under a private placement, which was subsequently
canceled. Prior to the year end, May 31, 1998, the Company received $50,000
from an investor to purchase shares of our Common stock, which was
subsequently returned to the investor.
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Office equipment $ 57,104 $ 55,526
Accumulated depreciation (16,860) (5,553)
-------- --------
Property and equipment, net $ 40,244 $ 49,973
======== ========
</TABLE>
Total depreciation expense for the years ended May 31, 1999 and 1998, amounted
to $11,307 and $5,553, respectively.
5. ACCRUED AND OTHER LIABILITIES
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Professional fees $ 20,150 $ 6,900
Accrued compensation and related taxes 848 196
Deposit on potential purchase of stock - 50,000
-------- --------
$ 20,998 $ 57,096
======== ========
</TABLE>
6. STOCKHOLDERS' EQUITY
The Company has authorized 50,000,000 shares of Common stock with a par value
of $.0001 per share. At May 31, 1999 and 1998, 586,444 shares and 275,333
shares, respectively, were issued and outstanding.
The Company has authorized 1,000,000 shares of Preferred Stock with a par
value of $.01 per share, and convertible into two shares of Common stock for
$2 within one year of the subscription date. No Preferred shares have been
issued. Any rights and preferences will be established by the Company's Board
of Directors upon issuance.
[Page F-9]
72
<PAGE>
PRIVATE OFFERING In August 1998, the Board of Directors authorized the
Company to offer and sell to foreign investors up to 444,444 shares of our
Common stock at a purchase price of $.25 per share under a private placement
to foreign investors, pursuant to an exemption available under the Securities
Act of 1933, as amended. Under this offering, which was prepared prior to the
Merger (although no stock was sold nor proceeds received before the Merger),
311,111 shares were issued at prices ranging from $1.08 to $2.25 generating
net proceeds of $504,937 prior to May 31, 1999. Additional shares of 133,333
were sold in June 1999 for $72,000, with payment expected in July 1999.
7. INCOME TAXES
For the year ended May 31, 1999, the Company generated for U.S. income tax
purposes a net operating loss of approximately $93,300. This loss carryforward
expires in the year 2018. The Company had a net operating loss carryforward of
approximately $2,850,000 as of May 31, 1998. However, as of September 1, 1998,
and subsequently, there were ownership changes in the Company as defined in
Section 382 of the Internal Revenue Code. Because of these changes, the
Company's ability to utilize net operating losses and capital losses available
before the ownership change were virtually eliminated. The utilization of the
remaining carryforward is dependent on the Company's ability to generate
sufficient taxable income during the carryforward periods and no further
significant changes in ownership.
The Company computes deferred income taxes under the provisions of Statement
of Financial Accounting Standards No. 109, which requires the use of an asset
and liability method of accounting for income taxes. Under FAS No. 109,
deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. These differences
result primarily from the use of the accelerated cost recovery method of
depreciation and the write-off method for accounts receivable as opposed to
the allowance method. Statement No. 109 also provides for the recognition and
measurement of deferred income tax benefits based on the likelihood of their
realization in future years. A valuation allowance must be established to
reduce deferred income tax benefits if it is more likely than not that a
portion of the deferred income tax benefits will not be realized. It is
Management's opinion that the entire deferred tax benefit may not be
recognized in future years. Therefore, a valuation allowance equal to the
deferred tax benefit has been established, resulting in no deferred tax
benefits as of the balance sheet dates.
8. COMMITMENTS AND CONTINGENCIES
LEASED PREMISES The Company leases our facilities in St. Petersburg, Florida
under a three-year lease agreement dated July 24, 1997. The lease provides for
monthly payments of $1,124. Rent expense for the years ended May 31, 1999 and
1998, was $13,482 and $12,359, respectively.
[Page F-10]
73
<PAGE>
Future minimum lease payments under the lease agreement for years ending May
31 are as follows:
<TABLE>
<S> <C>
2000 $13,488
2001 2,248
-------
$15,736
=======
</TABLE>
CONSULTING AGREEMENTS From time-to-time, the Company engages, retains and
dismisses various consultants. The consultants provide various services
including assisting with shareholder relations, responding to inquiries, short
and long-term strategic planning, marketing the Company to the investment
community and identification and negotiation of potential acquisitions.
YEAR 2000 The year 2000 issue results from certain computer systems and
software applications that use only two digits (rather than four) to define
the applicable year. As a result, such systems and applications may recognize
a date of "00" as 1900 instead of the intended year 2000, which could
result in data miscalculations and software failures. The Company has
conducted a preliminary assessment of our key computer systems and software
application and believes they are Year 2000 compliant. Based on the initial
assessment, the Company believes the cost of addressing the Year 2000 issue
should not have a material impact on the Company's financial position or
results of operations.
POTENTIAL ACQUISITIONS On May 25, 1999, the Board of Directors authorized
negotiations with PEP Equities, Inc. for the purpose of acquiring an interest
to the extent that it would become a subsidiary of the Company.
The Company is negotiating with Micro Bytes Computer Center, Inc. for the
purchase of business assets and inventory and has executed a Letter of Intent
dated June 16, 1999. The purchase would be accomplished in part by the
issuance of restricted Common stock by the Company, which would be given
"piggy-back" registration rights.
On June 30, 1999, a letter of intent was signed by the Company and Delcor
Industries, Inc. (Delcor) to acquire 100% of Delcor for cash and debt. The
letter of intent gives the parties until August 1, 1999 to sign a purchase
agreement to finalize the acquisition. Delcor manufactures and assembles
electronic components, and employs approximately 75 people.
GOING CONCERN The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. The Company has
suffered recurring losses from operations and at May 31, 1999, had a working
capital deficit and a deficiency in assets. These and other factors raise
substantial doubt about the Company's ability to continue as a going concern,
without additional capitalization. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
[Page F-11]
74
<PAGE>
MANAGEMENT'S PLANS Management has decided to address the Company's financial
situation by the following:
Sale of 133,333 additional shares of common stock for $72,000 as part of a
foreign private placement, expected to be received in July 1999.
The note payable stockholder has been restructured and will not be satisfied
until the Company has an acceptable working capital.
An SB-2 is expected to be filed with the United States Securities and Exchange
Commission, which would provide for the Company to raise up to $5,000,000 from
the general public.
Acquisition of at least two, possibly four, additional companies in the
computer and Internet fields for a better vertical integration and to spread
general and administrative costs over a broader base. In that regard, three
letters of intent have been signed and the Company is in the process of
drafting agreements before performing its due diligence. Before proceeding
with such due diligence, the Company must first raise the necessary capital.
The acquisitions would be significant to the Company, but they are improbable
if the Company is unable to fund them.
Increase promotional expenditures in an effort to increase revenues.
10. SUBSEQUENT EVENTS
REVERSE STOCK SPLIT During the first fiscal quarter of the Company's 1998
fiscal year, the Common stock of the Company experienced a significant decline
in the trading per share price. In addition to the detrimental effect the
lower trading price had to the shareholders, it diminished the Company's
ability to make acquisitions using the Company's Common stock. As a result of
the above, effective on June 30, 1999, the Company reverse split our common
stock at a ratio of one new share for each nine old shares issued and
outstanding. Retroactive recognition of the reverse stock split has been given
to all share amounts reported in the May 31, 1999, and 1998 financial
statements.
SALE OF COMMON STOCK On June 14, 1999, the Company sold the remaining 133,333
shares of its Common stock from its private placement for $72,000; however,
the amount is unpaid.
[Page F-12]
75
<PAGE>
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76
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Internet Stock Market Resources has had no disagreements with its independent
accountants. There been no material changes in ISMR's financial statements
because of disagreements between the Company and its accountants with respect
to Company accounting or with respect to financial disclosures.
77
<PAGE>
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78
<PAGE>
79
<PAGE>
<TABLE>
<S> <S>
UNTIL XXXX XX, 19XX, ALL DEALERS THAT EFFECT
TRANSACTIONS IN THESE SECURITIES, WHETHER
OR NOT PARTICIPATING IN THIS OFFERING, MAY
BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
TABLE OF CONTENTS 833,333 Units
Summary Information 3
Risk Factors 5
Use of Proceeds 11
Determination of Offering Price 13
Dilution 15 $6.00 Per Unit
Selling Security Holders 17
Plan of Distribution 19
Legal Proceedings 21
Directors, Executive Officers, Promoters
and Control Persons 23
Security Ownership of Certain Beneficial
Owners and Management 27 Internet Stock Market
Description of Securities 29 Resources, Inc.
Interest of Named Experts and Counsel 31
Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities 33 ----------
Organization Within Last Five Years 35 Prospectus
Description of Business 37 ----------
Management's Discussion and Analysis or
Plan of Operation 43
Description of Property 47
Certain Relationships and Related Internet Stock Market
Transactions 49 Resources, Inc.
Market for Common Equity and Related 405 Central Avenue
Stockholder Matters 51 102 Lobby Level
Executive Compensation 53 St. Petersburg, Florida 33701
Financial Statements 55 (727) 896-9696
Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure 71 Dated: XXXX XX, 19XX
</TABLE>
80
<PAGE>
INDEMNIFICATION OF OFFICERS AND DIRECTORS
At this time Internet Stock Market Resources, Inc. has no provisions within
its charter or by-laws that insure or indemnify the directors or officers,
either jointly or severally, of the Company for their actions in such
capacities. Neither are the officers and directors insured or indemnified by
contract or other arrangement. The Company is not aware of any statute that
insures or indemnifies a controlling person, director, or officer, or
otherwise affects his or her liability in that capacity.
<PAGE>
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company estimates offering expenses related to issuance and distribution
will be $80,000 if all 833,333 Units are sold; for purposes of presentation in
the Prospectus of this registration statement, the Company has estimated that
the foregoing expenses will be proportionately less for fewer Units
sold.
Concerning other expenses of the offering, if qualified broker/dealers sell
Units of this offering, they will be paid as much as 10% of the gross proceeds
from the Units they sell; any such broker/dealers will also be issued 10,000
shares of Class A Preferred Stock of the Company for each 83,333 Units they
sell. (These shares of Class A Preferred Stock will be "restricted," as that
term is meant with reference to 17 CFR 230.144, because such Preferred shares
are not the subject of a registration statement nor of an qualifying exemption
therefrom.)
The table below shows the effect on proceeds from this offering, considering
the Company's issuance and distribution costs as well as the payment of a 10%
broker's fees, on all 833,333 being registered on this Form SB-2.
<TABLE>
<S> <C>
Gross Proceeds $ 4,999,998
Costs of Offering 80,000
Brokers' Fees 500,000
------------
$ 4,419,998
</TABLE>
As of the date of this registration statement, the Company has no agreement
with any broker/dealer to sell Units of this offering. The considerations,
described and tabulated above, to be paid to broker/dealers that sell Units
are as established by the Company itself and are not the result of arms-
length negotiations with any broker/dealers or other third parties.
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
In July of 1999, the Company sold 133,334 shares of its Common stock for
$72,000 in a foreign private placement.
<PAGE>
UNDERTAKINGS
Pursuant to Item 512(e) of Regulation S-B:
As permitted under Rule 461, Internet Stock Market Resources, Inc. is
requesting an accelerated effective date. As such, the Company herewith
warrants as follows:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, Internet Stock Market Resources, Inc. has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company 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, Internet Stock Market Resources, Inc. will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
<PAGE>
EXHIBITS
Exhibit No. Description of Exhibit
----------- ------------------------------
3.1 Articles of Incorporation of Internet Stock Market
Resources, Inc.*
3.2 By-Laws of Internet Stock Market Resources, Inc.*
4.1 Specimen Common Stock Certificate*
4.2 Specimen Preferred Stock Certificate*
4.3 Subscription Agreement
4.4 Designation of Class A Preferred Stock*
10 Letter of Intent Between the Company and Delcor Industries*
23.1 Letter of Consent and Opinion of Thomas R. Todd, Jr., Esq.
23.2 Letter of Consent of Independent Auditors
27 Financial Data Schedule
* To be filed supplementally.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933 Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and authorized this Registration Statement
to be signed on its behalf by the undersigned in the City of
St. Petersburg, State of Florida, on December 8, 1999.
Internet Stock Market Resources, Inc.
By:
/s/Budd Morris
- -----------------------
Budd Morris
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement was signed by the following persons in
the capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <S> <S>
/s/Budd Morris Director and Chief Executive Officer December 8, 1999
- -----------------------
Budd Morris
/s/Anastasios KyriakidesDirector and Secretary December 8, 1999
- ------------------------
Anastasios Kyriakides
/s/Caroline Latta Director and Vice President December 8, 1999
- ------------------------
Caroline Latta
/s/Chad Morris Director and Vice President December 8, 1999
- ------------------------
Chad Morris
</TABLE>
Subscription Agreement
(Pro Forma)
SUBSCRIPTION AGREEMENT
for Units of
Internet Stock Market Resources, Inc.
405 CENTRAL AVENUE ? 102 LOBBY LEVEL * ST. PETERSBURG, FLORIDA 33701
This Subscription Agreement is to purchase Units of Internet Stock Market
Resources, Inc. (the "Company") from the Company. Each Unit consists of four
shares of the Company's Common stock, par value $0.0001 per share, plus one
share of its Preferred Stock; for $2.00, each of the Preferred shares can be
exchanged for two shares of the Company's Common stock, as long as the
exchange is made within one year of the subscription date. The minimum
subscription is 100 Units. These Units are being offered by the Company
through the Company's Prospectus dated XXXX XX, 19XX (the "Prospectus"). This
offering is not valid in any jurisdiction where prohibited by law or statute.
The undersigned hereby warrants that a copy of the Company's Prospectus
dated XXXX XX, 19XX has been delivered. The undersigned furthermore warrants
that he/she/it is a resident of/incorporated in one of the following states:
XX, XX, XX, XX, XX
The undersigned hereby irrevocably subscribe(s) for the following number
of Units of Internet Stock Market Resources, Inc. upon the terms and
conditions set forth in the Prospectus, receipt of which is acknowledged by
signature(s) below. Number of Units subscribed for:
_________________ X $6.00 per Unit = $____________________.00
(Number of Units) (Total Subscription Price)
Subscription price is payable to: "Internet Stock Market Resources, Inc."
Certificates in the name(s) written below, for the number of shares
represented by the Units written above, will be printed and sent by the
Company's stock transfer agent.
INDICATE FORM OF OWNERSHIP:
* Individual.
* Joint Tenants with Right of Survivorship.(Both names must be stated
and signed.)
* Tenants in Common.(All names must be stated and signed.)
* Trust. Trustee signs For Benefit Of:
* Corporation.(Name of Company must be stated and signed by an
authorized officer.)
* Partnership.(Name must be set forth and signed by an authorized
partner.)
* Other Entity.(Name must be stated and signed properly by an authorized
person.)
PRINT OR TYPE THE FOLLOWING INFORMATION:
(Press firmly; you are making 2 copies)
1.
________________________________________________________________________
Name
________________________________________________________________________
Address
________________, _____ ________ (_____) _____-_______ _________________
City State ZIP Code Telephone Number Social Security
Number or FEIN
x___________________________________________________, ________
Signature Date
2.
________________________________________________________________________
Name
________________________________________________________________________
Address
________________, _____ ________ (_____) _____-_______ _________________
City State ZIP Code Telephone Number Social Security
Number or FEIN
x___________________________________________________, ________
Signature Date
December 3, 1999
Thomas R. Todd, Jr., Esq.
P.O. Box 88519
Atlanta, Georgia 30356
Internet Stock Market Resources, Inc.
405 Central Avenue
102 Lobby Level
St. Petersburg, Florida 33701
Dear Members of the Board of Directors:
You have asked me to provide you my legal opinion with regard to certain
matters concerning the following described securities of Internet Stock Market
Resources, Inc. (the "Company"), which securities are the subject of a Form
SB-2 Registration Statement, as that document is amended by Amendment 1
thereto (the "Registration Statement") filed with the Securities and Exchnage
Commission by the Company in electronic form on or about December 3, 1999 for
the purpose of registering such securities under the Securities Act of 1933:
Eight Hundred Thirty Three Thousand Three Hundred
Thirty Three (833,333) Units (hereinafter referred to
as the "Units") each unit consisting of four (4)
shares of common stock and one (1) share of Class A
Preferred Stock.
<PAGE>
In rendering this opinion, I have examined certain corporate records of
the Company, including the Company's Articles of Incorporation and amendments
thereto, the By-laws, the minutes of meetings of the board of directors and
shareholders, the Registration Statement, and such other documents and records
as furnished to me by officers of the Company, originals or photocopies,
certified or otherwise identified to my satisfaction, and certificates of
public officials, as I deemed relevant and appropriate. I have also relied
upon the representations made to me by the Company's officers and directors.
Based upon the foregoing, my opinion is as follows:
1. The Company is duly and validly organized and is validly existing
and in good standing under the laws of the State of Delaware, as evidenced by
a certificate of the Corporations Division of the State of Delaware.
2. The Units, when sold and issued in accordance with the Registration
Statement and the final prospectus thereunder, and for the consideration
therein referred to, will be legally issued, fully paid and non-assessable.
This opinion letter speaks of the date hereof and there is no obligation
on my part to update this opinion letter even though matters which
subsequently occur may affect my analysis or conclusions in this opinion
letter.
I hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement and
further consent to statements made therein regarding my office and the use of
my name under the heading of "Legal Matters" in the prospectus constituting a
part of such Registration Statement.
Very truly yours,
/s/ Thomas R. Todd, Jr.
-----------------------
Thomas R. Todd, Jr
Dohan and Company, CPA's
A Professional Association
7700 North Kendall Drive, #204
Miami, Florida 33156-7564
Telephone: (305) 274-1366
Facsimile: (305) 274-1368
Stockholders and Board of Directors
Internet Stock Market Resources, Inc.
St. Petersburg, Florida
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 9, 1999, in Amendment No. 1 to the Registration
Statement (Form SB-2 No. 33-68051) and related Prospectus of Internet Stock
Market Resources, Inc. for the registration of 833,333 units, each unit
consisting four shares of its Common Stock and one share of its Preferred
Stock.
/s/ Dohan and Company, P.A., CPA's
- --------------------------------
Miami, Florida
November 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE PERIOD ENDED May 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> MAY-31-1999 MAY-31-1998
<PERIOD-START> JUN-01-1998 JUN-01-1997
<PERIOD-END> MAY-31-1999 MAY-31-1998
<CASH> 122,786 107,653
<SECURITIES> 0 0
<RECEIVABLES> 59,663 51,686
<ALLOWANCES> (37,320) (19,493)
<INVENTORY> 0 0
<CURRENT-ASSETS> 151,057 194,766
<PP&E> 57,104 55,526
<DEPRECIATION> (16,860) (5,553)
<TOTAL-ASSETS> 192,301 245,739
<CURRENT-LIABILITIES> 258,975 575,920
<BONDS> 564,965 678,515
0 0
0 0
<COMMON> 59 28
<OTHER-SE> (631,698) (1,008,724)
<TOTAL-LIABILITY-AND-EQUITY> 192,301 245,739
<SALES> 214,175 382,775
<TOTAL-REVENUES> 214,175 382,775
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> (308,691) 396,397
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (36,363) 0
<INCOME-PRETAX> (127,880) (8,290)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (127,880) (8,290)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (127,880) (8,290)
<EPS-BASIC> (0.32) (0.08)
<EPS-DILUTED> (0.32) (0.08)
</TABLE>
