As filed with the Securities and Exchange Commission on August 14, 2000.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
VentureNet, Inc.
(Name of Small Business Issuer in its Charter)
Delaware 7389 76-0246940
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or Classification Number) Identification Number)
Organization)
27349 Jefferson Ave., Suite 200
Temecula, CA 92590
(909) 693-1644
(Address and telephone number
of principal executive offices and
principal place of business)
Michael N. Brette, J.D.
27349 Jefferson Ave., Suite 200 with copies to J. Bennett Grocock, Esq.
Temecula, CA 92590 The Business Law Group
(909) 296-9945 205 E. Central Blvd., Suite 601
(Name, address and telephone number Orlando, Florida 32801
of agent for service)
Approximate date of proposed sale to public: As soon as practicable after this
Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) of the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
i
<PAGE>
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------
Title of each Proposed Proposed
class of maximum maximum
securities to offering aggregate Amount of
be registered Amount of shares price per offering registration
to be registered unit price fee
Common
Stock 15,692,000 $10.00 $10,000,000 $2,780
--------------------------------------------------------------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ii
<PAGE>
PRELIMINARY PROSPECTUS DATED AUGUST 14, 2000
SUBJECT TO COMPLETION
VentureNet, Inc., is a Delaware corporation. We are offering a maximum
of 1,000,000 units, comprised of four (4) shares of common stock, par value
$0.0001 per share, and one (1) warrant to purchase one share of common stock at
$3.50 per share on or before December 31, 2002 (the "Units"), at a purchase
price of $10.00 per Unit. This is a best-efforts offering. There is no minimum
offering amount. This offering will terminate 180 days from the effective date
of this registration; provided, however, we may extend this offering for an
additional 30 days. There is no escrow account and we may use the offering
proceeds when received and accepted by us. Proceeds of this offering are to be
deposited directly into our operating account. See "TERMS OF THE OFFERING AND
PLAN OF DISTRIBUTION."
Our common stock trades on the Over-the-Counter Electronic Bulletin
Board service of the National Association of Securities Dealers under the symbol
VNTN. On August 9, 2000, the bid price for the stock was $1.03 and the ask price
was $1.125.
THERE ARE MATERIAL RISKS IN CONNECTION WITH THE PURCHASE OF OUR
SECURITIES. SEE "RISK FACTORS," PAGE 3.
[INSERT STATE SECURITIES LEGENDS IN STATES WHERE OFFERS ARE MADE.]
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Information contained in this document 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 sales 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 state.
Maximum Maximum
Price to Units Proceeds to
Public Offered Commissions(1) Company(2)
$10.00 1,000,000 $ 0.00 $ 10,000,000
(1) The common shares and warrants are being offered directly by us
(employees, officers and directors). No sales commissions will be paid
on shares sold through this offering.
(2) The amount as shown in the preceding table does not reflect the
deduction of
a. General expenses payable; and
b. Fees payable in connection with legal and accounting expenses
incurred in this offering.
c. These expenses are estimated to be $80,000.
The date of this Preliminary Prospectus is August __, 2000
iii
<PAGE>
REPORTS TO SECURITY HOLDERS
We are currently subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and periodically file, and will
continue to file, reports and other information with the United States
Securities and Exchange Commission ("Commission"). The reports and other
information filed by us can be inspected and copied at the public reference
facilities maintained by the Commission in Washington, D.C. and at the Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and the New York Regional Office, 7 World Trade Center, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates.
In addition, most filings are available through the Commission's Electronic Data
Gathering and Retrival system ("EDGAR").
We will furnish to shareholders:
(i) an annual report containing financial information examined and
reported upon by our certified public accountants;
(ii) unaudited financial statements for each of the first three
quarters of the fiscal year; and;
(iii) additional information concerning the business and operations
of the Company deemed appropriate by the Board of Directors.
Included in this document are:
1. Audited annual financial statements dated May 31, 2000 and
1999.
2. Unaudited financial statements from June 1, 2000 to June 30,
2000.
We have filed with the Commission a registration statement (together
with all amendments and exhibits thereto, the "Registration Statement"), of
which this prospectus is a part, on Form SB-2 under the Securities Act of 1933,
as amended (the "Act") with respect to the securities offered hereby. This
prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the Rules and
Regulations of the Commission. Statements contained in this document concerning
the provisions of any other documents are not necessarily complete, and in each
instance reference is made to the copy of such documents filed as an exhibit to
the Registration Statement. Each such statement is qualified in its entirety by
such reference. For further information with respect to the Company and the
securities offered, reference is made to the Registration Statement. Copies of
such materials may be examined without charge at, or obtained upon payment of
prescribed fees from, the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, at the
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and the New York Regional Office, 7 World Trade
Center, New York, New York 10048.
We will continue to voluntarily file periodic reports in the event our
obligation to file such reports is suspended under Section 15(d) of the Exchange
Act.
We will provide without charge to each person who receives a
prospectus, upon written or oral request of such person, a copy of any of the
information that was incorporated by reference in the prospectus (not including
exhibits to the information that is incorporated by reference unless the
exhibits are themselves specifically incorporated by reference). Requests for
copies of said documents should be directed to Michael N. Brette.
The Commission maintains a Web site -- //www.sec.gov -- that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission.
iv
<PAGE>
UNTIL NOVEMBER 8, 2000 (90 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL PERSONS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF SUCH PERSONS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
NO DEALER, SALESMAN, AGENT OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, OR THE UNDERWRITER, IF AN
UNDERWRITER ASSISTS IN THE SALE OF THE SECURITIES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE TO ANY
PERSON IN ANY STATE, TERRITORY OR POSSESSION OF THE UNITED STATES IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED BY THE LAWS THEREOF, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
v
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY ......................................................... 2
RISK FACTORS ............................................................... 3
USE OF PROCEEDS ............................................................ 4
DETERMINATION OF OFFERING PRICE ............................................ 5
DILUTION ................................................................... 6
PRINCIPAL AND SELLING SECURITY HOLDERS ..................................... 7
TERMS OF THE OFFERING AND PLAN OF DISTRIBUTION ............................. 8
LEGAL PROCEEDINGS .......................................................... 10
MANAGEMENT ................................................................. 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSHIP AND MANAGEMENT .......... 15
DESCRIPTION OF SECURITIES .................................................. 16
EXPERTS .................................................................... 17
INTERESTS OF NAMED EXPERTS AND COUNSEL ..................................... 17
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION ....................... 18
ORGANIZATION WITHIN LAST FIVE YEARS ........................................ 19
DESCRIPTION OF BUSINESS .................................................... 20
MANAGEMENT'S DISCUSSION AND ANALYSIS ....................................... 23
DESCRIPTION OF PROPERTY .................................................... 25
CERTAIN TRANSACTIONS ....................................................... 26
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS ................... 27
EXECUTIVE COMPENSATION ..................................................... 29
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS .............................. 30
INDEX TO FINANCIAL STATEMENTS .............................................. 31
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS ...........................
vi
<PAGE>
Prospectus
VentureNet, Inc.
A Maximum of 1,000,000 Units
$ 10.00 PER UNIT
This is a public offering of VentureNet, Inc. securities.
o Each Unit offered by this prospectus consists of four (4) shares of
VentureNet's common stock and one (1) warrant to purchase one share of
VentureNet at $3.50 before December 31, 2002.
o VentureNet has set the price of the units arbitrarily.
o This is a best-efforts offering. No minimum number of units must be
sold before VentureNet can use the proceeds. This offering will end no
more than 180 days from the date at the bottom of this page.
VentureNet's common stock trades on the Over-the-Counter Electronic Bulletin
Board Service of the National Association of Securities Dealers under the symbol
VNTN. On August 9, 2000, the bid price for the stock was $1.03 and the ask price
was $1.125.
Neither the United States 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.
Investment in units of VentureNet, Inc. is very risky and speculative and should
be considered only by those who are able to bear the loss of part or all of the
money they invest. See the section titled RISK FACTORS, starting on Page 3.
-----------------------------------------
Offering Price Proceeds to Company
---------------------------------------------------------
Per Unit $10.00 $10.00
---------------------------------------------------------------------
Maximum: 1,000,000 $10.00 $10,000,000.00
---------------------------------------------------------------------
-----------------------------------------------------
VentureNet, Inc.
27349 Jefferson Ave., Suite 200
Temecula, California 92590
(909) 693-1644
-----------------------------------------------------
The date of this preliminary prospectus is August 10, 2000
1
<PAGE>
PROSPECTUS SUMMARY
The Company
VentureNet, Inc. is a corporation formed under the laws of the State of
Delaware.
We intend to act as an "incubator", mentor or both, for corporate development
for potentially successful pre-public and private companies through the initial
public offering or private sale stage. We will provide management services,
corporate development and structure in emerging and established business
operations which demonstrate potential for long-term capital growth and which
would benefit from public ownership. Our belief is that smaller companies,
specifically those between $2 million and $20 million in annual sales, offer the
greatest opportunity for gain, due to their inability to attract adequate
capital in the general markets, and we have the expertise in dealing with the
management and marketing problems associated with emerging firms in that size
range. Start-up companies will also be considered. Our experience is that
exceptional bargains are available for investments of that size and type of
company because of being largely overlooked by the capital markets. Decisions as
to which business opportunity to participate in will be made by management, who
may enter into investment decisions with or without the consent, vote, or
approval of the Executive Committee. To help accomplish these goals, VentureNet,
Inc. will provide substantial working capital, expenses, and fees to the
emerging companies to attempt to complete their business plan.
The Offering
VentureNet is offering by this prospectus a maximum of 1,000,000 units, which is
comprised of four (4) shares of common stock, par value $0.0001 per share, and
one (1) warrant to purchase one share of common stock at $3.50 per share before
December 31,2002 (the "Units").
The minimum amount of a subscription is 200 units.
o Common stock shares outstanding before the offering 26,565,777
o Shares offered (1,000,000 units, each with four shares) 4,000,000
================================================================================
Common stock - shares outstanding after the offering 30,565,777
Common stock - shares issued if all current holders of
warrant shares are converted to common shares 5,500,000
Common stock - shares issued if all warrant shares are
converted 4-for-1 to common shares 1,000,000
Use of proceeds if all units are sold :
After paying offering expenses of approximately $80,000, $6,143,608 will be
used to fund, set-up to buy operating assets, primarily of other companies,
to create VentureNet, Inc.'s subsidiaries; $536,000 for repayment of debt;
$323,984 for property insurance and professional fees; $144,000 will be
spent on marketing; $100,008 will be used to upgrade equipment and software;
and $1,652,384 will be allocated for salaries and wages.
================================================================================
2
<PAGE>
RISK FACTORS
The purchase of our shares involves a number of significant risk factors.
High Risk Investments. The type of investments that we intend to make, involve a
high degree of risk. Although management intends to invest primarily in
established companies at the pre-public level, such investments involve a high
degree of business and financial risk that can result in substantial losses to
us.
Lack of diversification. Our size makes it unlikely that we will be able to
commit our funds to the acquisition of securities of a large number of companies
that have large capital requirements and, therefore, we may not be able to
achieve the same type of diversification as larger entities engaged in venture
capital activities. This is particularly true if only a small number of Units is
sold in which case we would be severely restricted by the capital available for
investment in any opportunity. Investors are further cautioned that funds
expended in venture capital activities are usually associated with a high degree
of risk that is only partially offset by a wide diversification of investments.
If substantially less than the maximum number of Units is sold, it would be
unlikely for us to attain such diversification of our investments which could
result in the possibility that our activities may not be profitable.
Non-Liquid and Volatile Nature of Company's Portfolio. We cannot readily
liquidate investments in the securities of portfolio companies (if applicable)
and therefore we are subject to risks associated with such non-liquidity. Such
investments often take the form of "restricted" securities that cannot readily
be sold, and if sold, may yield a price substantially less than the price of a
portfolio company's securities that are not so restricted. Additionally, many of
the companies in our portfolio may be small companies that have no market for
their securities or a small or insignificant market that is subject to extreme
volatility in price and volume. The value of our investment portfolio is
therefore subject to significant fluctuations beyond our control.
Market Risks. Our activities of will be subject to market risks that are beyond
the control of management, such as fluctuations in capital markets, interest
rates, economic downturns and world events. While such risks tend to affect a
business, they tend to have a greater influence upon financial or investment
companies than upon manufacturing or operating companies. Such risks also tend
to have a greater impact upon small companies, such as will be held in our
portfolio, than upon larger and more established companies.
Key Personnel. Management will attempt to develop a broad-based management team.
However management's plan of operations has been formulated by, and our future
success is likely to be largely dependent upon, the current executive officers
of management. The loss of the service of one or more of these individuals could
have a material adverse effect on our business.
We have experienced significant losses and have a working capital deficiency. We
have experienced losses and have an accumulated deficit of approximately
$1,370,000 through June 30, 2000. We also have a working capital deficit of
approximately $590,000 as of June 30, 2000.
3
<PAGE>
USE OF PROCEEDS
If all of the units of this offering are sold, the net proceeds to VentureNet
from the sale of the units will be approximately $9,920,000 after deducting
estimated offering expenses of $ 80,000. The table below shows how proceeds from
this offering would be used for scenarios where VentureNet sells various amounts
of the units. Although VentureNet 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>
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Percent of Total Units Offered 25% 50% 75% 100%
-----------------------------------------------------------
Units Sold 250,000 500,000 750,000 1,000,000
Gross Proceeds from Offering $ 2,500,000 $ 5,000,000 $ 7,500,000 $10,000,000
Less: Offering Expenses 80,000 80,000 80,000 80,000
-----------------------------------------------------------
Net Proceeds from Offering $ 2,420,000 $ 4,920,000 $ 7,420,000 $ 9,920,000
===========================================================
Use of the Net Proceeds
-----------------------------------------------------------
Salaries $ 336,000 $ 672,000 $ 1,008,000 $ 1,344,000
Equipment and Software 25,002 50,004 75,006 100,008
Purchase of Assets 1,169,902 2,803,804 4,473,706 6,143,608
Marketing 36,000 72,000 108,000 144,000
Payment of Debt 500,000 536,000 536,000 536,000
Working Capital 353,096 786,192 1,219,288 1,652,384
-----------------------------------------------------------
Total Use of Net Proceeds $ 2,420,000 $ 4,920,000 $ 7,420,000 $ 9,920,000
===========================================================
---------------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------------------------------------------------------------------------
Budget for Working Capital
-----------------------------------------------------------------------------------------------
Expense Type Projected Outlay
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property and Casualty Insurance $ 5,000 $ 10,000 $ 15,000 $ 20,000
Professional Fees 75,996 151,992 227,988 303,984
Travel and Entertainment 15,000 30,000 45,000 60,000
Communications 36,000 72,000 108,000 144,000
Printing 18,000 36,000 54,000 72,000
Office Expenses 3,000 6,000 9,000 12,000
Supplies 1,500 3,000 4,500 6,000
Occupancy 16,200 32,400 48,600 64,800
Miscellaneous 162,400 444,800 707,200 969,600
---------- ---------- ---------- ----------
Total $ 353,096 $ 786,192 $1,219,288 $1,652,384
========== ========== ========== ==========
-----------------------------------------------------------------------------------------------
</TABLE>
Until the funds budgeted for the purchase of assets are actually spent for that
purpose, the money will be invested in short- to medium-term, interest-bearing
certificates of deposit at federally-insured banks.
4
<PAGE>
DETERMINATION OF OFFERING PRICE
VentureNet 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 VentureNet's
assets, sales, book value, or other generally accepted criteria of value.
5
<PAGE>
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 June 30, 2000.
<TABLE>
<CAPTION>
Percent of Total
Ownership Total Consideration
Shares Percent Consideration* Paid
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
If 25% of the Units are sold
Existing Shareholders 26,565,777 95.0% $ 693,939 22.3%
New Investors 1,000,000 05.0% $ 2,420,000 77.7%
Total 27,565,777 100.0% $ 3,113,939 100.0%
--------------------------------------------------------------------------------------------
If 50% of the Units are sold
Existing Shareholders 26,565,777 91.4% $ 693,939 12.4%
New Investors 2,000,000 8.6% $ 4,920,000 87.6%
Total 28,565,777 100.0% $ 5,613,939 100.0%
--------------------------------------------------------------------------------------------
If 75% of the Units are sold
Existing Shareholders 26,565,777 87.7% $ 693,939 8.6%
New Investors 3,000,000 12.3% $ 7,420,000 91.4%
Total 29,565,777 100.0% $ 8,113,939 100.0%
--------------------------------------------------------------------------------------------
If 100% of the Units are sold
Existing Shareholders 26,565,777 84.2% $ 693,939 6.5%
New Investors 4,000,000 15.8% $ 9,920,000 93.5%
Total 30,565,777 100.0% $10,613,939 100.0%
--------------------------------------------------------------------------------------------
</TABLE>
The following table shows the dilution per $2.50 share of common stock if all
1,000,000 units, comprised of four (4) shares of common stock, par value $0.0001
per share, and one (1) warrant to purchase one share of common stock at $3.50
per share before December 31,2002 (the "Units") offered here are sold:
Offering price per share of common stock $ 2.50
Net book value per share as of June 30, 2000 $ 0.03
Net book value per share after the offering if all units are sold $ 0.35
Per share dilution to investors in this offering $ 2.15
o If only 25% of the units offered here are sold, the dilution
per $2.50 share of common stock would be $2.39;
o if 50% of the units offered here are sold, the dilution per
$2.50 share of common stock would be $2.30; and
o if 75% of the units offered here are sold, the dilution per
$2.50 share of common stock would be $2.23.
The 26,565,777 common shares outstanding used in the calculations above are
current as of July 31, 2000, and do not assume the exercise of (1) 5,500,000
warrants, previously issued at $0.01 per share, and 1,000,000 warrants, to be
issued in this offering at $3.50 per share, convertible into 6,500,000 shares of
common stock; and (2) 96,500 shares of Class A Preferred stock, convertible into
193,000 shares of common stock at $2.50 per share until August 8, 2001, and
after August 8, 2000 the shares are convertible at the lower of $2.50 per share
or the closing bid price on the prior business day.
6
<PAGE>
PRINCIPAL AND SELLING SECURITY HOLDERS
We are registering 5,692,000 shares in this offering for future sale by the
following selling shareholders:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING NUMBER OF AFTER THE OFFERING
------------------------- SHARES BEING -----------------------
NUMBER OF OFFERED NUMBER OF
SHARES PERCENT SHARES PERCENT
<S> <C> <C> <C> <C> <C>
FIVE PERCENT STOCKHOLDERS:
DIRECTORS AND OFFICERS:
Michael N. Brette,
Chairman of the Board,
President and Chief
Executive Officer ....................... 25,000,000 94.1 -- 25,000,000 84.2
All directors and executive officers
as a group ................................. 25,000,000 94.1 -- 25,000,000 84.2
OTHER SELLING STOCKHOLDERS:
A.N. Kyriakides, former
Chairman of the Board (1) ............... 222,223 00.8 120,000 222,223 00.7
Keith Byington (1) ......................... -- -- 72,000 -- --
IMA Marketing, LTD (2) ..................... -- -- 3,700,000 -- --
M & A Group, LTD (3) ....................... -- -- 1,300,000 -- --
IVest Financial
Group, LLC (4) ......................... -- -- 500,000 -- --
</TABLE>
(1) Shares to be received for under consulting agreement. These shares may not
be sold until January 1, 2001
(2) Shares underlying warrants to be received for under consulting agreement
with exercise price of $0.01 per share. Shares are exercisable as follows:
700,000 on August 4, 2000, 1,000,000 on January 1, 2001, 1,000,000 on March 1,
2001, and 1,000,000 on May 1, 2001.
(3) Shares underlying warrants to be received for under consulting agreement
with exercise price of $0.01 per share. Shares are exercisable as follows:
300,000 on August 4, 2000, 300,000 on January 1, 2001, 300,000 on March 1, 2001,
and 400,000 on May 1, 2001.
(4) Shares underlying warrants to be received for under consulting agreement
with exercise price of $0.01 per share. Shares are exercisable as follows:
100,000 on August 4, 2000, 100,000 on January 1, 2001, 100,000 on April 1, 2001,
100,000 on July 1, 2001, and 100,000 on October 1, 2001;
We will not receive any proceeds from the shares sold by the selling
stockholders in this offering.
7
<PAGE>
PLAN OF DISTRIBUTION
VentureNet intends through this offering to sell up to 1,000,000 units at $10.00
per Unit.
o A Unit is four (4) shares of common stock of plus one warrant
to purchase one (1) share.of common stock at $3.50 on or
before December 31, 2002.
This offering is made on a basis sometimes called best efforts: this means that
VentureNet will use our best efforts to sell all 1,000,000 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, VentureNet 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 VentureNet can use proceeds, there is no escrow account for the
deposit of investors' funds, and no funds will be returned just because some or
all of the units offered are not sold.
As of the date of this prospectus, VentureNet plans to sell the units of this
offering through its own officers and directors; in other words, VentureNet 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. VentureNet 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. VentureNet does not
plan to do any general solicitations and will not accept any subscription unless
the subscriber has already received a prospectus. Depending on state laws, we
may not be permitted to sell shares in all states.
After the United States Securities and Exchange Commission grants VentureNet an
effective date, VentureNet may find an underwriter for this offering. If one is
found, VentureNet 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, VentureNet will have to stop the offering until the United
States Securities and Exchange Commission has given its permission to proceed
under the new underwriting arrangement.
VentureNet's officers and directors cannot be paid any commissions or special
fees for the units they sell.
To subscribe for units, an investor must complete, execute, date, and deliver to
VentureNet a subscription agreement that includes the purchase price in check or
money order payable to "VentureNet, Inc." A copy of the subscription agreement
is provided with this prospectus.
VentureNet 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 will be returned to the subscriber without
interest or deduction. VentureNet might reject a subscription in its entirety
for one or more reasons:
o If a subscriber were a resident of a state in which this
offering has not been registered, VentureNet would reject the
subscription;
o VentureNet 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
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o VentureNet 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 VentureNet might have for rejecting a
subscription in its entirety, but they are the ones believed most likely to
occur.
As stated above, VentureNet might have to allocate shares among subscribers. As
far as VentureNet can foresee, there are two reasons this might happen:
o The issue might get oversubscribed; that is, at some point
during the offering, subscriptions for more than 1,000,000
units are received. If that happens, VentureNet 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
o If separate but related persons subscribe, and VentureNet
determines they are a control entity when considered as a
group, VentureNet might allocate a limited number of units
among the individual investors of the group.
VentureNet common stock is listed on the Over-the-Counter Electronic Bulletin
Board Service of the National Association of Securities Dealers under the
trading symbol VNTN. Firms making a market in VentureNet common stock include:
Fleet Trading, WM. V. Frankel & Co., Inc., Forge Financial Group, Inc., Gaines,
Berland Inc., GVR Company, M. Hill Thompson Magid & Co., Herzog, Heine, Geduld,
Inc., Ladenburg, Thalmann & Co., Inc., Schwab Capital Markets L. P., M. H.
Meyerson & Co., Inc., North American Institutional Brokers, Knight Securities,
Inc., Paradise Valley Securities, Inc., Pacific Continental Securities, Paragon
Capital Corp., Program Trading Corp., Sharpe Capital, Inc. Wien Securities Corp.
VentureNet is a reporting company. We are required to make periodic filings on
Forms 10-KSB and 10-QSB with the Securities and Exchange Commission.
VentureNet's filings are current, but failure to stay current, or to make
required filings when they are due, would constitute grounds for being
de-listed. In general, VentureNet must comply with all applicable provisions of
the Securities Exchange Act of 1934 to maintain its stock listing. VentureNet
may voluntarily send its shareholders annual reports. VentureNet information is
also published in the Corporation Record of Standard & Poor's.
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LEGAL PROCEEDINGS
We are not a party to, or aware of any, pending or threatened litigation of a
material nature.
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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
VentureNet's directors and officers are as follows:
<TABLE>
<CAPTION>
Name Age Position and Office Held Term Period Served
---- --- ------------------------ ---- -------------
<S> <C> <C> <C> <C>
Michael N. Brette 49 Director, Chief Executive Officer, Chairman, President 1 Year 2 Months
William E. Bailey 62 Director, Vice Chairman 1 Year 2 Months
Sharon Shears 26 Director, Senior Vice President 1 Year 2 Months
Karl R. Rolls, Jr 56 Director, Counsel, Secretary 1 Year 2 Months
Felipe J. Sanchez 53 Chief Operating Officer 1 Year 2 Months
Joey Sanchez 53 Chief Financial Officer, Treasurer 1 Year 2 Months
Tony Necoechea 36 Assistant Vice President/Media Relations 1 Year 2 Months
William E. Daniel 42 Assistant Vice President Finance 1 Year 2 Months
</TABLE>
The members of the Board of Directors will be 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 currently receives compensation from, or has a
compensation agreement with, VentureNet 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
Michael N. Brette, J.D. has served as our Chairman and President since June
2000. Mr. Brette has earned a Bachelors Degree of several studies with a major
in Political Science and Philosophy from Ohio State University in 1974, and he
earned a Juris Doctor from Western State University School of Law, Orange
County, California in 1978. Prior to joining the company he served as chairman
and president of Capital Asset Management, LLC, an investment and asset
management firm, and as president and chairman of Corporate Stock Promotions,
LLC, and has served as a principal and/or officer of several other financial
acquisition and management companies. Mr. Brette has written weekly financial
columns for various newspapers, and over the past ten years has appeared as an
expert guest on numerous radio and television programs throughout the United
States. He is listed in "Who's Who of Industry and Finance", and "Who's Who in
the World". Mr. Brette is also the author of two books, "Asset Protection
Planning" and "Raising Capital For Your Business".
o From June, 2000 to present, Mr. Brette has been Chairman, President,
and Chief Executive Officer of VentureNet, Inc.
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o From August, 1995 to June, 2000, Mr. Brette has acted as founder and
Chairman of Capital Asset Management, LLC, a California based asset
management and investment advisory firm 3.
During the past five years, Mr. Brette has been very active in financing media,
writing weekly financing columns for various newspapers and appearing as
financial services expert guest on many radio, television, and Internet programs
throughout the United States. A noted author of full text business hard covers,
Mr. Brette published "Asset Protection Planning" (1997, Griffin, 329 P.) and
"Raising Capital For Your Business"(1998, Griffin Publishing, 279 P.) Mr.
Brette's duties at VentureNet, Inc. include Chairman of the Board, President,
and Chief Executive Officer, as well as Chairman of project review and Executive
Committee responsible for corporate investment and finance decisions.
Dr. William E. Bailey is the Vice Chairman of VentureNet, Inc. He is a graduate
of Harvard College(B.A., 1962), the Harvard Law School (J.D., 1968), and Union
Graduate School(Ph.D, 1996).
o 1970-Present, Associate, Bailey & Bailey, Attorneys at Law.
o 1986-Present, Special Counsel to Insurance Information Institute, a
national trade association of the property/casualty industry.
Currently broadcast host "It's Your Money" weekly on Talk America Radio Network,
reaching 85 radio market in the US and Canada. Mr. Bailey's duties at
VentureNet, Inc. include analysis in insurance and financial services industry
issues and litigation.
Sharon Shears is Senior Vice President of VentureNet, Inc. Ms. Shears is a
Paralegal Studies graduate of California Southern Law School.
o June, 2000 to Present, Senior Vice President of VentureNet, Inc.
o 1994-2000, Vice President of Capital Asset Management, LLC,
specializing in investment and asset management consulting to corporate
and accredited individual clients.
Ms. Shears has served in various capacities on behalf of the Chairman for seven
years. Her duties with VentureNet, Inc. include day to day operations,
supervising of Assistant Vice Presidents, office management, and client
relations and management liaison.
Karl R. Rolls, Jr. is Local Counsel and Corporate Secretary of VentureNet, Inc.
Mr. Rolls earned his Juris Doctorate degree from Thomas Jefferson School of Law,
San Diego, California in 1976.
o June, 2000 to Present, Corporate Counsel of VentureNet, Inc.
o September, 1997 to June, 2000 Corporate Counsel for Capital Asset
Management, LLC.
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o June, 1976 to September, 1997, private law practice specializing in
Business Law.
Mr. Rolls duties with VentureNet, Inc. include those of corporate secretary and
corporate counsel, as well as acting as a member of the executive committee and
in house liaison to national counsel.
Felipe J. Sanchez. Mr. Sanchez is the Chief Financial Officer of the Company.
Prior to joining the Company, Mr. Sanchez was the managing partner of The
Corporate Advocate. Mr. Sanchez began his career in 1972 as a tax preparer and
is a member of the Inland Society of Tax Consultants. He is a member of the
Board of Advisors for International Tax and Asset Preservation Academy and is a
frequent speaker on advanced tax matters.
The Corporate Advocate's services consist of an array of Advance Tax Planning
techniques that will enable the individuals as well as the corporate entity to
take advantage of all the vehicles available within the tax system. The
Corporate Advocate has operated under the watchful eyes of their father Joe
Sanchez who started this venture in 1962 and acts as General Manager for the
Planning firm.
Joey Sanchez - Chief Financial Officer
Mr. Joey Sanchez is the Chief Financial Officer and Treasurer of the Company.
Mr. Joey Sanchez joined the Corporate Advocate's planning team in 1979 and
brought with him the corporate tax preparation division. Mr. Joey Sanchez
co-consults for Capital Asset Management, an Asset Protection and Estate
Planning firm as Sr. Vice President of their Tax Division. Mr. Sanchez also has
been instrumental and brings a high level of expertise in co-consulting with
various attorneys in researching federal tax issues.
Mr. Sanchez created an alliance with Mr. Herman (Hy) Yerman who was one of the
thirteen founders of the Certified Financial Planning College in Denver,
Colorado. Mr. Yerman is a principal with Wealth Preservation Strategies who
consults with Mr. Sanchez on high profile clients for the Insurance Industry.
Tony Necoechea is Assistant Vice President/Media Relations for VentureNet, Inc.
Mr. Necoecea graduated with a Business Degree in Business Administration from
California State University Long Beach.
o June, 2000 to Present, Assistant Vice President/Media Relations to
VentureNet, Inc.
o May, 1998 to June, 2000, hosted Wall Street News Hour, a daily
syndicated business radio talk show.
o February, 1997 to May, 1998, Mercer & Associates with responsibility
for consulting with corporate clients.
o January, 1995 to February, 1997 handled financing for Pre-IPO companies
at Fortress Financial.
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Mr. Necoecea's duties with VentureNet, Inc. include all phases of media
relations, including corporate representation at trade shows, conventions, and
other professional gatherings, as well as representing us and our investment in
the daily broadcast of Wall Street News Hour.
William E. Daniel is Assistant Vice President/Finance for VentureNet, Inc. Mr.
Daniel received his education in financing and marketing at San Diego State
University.
o June, 2000 to Present, Assistant Vice President/Finance of VentureNet,
Inc.
o October, 1999 to June, 2000, in-house investor relations for Capital
Asset Management, LLC.
o January, 1996 to October, 1999, marketing representative for private
companies in the medical, automobile and energy industries.
o February, 1995 to Jan, 1996 President of a publicly-held
merger/acquisition company.
Mr. Daniel's duties at VentureNet, Inc. include business opportunity analysis,
shareholder relations, corporate representation at professional trade show. He
brings a diverse background in technical securities knowledge and public company
experience to us.
None of VentureNet's officers and directors serves as an officer or director of
another public corporation.
FAMILY RELATIONSHIPS AMONG OFFICERS AND DIRECTORS
None.
CERTAIN SIGNIFICANT EMPLOYEES
Other than the directors and officers listed above, we have no other employees
with significant decision making authority.
PROMOTERS
There are, at the date of this prospectus, no promoters of this Issue.
VentureNet may, however, retain the services of an underwriter. Such a
relationship would be the subject of an amendment to this prospectus.
CONTROL PERSONS
Michael N. Brette is Chairman of the Board, President and Chief Executive
Officer of VentureNet, Inc., and has beneficial ownership of 25 million shares
of VentureNet, Inc. common stock. This represents approximately 94.11% of the
outstanding shares as of June 30, 2000.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table displays the security ownership of VentureNet beneficial
owners and managers as of July 31, 2000.
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Michael N. Brette 25,000,000 shares in the Name of 94.11%
27349 Jefferson Ave. #200 Michael N.
Temecula, CA 92590 Brette.
</TABLE>
As a group, the officers and directors beneficially own approximately 25,000,000
shares on June 30, 2000.
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<PAGE>
DESCRIPTION OF SECURITIES
Common and Preferred Stock
VentureNet has authorized 50,000,000 shares of common stock with a par value of
$.0001 per share. There are 26,565,777 shares of common stock issued and
outstanding.
Preferred Stock
VentureNet has authorized 66,667 shares of preferred $.01 par value with no
rights and privileges defined and there are no such preferred shares were issued
and outstanding.
VentureNet has authorized 933,333 shares of Class A preferred stock, $0.01 par
value. There are 96,500 shares of Class A Preferred stock issued and
outstanding. The holders of Class A preferred stock are entitled to the
following rights and privileges:
o One share of Class A preferred stock may be exchanged for two shares of
common stock. Within one year from the issue date, the exchange price
is $5.00 for two shares of common stock. After one year, the exchange
price is the greater of $5.00 and the market bid price for two shares
of common stock. For one year from the issue date, the exchange price
is $5.00 for two shares of common stock.
o No voting rights.
o 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.
o Class A preferred stock has no rights to dividends of any kind.
o 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.
o If any part of the designation of the Class A preferred stock is held
invalid, the rest of the class's designation is still valid.
Warrants
In Connection with this offering, VentureNet has authorized the issuance of
1,000,000 warrants that authorize the holder of the warrant to directly purchase
one share of common stock at $3.50 on or before December 31, 2002. The warrants
have no rights and privileges other then those related to exercise.
In connection with various consulting agreements we have issued 5,500,000
warrants that authorize the holder of the warrant to directly purchase one share
of common stock at $0.01 on or before December 31, 2002. We have agreed to
currently register 5,500,000 shares of our common stock in this offering for
sale by these potential shareholders. The warrants have no rights and privileges
other then those related to exercise.
Units
The units in this offering are each composed of four (4) shares of common stock
and one (1) warrant to purchase one share of VentureNet common stock at $3.50 on
or before December 31, 2002.
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<PAGE>
EXPERTS
The financial statements of VentureNet as of May 31, 2000 and 1999 and
for each of the two years in included in this Prospectus, have been so included
in reliance on the reports of Dohan and Company, independent accountants, given
on the authority of said firm as experts in giving said reports.
INTEREST OF NAMED EXPERTS AND COUNSEL
None of the experts named in this prospectus owns any of VentureNet's
securities, nor were they hired on a contingent basis. These experts will not
receive any direct or indirect interest in VentureNet and none were promoters,
underwriters, voting trustees, directors, officers, or employees.
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<PAGE>
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
VentureNet has no insurance or other instrument of indemnity against liability
under the Securities Act of 1933. VentureNet has taken the general position that
the United States Securities and Exchange Commission considers such
indemnification not in the public interest.
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<PAGE>
ORGANIZATION WITHIN THE LAST FIVE YEARS
Operating under the name Trans America Enterprises, Inc., we became a public
entity when, in 1989, we filed with the United States Securities and Exchange
Commission a registration statement on Form S-18. On February 9, 1989, we merged
with Sea Venture Cruises, Inc., a Delaware close 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 we were unsuccessful in the cruise business, we 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,
our then 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 Web address
http://www.InternetStockExchange.com. That Web address was later revised to
www.InternetStockMarket.com. On March 26, 1998, our name was changed to Internet
Stock Exchange Corp. by an amendment to the Articles of Incorporation. On April
14, 1998, we executed a reverse-split of all shares of our common stock on a
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, we changed our name to Internet Stock Market Resources, Inc.
and subsequently announced that we 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 United States Securities and Exchange Commission 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 our fiscal year that
began on June 1, 1998 and ended on May 31, 1999.
On June 26, 2000, we sold 25,000,000 shares of common stock to Michael N. Brette
in exchange for certain assets held by Mr. Brette. In connection with this
exchange we also changed our name to VentureNet, Inc.
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<PAGE>
DESCRIPTION OF BUSINESS
Overview
We specialize in funding extraordinary entrepreneurs operating businesses that
represent dynamic growth potential. We bridge the gap between these promising
growth companies needing capital and their access to the capital markets. By
bringing capital to these companies, we ignite a creative synergy that rewards
the sprit of enterprise and safeguards entrusted capital.
STRATEGIES FOR GROWTH OPPORTUNITIES
At VentureNet, we assist promising companies reach their next level of
performance by becoming publicly traded companies. We qualify only those
companies whose performance has successfully migrated beyond start-up, but have
yet to be discovered by venture capitalists or institutional investors.
Candidate companies are scrutinized for their growth history, profit potential,
market trends and management teams as part of a rigorous due diligence process.
We assess market potential as well as channels of distribution. We analyze a
company's business plan to quantify real profit potential, and identify
prospective partnering opportunities with established companies.
THE EARLY ADVANTAGE
We look for qualified companies that are planning to go public within 6 to 24
months after we invest in them. Our early-stage investment allows us to obtain a
large equity position in these companies-often at a substantial discount to the
existing offering price. In this way, our shareholders are able to profit from
any added value these promising companies may realize once they become publicly
traded companies.
CONNECTIONS AND RESOURCES
As companies come to our attention as a result of our extensive networking with
venture capital companies, investment bankers, and our contacts with various
investment organizations and associations, we will identify and research only
those companies that fit our investment guidelines. We discover undervalued
companies and situations, that by investing early, we are positioned to take
advantage of the potential increase in value before they become available to the
general investment community.
Principal products or services and their markets
VentureNet currently is in the business of providing capital and business
related services to public and private companies. We will provide management
services, corporate development and structure in emerging and established
business operations which demonstrate potential for long-term capital growth and
development. Prior to August 2000, we were in the business of providing
Internet-based business and advertising information.
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Distribution methods of products or services
Management services are offered to each target company and the company is free
to choose which service best helps management complete its business objectives.
Status of any new publicly announced product or service
VentureNet has not publicly announced any new services, although our Website's
front page has links to other financial and stock market-related services.
Sources and availability of raw materials and the names of principal suppliers
VentureNet's 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, as well as for communications by voice and data with
customers. VentureNet's primary long distance carrier is AT&T.
Patents, trademarks, licenses, franchises, concessions, royalty agreements or
labor contracts, including duration
VentureNet holds no patents, licenses, franchises, concessions, or royalty
agreements, and has no labor contracts.
Need for any government approval of principal products or services
Government approval for VentureNet's products and services is not currently
required.
Competition
The business of providing capital and business services is intensely
competitive. VentureNet seeks entities that require investment capital in the
under $2 million range and that also utilize other corporate services provided
for a fee. VentureNet is attempting to carve out a profitable niche in the
marketplace by offering our clients the ability to execute on their business
plan without the burden of administering the company. There is no assurance that
VentureNet will not be overwhelmed by competitors offering similar or possibly
even better capital and business services, and at prices to clients below what
VentureNet charges.
Effect of existing or probable governmental regulations on the business
VentureNet does not know of any federal or state regulatons that might affect
the business nor does VentueNet know of any federal and state regulations that
might be enacted in the future that will adversely affect the industry.
Amount spent during each of the last two fiscal years on research and
development activities
VentureNet does not generally involve itself in research and development.
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<PAGE>
Costs and effects of compliance with environmental laws (federal, state and
local)
Environmental laws do not materially affect VentureNet or the companies we have
invested in.
Number of total employees and number of full-time employees
VentureNet currently has 11 full-time employees.
Cyclicality of the industry
VentureNet is dependent on the economic well being of its clients to produce
revenue and capital appreciation for the investment in the emerging companies.
Revenue from these companies may erode possibly severely, by any economic
downturn. During the recessionary phase of the economic cycle, most companies
experience a decline in revenues which will could have a direct effect on
VentureNet revenue.
Economic dependence
VentureNet 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, VentureNet had largely conducted
business in the normal course. VentureNet had 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.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
Prior August, 2000 we primarily derived revenues from our Internet-based
business and advertising information about emerging companies. Client companies
provided their own content, which may include information about goods and
services they offer, new corporate developments, and links to their own
Websites. Our Website also provided links to other sites that provide business
information. We currently expect to discontinue these services.
We intend to act as an "incubator", mentor or both, for corporate development
for potentially successful pre-public and private companies through the initial
public offering or private sale stage. We will provide management services,
corporate development and structure in emerging and established business
operations which demonstrate potential for long-term capital growth and which
would benefit from public ownership. Our belief is that smaller companies,
specifically those between $2 million and $20 million in annual sales, offer the
greatest opportunity for gain, due to their inability to attract adequate
capital in the general markets, and we have the expertise in dealing with the
management and marketing problems associated with emerging firms in that size
range. Start-up companies will also be considered. Our experience is that
exceptional bargains are available for investments of that size and type of
company because of being largely overlooked by the capital markets. Decisions as
to which business opportunity to participate in will be made by management, who
may enter into investment decisions with or without the consent, vote, or
approval of the Executive Committee. To help accomplish these goals, VentureNet,
Inc. will provide substantial working capital, expenses, and fees to the
emerging companies to attempt to complete their business plan.
We have embarked on an aggressive plan of expansion involving the acquisition of
the operating assets of other going concerns: the assets bought would generally
constitute distinct operating units of ours. Although management is looking for
asset purchases within our areas of expertise, we have made overtures to a
variety of potential holdings. It is management's intention to use a group of
financing vehicles to buy assets: among these may be cash, debt, and/or equity
securities. To the end of having cash available for purchases, we must raise the
proceeds from our offering.
RESULTS OF OPERATIONS
Year Ended May 31, 2000 Compared to the Year Ended May 31, 1999
VentureNet's revenues for the 12 months ending May 31, 2000, were $370,688
against revenues of $214,175 for the 12 months ending May 31, 1999, representing
an increase of 75%. Much of increase for fiscal 2000 was because of revenues
earned from some one-time services VentureNet performed during fiscal 2000 and
to virtually no revenue being earned during part of the third quarter of fiscal
1999. That collapse of revenues was the result of VentureNet's suspension of
sales activities during a United States Securities and Exchange Commission
investigation that resulted in no findings adverse to VentureNet. This temporary
halt to new business development was overcome in fiscal 1999's fourth quarter as
continuing clients remained with VentureNet while new clients were being added
at the rate of approximately three
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<PAGE>
to four per month. From fiscal 2000 to fiscal 1999, operating expenses increased
by 48% to $512,084, reflecting certain variable costs of operations that
increased as revenues did. Management believes that, as operating revenues grow,
total expenses will also do so, but at a lower rate.
As a result of the foregoing our net loss for the year ending May 31, 2000,
increased only 8% to $137,762 from a net loss of $127,880 for 1999.
EFFECTS OF INFLATION
Management believes that VentureNet's revenues and results of operations have
not been significantly affected by inflation during the two years ended May 31,
2000. The economy's overall low inflation rates at both the producer and
consumer levels have been reflected in VentureNet's business and its industry.
GOING CONCERN
VentureNet has suffered recurring losses from operations and at May 31, 2000,
had a working capital deficit and a deficiency in assets. These and other
factors raise doubt about VentureNet'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.
For the One Month Ended June 30, 2000
VentureNet's revenues for the one month ended June 30, 2000, were $12,000. As a
result of the transaction with Mr. Brette and discussions as to our new business
plans, we did not generate revenues consistent with those earned during the
fiscal year ended May 31, 2000. Our operating expenses were $115,074, which were
significantly more than in past months primarily due to employees and various
consultants involved in developing our new business plan. Management believes
that our expenses will remain at increased levels while we continue to develop
and initiate our new business plan.
As a result of the foregoing we had a net loss of $96,407 for the one month
ended June 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Total cash balances declined $52,902, or 43%, from their previous year levels.
This decrease was primarily attributed to the use of $86,123 in cash flows for
operating activities. During June 2000 we used and additional $58,523 in cash
primarily for operating activities. As of June 30, 2000, we have a working
capital deficit of approximately $590,000.
Management does not believe that its current sources of cash are sufficient to
fund its operations. In addition, we have revised our business plan which will
require significant capital. As a result we must raise some or all of the
proceeds of our $10,000,000 offering.
On June 26, 2000, Michael N. Brette, our new Chairman of the Board, President
and Chief Executive Officer, exchanged certain assets, with a cost to Mr. Brette
of $1,237,000, to the Company for 25,000,000 shares of VentureNet's common
stock.
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<PAGE>
DESCRIPTION OF PROPERTY
Until September 30, 2003, VentureNet is committed to lease approximately 2,700
square feet of office space for $3,550 per month at Jefferson Avenue, Suite 200,
Temecula, California. The office building is in good condition.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As a result of our merger with Internet Stock Exchange Corp. - effective on
September 1, 1998, Mr. A.N. Kyriakides, our former Chairman of the Board,
through affiliated parties, received consideration of 222,222 shares of ISMR's
common stock plus a $1,000,000 note payable. The Principle balance of this note
is currently approximately $536,000 and the terms of the note were extended.
VentureNet will repay the outstanding loan payable within 180 days, provided,
however, that if VentureNet completes any equity or debt financing before the
maturity date of the note, VentureNet shall pay twenty percent (20%) of all
gross proceeds raised in any equity or debt offering(s) within ten (10) days
from the closing of such offering(s), toward payment of the note. Interest at
the rate of 6% per annum will accrue on this note from the date of closing until
paid. If the loan is not paid on time, then the default rate of interest of 9%
per annum will accrue from the default date until paid.
On June 26, 2000, Michael N. Brette, our new Chairman of the Board, President
and Chief Executive Officer, exchanged certain assets, with a cost to Mr. Brette
of $1,237,000, to the Company for 25,000,000 shares of VentureNet's common
stock.
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<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The principal United States market in which VentureNet common stock is and has
been traded is the Over-the-Counter Electronic Bulletin Board Service of the
National Association of Securities Dealers. VentureNet common stock began
trading in 1989 under the symbol SVCR, which was subsequently changed to ISMR,
changed in June 2000 to VNTN. Through May, 2000, the high sales price was $5.00,
adjusted for all stock splits, and the low sales price was $0.0001. Firms making
a market in VentureNet common stock include: Fleet Trading, WM. V. Frankel &
Co., Inc., Forge Financial Group, Inc., Gaines, Berland Inc., GVR Company, M.
Hill Thompson Magid & Co., Herzog, Heine, Geduld, Inc., Ladenburg, Thalmann &
Co., Inc., Schwab Capital Markets L. P., M. H. Meyerson & Co., Inc., North
American Institutional Brokers, Knight Securities, Inc., Paradise Valley
Securities, Inc., Pacific Continental Securities, Paragon Capital Corp., Program
Trading Corp., Sharpe Capital, Inc. Wien Securities Corp.
Year Ended Year Ended
May 31, 2000 May 31, 1999
High* Low* High* Low*
----- ---- ----- ----
First Quarter $1.88 $1.50 $2.25 $1.50
Second Quarter $1.75 $0.41 $3.50 $0.87
Third Quarter $3.31 $0.75 $1.25 $0.56
Fourth Quarter $5.13 $2.00 $0.75 $0.25
* The prices presented above are bid prices which represent prices between
broker-dealers and do not include retail markups and markdowns or any commission
to the dealer. These prices may not reflect actual transactions.
On July 31, 2000, there were approximately 286 holders of record of VentureNet
common stock. This number does not include any adjustment for stockholders
owning VentureNet common stock in street name.
The stock transfer records of the corporation indicate that, as of July 31,
2000, there were 26,565,777 common shares outstanding. VentureNet has never paid
dividends, and it does not anticipate paying any dividends in the near future;
instead, it intends to retain earnings, if any, to provide funds for general
corporate purposes and the expansion of business.
As well as being regulated at the federal level by the Securities Exchange Act
of 1934, the sale and resale of securities like VentureNet's is regulated at the
state level through the Blue Sky laws.
o VentureNet common stock is listed on the Over-the-Counter Electronic
Bulletin Board Service of the National Association of Securities
Dealers under the trading symbol
27
<PAGE>
VNTN and this offering has been the subject of a federally qualified
registration statement, but the stock still might not be salable by the
resident of a state in which VentureNet has not met the applicable Blue
Sky requirements.
o 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 - especially "penny stocks" and
others 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-priced stocks like VentureNet's.
The United States Securities and Exchange Commission has adopted rules that
regulate broker-dealer practices in connection with transactions in these "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 National Association of Securities Dealers Automated
Quotation system, provided that current price and volume information with
respect to transactions in such securities is provided by such exchange or
system. If VentureNet's common stock meets the definition of a "penny stock",
before executing a transaction not otherwise exempt, a broker-dealer must do the
following:
o Deliver a standardized risk disclosure document prepared by the
Securities and Exchange Commission that provides information about
penny stocks and the nature and level of risks in the penny stock
market.
o Provide the customer with bid and offer quotations for VentureNet's
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.
o Make a special, written determination that VentureNet's 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 VentureNet's stock if it is or
becomes subject to the penny stock rules. If VentureNet common stock is or
becomes subject to the penny stock rules, shareholders may find it more
difficult to sell their the stock in 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 VentureNet stock.
28
<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, 1999 and 2000.
Name and Compensation
Principal position Year Salary Bonus Other
---------------------- ---- ------ ----- -----
Michael Brette, CEO 2000 None None None
Budd Morris, 2000 0 0 $70,500
former CEO 1999 0 0 $27,628
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. The Board of Directors plans to appoint an independent
compensation review panel to make recommendations regarding the compensation
structure of VentureNet's officers and will take that panel's findings into
account in establishing salaries, benefits, and incentives appropriate for
VentureNet's key personnel.
29
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
We have had no disagreements with our independent accountants. There been no
material changes in our financial statements because of disagreements between us
and our accountants with respect to accounting or with respect to financial
disclosures.
30
<PAGE>
VentureNet, Inc.
F/K/A INTERNET STOCK MARKET RESOURCES, INC.
FINANCIAL STATEMENTS
MAY 31, 2000 and 1999
CONTENTS
<TABLE>
<CAPTION>
Page
-----------
<S> <C>
INDEPENDENT AUDITOR'S REPORT F-1
FINANCIAL STATEMENTS (including unaudited one month ended June 30, 2000)
Balance Sheets F-2
Statements of Operations F-3
Statements of Stockholders' Equity (Deficiency in Assets) F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 to F-12
</TABLE>
31
<PAGE>
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
VentureNet, Inc. (F/K/A Internet Stock Market Resources, Inc.)
Temecula, California
We have audited the accompanying balance sheets of VentureNet, Inc. (F/K/A
Internet Stock Market Resources, Inc.), as of May 31, 2000 and 1999, and the
related statements of operations, stockholders' equity (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 VentureNet, Inc. (F/K/A
Internet Stock Market Resources, Inc.) at May 31, 2000 and 1999, and the results
of its operations and its 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 8 to the
financial statements, the Company has suffered recurring losses from operations
and has working capital deficit that raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 8. 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
June 9, 2000 (except for Note 9 as to which
the date is August 5, 2000)
Miami, Florida
Member:
Florida Institute of Certified Public Accountants
American Institute of Certified Public Accountants -
Private Companies and SEC Practice Sections
SC International - Offices in Principal Cities World-Wide
F-1
<PAGE>
VentureNet, Inc. (F/K/A INTERNET STOCK MARKET RESOURCES, INC.)
<TABLE>
<CAPTION>
BALANCE SHEETS June 30, May 31,
2000 ---------------------------
(Unaudited) 2000 1999
----------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 11,361 $ 69,884 $ 122,786
Accounts receivable, less allowance
for doubtful accounts of $7,825
in 2000 and $37,320 in 1999 49,025 59,425 22,343
Recoverable income taxes 654 654 5,928
Prepaid expenses 12,500 -- --
----------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 73,540 129,963 151,057
PROPERTY AND EQUIPMENT 29,974 30,924 40,244
EQUITY SECURITIES, available for sale 1,237,000 -- --
DEPOSITS 500 500 1,000
DUE FROM AFFILIATE 6,477 6,477 --
----------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,347,491 $ 167,864 $ 192,301
==========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
CURRENT LIABILITIES
Accounts payable $ 34,182 $ 34,182 $ 11,196
Accrued and other liabilities 71,937 108,680 22,144
Deferred income 20,500 22,500 112,084
Current portion of note payable to
stockholder 536,000 536,000 113,550
----------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 662,619 701,362 258,974
NOTE PAYABLE TO STOCKHOLDER, 6%,
DUE JUNE 1, 2000 -- -- 564,965
----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 662,619 701,362 823,939
----------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTES 5 AND 9)
STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
Preferred stock, $.01 par value; 66,667
shares authorized; none issued and
outstanding
Preferred stock, Class A, $.01 par value;
933,333 shares authorized; 96,500,
96,500 and 0 shares issued and
outstanding, respectively 965 965 --
Common stock;$.0001 par value; 50,000,000
Shares authorized; 26,565,777,
1,381,333 and 586,444 shares issued
and outstanding, respectively 2,657 139 59
Additional paid-in capital 3,512,417 2,093,491 505,127
Note receivable arising from the
sale of stock, including accrued interest (810,174) (803,507) --
Stock subscription receivable (650,000) (550,000) --
Deficit (1,370,993) (1,274,586) (1,136,824)
----------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS) 684,872 (533,498) (631,638)
----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS) $ 1,347,491 $ 167,864 $ 192,301
==========================================================================================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
VentureNet, Inc. (F/K/A INTERNET STOCK MARKET RESOURCES, INC.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the one month For the years ended May 31,
ended June 30, 2000 -----------------------------
(Unaudited) 2000 1999
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $ 12,000 $ 370,688 $ 214,175
------------------------------------------------------------------------------------------
EXPENSES
Bad debts -- 27,250 35,763
Depreciation and amortization 950 11,460 11,307
Office rent 562 8,778 13,482
General and administrative 13,594 45,524 43,801
Interest 2,690 36,267 34,947
Advertising and promotions -- 19,356 3,375
Professional fees 25,168 101,863 82,405
Compensation and related taxes 67,698 232,627 97,890
Telephone 4,412 28,959 20,668
------------------------------------------------------------------------------------------
TOTAL EXPENSES 115,074 512,084 343,638
------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (103,074) (141,396) (129,463)
OTHER INCOME 6,667 3,634 1,583
------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS BEFORE INCOME TAXES (96,407) (137,762) (127,880)
PROVISION FOR INCOME TAXES -- -- --
------------------------------------------------------------------------------------------
NET LOSS ($ 96,407) ($ 137,762) ($ 127,880)
==========================================================================================
BASIC AND DILUTED NET LOSS PER SHARE ($ 0.01) ($ 0.17) ($ 0.32)
==========================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 26,565,777 817,815 398,045
==========================================================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
VentureNet, Inc. (F/K/A INTERNET STOCK MARKET RESOURCES, INC.)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
For the years ended May 31, 2000 and 1999 and the (Unaudited) one month ended
June 30, 2000
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
ADDITIONAL
COMMON PREFERRED PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCES -
MAY 31, 1998 275,333 $ 28 -- -- $ 3,458,279
PRIVATE STOCK
PLACEMENT 311,111 31 -- -- 504,906
RECAPITALIZATION
OF DEFICIT -- -- -- -- (3,458,058)
NET LOSS FOR
1999 -- -- -- -- --
---------------------------------------------------------------------------------------------------
BALANCES -
MAY 31, 1999 586,444 59 -- -- 505,127
PRIVATE STOCK
PLACEMENT 133,333 13 -- -- 54,947
SHARES ISSUED FOR
SERVICES 55,556 6 -- -- 55,550
ADDITIONAL PUBLIC
OFFERING 606,000 61 96,500 965 1,477,867
INTEREST ON NOTE -- -- -- -- --
NET LOSS FOR
2000 -- -- -- -- --
---------------------------------------------------------------------------------------------------
BALANCES -
MAY 31, 2000 1,381,333 $ 139 96,500 $ 965 $ 2,093,491
(Unaudited)
SHARES ISSUED FOR
SERVICES 84,444 8 -- -- 84,436
SHARES ISSUED IN
EXCHANGE 25,000,000 2,500 -- -- 1,234,500
ADDITIONAL PUBLIC
OFFERING 100,000 10 -- -- 99,990
INTEREST ON NOTE -- -- -- -- --
NET LOSS FOR
2000 -- -- -- -- --
---------------------------------------------------------------------------------------------------
BALANCES - for the one month ended
JUNE 30, 2000
(Unaudited) 26,565,777 $ 2,657 96,500 $ 965 $ 3,512,417
===================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
SUBSCRIPTION NOTE
DEFICIT RECEIVABLE RECEIVABLE TOTAL
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCES -
MAY 31, 1998 ($4,467,002) -- -- ($1,008,695)
PRIVATE STOCK
PLACEMENT -- -- -- 504,937
RECAPITALIZATION
OF DEFICIT 3,458,058 -- -- --
NET LOSS FOR
1999 (127,880) -- -- (127,880)
------------------------------------------------------------------------------------------
BALANCES -
MAY 31, 1999 (1,136,824) -- -- (631,638)
PRIVATE STOCK
PLACEMENT -- -- -- 54,960
SHARES ISSUED FOR
SERVICES -- -- -- 55,556
ADDITIONAL PUBLIC
OFFERING -- (550,000) (800,000) 128,893
INTEREST ON NOTE -- -- (3,507) (3,507)
NET LOSS FOR
2000 (137,762) -- (137,762)
------------------------------------------------------------------------------------------
BALANCES -
MAY 31, 2000 ($1,274,586) ($ 550,000) ($ 803,507) ($ 533,498)
(Unaudited)
SHARES ISSUED FOR
SERVICES -- -- -- 84,444
SHARES ISSUED IN
EXCHANGE -- -- -- 1,237,000
ADDITIONAL PUBLIC
OFFERING -- (100,000) -- --
INTEREST ON NOTE -- -- (6,667) (6,667)
NET LOSS FOR
2000 (96,407) -- -- (96,407)
------------------------------------------------------------------------------------------
BALANCES - for the one month ended
JUNE 30, 2000
(Unaudited) ($1,370,993) ($ 650,000) ($ 810,174) $ 684,872
==========================================================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
VentureNet, Inc. (F/K/A INTERNET STOCK MARKET RESOURCES, INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the one month
ended For the years ended May 31
June 30, 2000 ---------------------------
(Unaudited) 2000 1999
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($ 96,407) ($ 137,762) ($ 127,880)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 950 11,460 11,307
Common stock issued for services rendered 84,444 55,556 --
Changes in assets and liabilities:
Decrease in restricted cash -- -- 50,000
Decrease (increase) in accounts receivable 10,400 (37,082) 9,850
Decrease (increase) in recoverable income taxes -- 5,274 (5,928)
(Increase) decrease in accrued interest receivable (6,667) (3,507) 4,920
Increase in prepaid expenses (12,500) -- --
Increase in accounts payable -- 22,986 2,202
Increase (decrease) in accrued and
other liabilities (36,743) 86,536 (34,952)
Decrease in deferred income (2,000) (89,584) (12,360)
-------------------------------------------------------------------------------------------------------------
NET CASH USED BY OPERATING ACTIVITIES (58,523) (86,123) (102,841)
-------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issuance -- 183,853 504,937
Payments on from due from affiliate -- (6,477) --
Proceeds of stockholder loan -- 34,250 --
Principal payments on note payable stockholder -- (176,765) (385,385)
-------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- 34,861 119,552
-------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment -- (2,140) (1,578)
Security deposits -- 500 --
-------------------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES -- (1,640) (1,578)
-------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH (58,523) (52,902) 15,133
CASH AND EQUIVALENTS, beginning of period 69,884 122,786 107,653
-------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS, end of period $ 11,361 $ 69,884 $ 122,786
=============================================================================================================
SUPPLEMENTAL DISCLOSURES
Interest received -- $ 127 $ 6,503
Interest paid -- $ 36,018 $ 36,363
Income taxes paid -- $ -- $ 2,928
=============================================================================================================
SUPPLEMENTAL DISCLOSURES OF NON-CASH
FINANCING TRANSACTIONS:
Common stock issued for note receivable
accruing 10% interest -- $ 800,000 --
Common stock issued for stock subscriptions
receivable $ 100,000 $ 550,000 --
Common stock issued for in exchange for
equity securities $ 1,237,000 -- --
In connection with the merger, in September 1998 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 stockholder."
=============================================================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
INTERNET STOCK MARKET RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
BUSINESS ACTIVITY VentureNet, Inc. (F/K/A Internet Stock Market Resources,
Inc.), (VentureNet) provides Internet design and access to financial websites
and information on behalf of smaller, growing public companies. VentureNet is an
information exchange and web destination of choice for investors, researchers,
analysts, brokers, media, etc. to obtain rapid, up-to-date information on
publicly traded companies. The companies, upon becoming a member of VentureNet
and paying necessary fees to VentureNet, supply all information. VentureNet
includes stock information and related financial material at no extra charge.
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 2,000,000 restricted common shares of VentureNet's stock
and a promissory note for $1,000,000.
The Surviving Corporation is 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 completed all aspects of its
merger/acquisition with the Non-surviving Corporation.
Subsequent to May 31, 2000, the Company changed its name to VentureNet, Inc.
from Internet Stock Market Resources, Inc. (See Note 9).
ACCOUNTING BASIS These financial statements reflect the merger as if it were a
"pooling of interests" of the two entities as a result of common control.
Accordingly, financial information for periods prior to the merger reflect
retroactive restatement of the companies' combined financial position and
operating results.
RECLASSIFICATIONS AND RESTATEMENTS Amounts in the prior year financial
statements have been reclassified for comparative purposes to conform to 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.
CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows,
VentureNet considers all highly liquid debt securities purchased with maturity
of three months or less to be cash equivalents.
CONCENTRATIONS OF CREDIT RISK Financial instruments, which potentially subject
VentureNet to a concentration of credit risk, are cash and cash equivalents and
accounts receivable. VentureNet 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 at
May 31, 1999.
As of May 31, 2000 and 1999, VentureNet 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. VentureNet
clients are typically smaller, publicly traded organizations. Consequently,
VentureNet'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.
F-6
<PAGE>
PROPERTY AND EQUIPMENT Property and equipment, consisting of furnishings and
equipment used in its 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 when the collection of sales
proceeds is reasonably assured and all other material conditions of the sales
are met. Income on contracts in excess of one month is deferred and recognized
monthly, pro-rata, over the term of the agreement.
ADVERTISING Advertising costs are charged to operations in the year incurred.
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, 2000 and May 31, 1999.
INCOME TAXES Income taxes are computed under the provisions of the Financial
Accounting Standards Board (FASB) Statement 109 No. (SFAS 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
VentureNet'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 VentureNet'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 VentureNet to accumulate sufficient working capital. The
shareholder was an officer and director of VentureNet during the fiscal year
ended May 31, 2000.
F-7
<PAGE>
Subsequent to May 31, 2000, in accordance with a June 13, 2000 agreement, the
terms of the note were extended. VentureNet will repay the outstanding loan
payable of approximately $535,000 as of May 31, 2000, within 180 days, provided,
however, that if VentureNet completes any equity or debt financing before the
maturity date of the note, VentureNet shall pay twenty percent (20%) of all
gross proceeds raised in any equity or debt offering(s) within ten (10) days
from the closing of such offering(s), toward payment of the note. Interest at
the rate of 6% per annum will accrue on this note from the date of closing until
paid. If the loan is not paid timely, then the default rate of interest of 9%
per annum will accrue from the default date until paid.
3. PROPERTIES AND EQUIPMENT
Property and equipment consisted of the following:
2000 1999
-------- --------
Office equipment $ 59,245 $ 57,104
Accumulated depreciation (28,320) (16,860)
-------- --------
Property and equipment, net $ 30,924 $ 40,244
======== ========
Total depreciation expense for the years ended May 31, 2000 and 1999, amounted
to $11,460 and $11,117, respectively.
4. ACCRUED AND OTHER LIABILITIES
Accrued liabilities consisted of the following:
2000 1999
-------- --------
Professional fees $ 62,100 $ 20,150
Accrued compensation and related taxes 45,185 848
Accrued interest 1,395 1,146
-------- --------
$108,680 $ 22,144
======== ========
5. STOCKHOLDERS' EQUITY
VentureNet has authorized 50,000,000 shares of common stock with a par value of
$.0001 per share. At May 31, 2000 and 1999, 1,381,333 shares and 586,444 shares,
respectively, were issued and outstanding. VentureNet has authorized 66,667
shares of preferred $.01 par value with no rights and privileges defined and no
such preferred shares were issued and outstanding at May 31, 2000 and 1999.
VentureNet has authorized 933,333 shares of Class A preferred stock, $0.01 par
value. At May 31, 2000 and 1999, 96,500 shares and no shares, respectively, were
issued and outstanding. The holders of Class A preferred stock are entitled to
the following rights and privileges:
o One share of Class A preferred stock may be exchanged for two shares of
common stock. Within one year from the issue date, the exchange price
is $5.00 for two shares of common stock. After one year, the exchange
price is the greater of $5.00 and the market bid price for two shares
of common stock. For one year from the issue date, the exchange price
is $5.00 for two shares of common stock.
o No voting rights.
o 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.
o Class A preferred stock has no rights to dividends of any kind.
F-8
<PAGE>
o 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.
o If any part of the designation of the Class A preferred stock is held
invalid, the rest of the class's designation is still valid.
PRIVATE OFFERING In August 1998, the Board of Directors authorized VentureNet to
offer and sell to foreign investors up to 4,000,000 shares of its 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 made before the merger, 2,800,000
shares were issued at prices ranging from $.12 to $.25 generating net proceeds
of $504,937 before May 31, 1999. On June 14, 1999, VentureNet sold the remaining
133,333 (post-reverse split) shares of its common stock from its private
placement for $54,960.
REVERSE STOCK SPLIT During the first fiscal quarter of VentureNet's 1998 fiscal
year, the common stock of VentureNet experienced a significant decline in the
trading per share price. In addition to the detrimental effect of the lower
trading price had on the shareholders, it diminished VentureNet's ability to
make acquisitions using VentureNet's common stock. As a result of the above,
effective on June 30,1999, VentureNet reverse split its common stock at a ratio
of one new share for each nine old shares issued and outstanding. Recognition of
the reverse stock split has been given in the May 31, 1999 financial statements.
SHARES ISSUED FOR SERVICES On July 9, 1999, the Company authorized the issuance
to two officers of the Company, 55,556 shares of its common stock for services
rendered beyond the normal course of business as officers of the Company. This
stock was valued at $55,556.
PUBLIC OFFERING Through a public offering registered with the United States
Securities and Exchange Commission, VentureNet offered to sell 833,333 units of
VentureNet securities. Each unit contained four shares of VentureNet common
stock and one share of VentureNet Class A preferred stock. However, most of
these units were not issued exactly in accordance with the terms of the
registration statement, including no preferred stock being issued in connection
with the promissory note as described below and the "put" option also described
below.
PROMISSORY NOTE In connection with the public offering, the Company issued
320,000 shares of common stock in exchange for a promissory note in the amount
of $800,000. This note bears interest at 10% per annum and is due November 15,
2000. This note is collateralized by 1.2 million shares and 1.2 million warrants
of Shane Resources, Inc. In a security agreement dated, May 15, 2000, the
purchase of VentureNet's stock also pledged 30,000 shares of MedCom, Inc. of
Bellevue, WA.
STOCK SUBSCRIPTIONS RECEIVABLE In connection with the public offering, the
Company issued 221,500 shares of common stock in exchange for Stock Subscription
Agreements for an aggregate purchase price of $550,000. The due date of these
stock subscription agreements are December 31, 2000 and the notes bear interest
at 6% per annum. In the alternative, the subscribers were permitted the option
to "put" their shares back to the Company in full forgiveness of any amounts
due, and with no further recourse by the Company.
SALE OF COMMON STOCK Through the public offering, the Company sold 52,000 shares
of common stock at an average price of $2.12 per share for a total of $110,000.
In April 2000, the Company sold 22,000 shares of common stock at $2.50 for a
total of $55,000.
F-9
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6. INCOME TAXES
For the year ended May 31, 2000, VentureNet generated for U.S. income tax
purposes a net operating loss of approximately $129,000. This loss carryforward
expires in the year 2020. VentureNet had a net operating loss carryforward of
approximately $3,127,000 as of May 31, 2000. However, as of September 1, 1998,
and subsequently, there were ownership changes in VentureNet as defined in
Section 382 of the Internal Revenue Code. Because of these changes, VentureNet'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 VentureNet'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 SFAS 109, deferred income
taxes reflect the net 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 of $1,097,485 may not be recognized in future years.
Therefore, a valuation allowance of $1,097,485 equal to the deferred tax benefit
has been established, resulting in no deferred tax benefits as of the balance
sheet dates.
7. COMMITMENTS AND CONTINGENCIES
LEASED PREMISES VentureNet leases its facilities in St. Petersburg, Florida
under a three-year lease agreement, dated August 10, 1999. The lease provides
for monthly payments of $525, with subsequent increases on January 1, 2001 to
$675, and January 1, 2002 to $825. Rent expense for the years ended May 31, 2000
and 1999, was $8,778 and $13,482, respectively.
Future minimum lease payments under the lease agreement for years ending May 31
are as follows:
2001 $ 7,544
2002 9,470
2003 6,179
-------
$23,193
=======
CONSULTING AGREEMENTS From time-to-time, VentureNet 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 VentureNet 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. VentureNet has conducted a preliminary
assessment of its key computer systems and software application and believes
they are Year 2000 compliant. Based on the initial assessment, VentureNet
believes the cost of addressing the Year 2000 issue should not have a material
impact on VentureNet's financial position or results of operations.
F-10
<PAGE>
ACQUISITIONS On May 25, 1999, the Board of Directors authorized negotiations
with PEP Equities, Inc. for acquiring an interest to the extent that it would
become a subsidiary of VentureNet.
VentureNet also negotiated with Micro Bytes Computer Center, Inc. for the
purchase of business assets and inventory and entered into a Letter of Intent
dated June 16, 1999. The purchase would have been accomplished in part by the
issuance of restricted common stock by VentureNet, which would have been given
"piggy-back" registration rights.
Both of the above potential acquisitions were terminated by mutual agreement in
1999.
On June 30, 1999, a letter of intent was signed by VentureNet and Delcor
Industries, Inc. (Delcor) to acquire 100% of Delcor for cash and debt. The
letter of intent gave 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.
The letter of intent expired according to its terms, however, VentureNet
maintained open lines of communications with Delcor. About five months after the
letter of intent expired, Delcor raised capital in contemplation of closing a
transaction with the Company. Since the transaction did not close, a possibility
exists that the Delcor investors could bring some claim against VentureNet,
however, no such claim is currently pending.
8. GOING CONCERN AND MANAGEMENT'S PLAN
GOING CONCERN The accompanying financial statements have been prepared assuming
VentureNet will continue as a going concern. VentureNet has suffered recurring
losses from operations and at May 31, 2000, had a working capital deficit and a
deficiency in assets. These and other factors raise doubt about VentureNet'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.
MANAGEMENT'S PLANS Management has decided to address VentureNet's financial
situation by the following:
The outstanding additional offering on Form SB-2 was suspended as a result of
the acquisition discussed below, but is expected to be refiled with the United
States Securities and Exchange Commission, which would provide for VentureNet to
raise up to $10,000,000 from the general public.
Further, VentureNet acquired interests in a number of 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, additional
letters of intent are being considered for signature and VentureNet is in the
process of drafting agreements and performing its due diligence.
The Company also expects to increase promotional expenditures in an effort to
increase revenues.
9. SUBSEQUENT EVENTS
On June 13, 2000, Internet Stock Market Resources Inc. agreed to exchange
25,000,000 shares of its common stock for common stock in a number of private
and public companies controlled by Michael N. Brette.
VentureNet has signed an agreement with Mr. Brette for him to contribute a
majority of his ownership in seven companies including ATI Networks, The
Hydrogiene Corp., Solutions Media, Inc. and Gramerica Food Company, Inc. The
companies are involved in various emerging and new technologies, including GPS
(Global Positioning System), Internet software applications, and web-based
marketing. Upon receiving shareholder approval, Internet Stock Market Resources,
Inc. changed its name to VentureNet, Inc. and changed its trading symbol to
VNTN.
F-11
<PAGE>
Mr. Brette was the Chairman and President of VentureNet.com, a consulting,
publicity, mentoring, and financing group that specialized in providing services
for emerging growth companies and financing in management expertise to
pre-public and public and merging growth companies that demonstrate high-growth
potential. The focus of VentureNet will be to assist early stage companies in
securing early stage and first round financing for consumer and technology based
enterprises.
Upon closing, in June 2000, Mr. Brette became the Chairman of the Board and
President of VentureNet. As a part of its plan to continue as a going concern,
VentureNet believes the change in control represents an opportunity to both
combining the existing structure with a synergistic effect of the products and
personnel Mr. Brette will be adding. VentureNet believes that with this
opportunity they can produce the kind of management solutions which reduce costs
and provide greater financial exposure for the future.
VentureNet has entered into a consulting agreement with the former Chairman of
the Board, Mr. Kyriakides, for one year commencing June 13, 2000 at a fee of
120,000 shares of common stock, currently valued at approximately $157,500,
payable on January 1, 2001.
An additional consulting agreement for financial and strategic matters was
entered into with a consultant, for one year commencing July 1, 2000 at a fee of
72,000 shares of common stock, currently valued at approximately $94,500,
payable on January 1, 2001.
On August 5, 2000, VentureNet entered into three other consulting agreement for
financial, strategic, and international matters with various companies, for one
year at a fee of 5,500,000 warrants, currently valued at approximately
$7,218,750, for the direct purchase of 5,500,000 shares of common stock at
$0.01. The warrants have various exercise schedules during the terms of the
agreements.
10. UNAUDITED FINANCIAL STATEMENTS (Unaudited)
The unaudited financial statements as of and for the one month ended June 30,
2000 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 one month period
ended June 30, 2000 are not necessarily indicative of the results that may be
expected for the year ending May 31, 2001.
F-12
<PAGE>
PART II - INFORMATION NOT REQUIRED TO BE IN PROSPECTUS
INDEMNIFICATION OF OFFICERS AND DIRECTORS
At this time VentureNet has no provisions within our charter or by-laws that
insure or indemnify our director's or officers, either jointly or severally, for
their actions in such capacities. Neither are the officers and directors insured
or indemnified by contract or other arrangement. We are 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.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We estimate offering expenses related to issuance and distribution will be
$80,000 if all 1,000,000 units are sold; for purposes of presentation in the
Prospectus of this registration statement, we have estimated that the foregoing
expenses will be proportionately less if fewer units sold.
The table below shows the effect on proceeds from this offering, considering our
issuance and distribution costs on all 15,692,000 shares being registered on
this Form SB-2.
SEC Registration Fee $ 2,780
Blue Sky Fees and Expenses 5,000
Legal Fees and Expenses 35,000
Printing and Engraving Expenses 5,000
Accountants' Fees and Expenses 10,000
Miscellaneous 3,220
-------
Total $80,000
=======
The expenses, except for the SEC fees, are estimated.
As of the date of this registration statement, we have no agreement with any
broker/dealer to sell Units of this offering.
RECENT SALES OF UNREGISTERED SECURITIES
On June 26, 2000, Michael N. Brette, our new Chairman of the Board, President
and Chief Executive Officer, exchanged certain assets, with a cost to Mr. Brette
of $1,237,000, to the Company for 25,000,000 shares of VentureNet's common
stock.
During June 2000, we also issued 115,000 shares of common stock to various
employees and consultants for services rendered.
As a result of the merger of Internet Stock Market Resources, Inc. and Internet
Stock Market Corp. - effective on September 1, 1998 - MCK Marine Enterprises
received consideration of 222,222 shares of Internet Stock Market Resources'
common stock for $1,000, in reliance on transactional exemptions available under
Regulation S of the Securities Act of 1933, as amended. At the time of this
sale, MCK Marine Enterprises was controlled by Anastasios Kyriakides, a director
of Internet Stock Market Resources, Inc. Mr. Kyriakides remains the controlling
person of MCK Marine Enterprises. The exempt nature of the transaction was due
to the following: 1) the purchase of the securities was for investment purposes
only; 2) the shares sold could not be hypothecated, sold, or otherwise
transferred, as was evidenced by legend imprinted on the obverse of the stock
certificate evidencing the ownership of the shares, unless and/or until such
time as the securities were either registered or an exemption from registration
was available for their disposition; and 3) the purchaser was a foreign entity
of legal standing in Liberia.
II-1
<PAGE>
In August 1998, the Board of Directors authorized Internet Stock Market
Resources to offer and sell to foreign investors up to 444,444 shares of its
common stock at a purchase price of $.25 per share under a self-underwritten,
private placement to foreign investors, pursuant to transactional exemptions
available under Regulation S of the Securities Act of 1933, as amended. Under
this offering, which was prepared prior to 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. In July 1999 we issued 133,333 shares at approximately
$0.41 per share generating proceeds of $54,960. No stock was sold nor proceeds
received before the Merger, and the offer was neither legally binding nor
probable until such time after the merger as the offering was consummated. The
exempt nature of the transaction was due to the following: 1) the purchase of
the securities was for investment purposes only; 2) the shares sold could not be
hypothecated, sold, or otherwise transferred, as was evidenced by legend
imprinted on the obverse of the stock certificate evidencing the ownership of
the shares, unless and/or until such time as the securities were either
registered or an exemption from registration was available for their
disposition; and 3) the purchasers were foreign entities.
The dates and amounts of sales described above are as follows:
Date of Sale Sales Price Proceeds Number of Shares Sold
($) ($) (#)
November 1, 1998 2.25 100,000 44,444
December 8, 1998 1.80 100,000 55,556
December 9, 1998 2.14 94,969 44,444
February 10, 1999 1.62 89,968 55,556
April 30, 1999 1.08 120,000 111,111
July 1999 0.41 54,960 133,333
------- -------
Total 559,897 444,444
We believe that we took reasonable steps to ensure that each of the offerees
in these transactions were accredited investors under Rule 501 of the Securities
Act.
UNDERTAKINGS
Pursuant to Item 512(e) of Regulation S-B:
As permitted under Rule 461, VentureNet is requesting an accelerated
effective date. As such, VentureNet 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, VentureNet has been advised that in the opinion of the United States
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 us of expenses incurred or paid by our directors,
officers or controlling persons 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, we 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.
II-2
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EXHIBITS
Exhibit No. Description of Exhibit
----------- ----------------------
2 Exchange Agreement and Plan of Acquisition between Michael
Brette and Internet Stock Market Resources, Inc.
10.1 Consulting agreement - Kyriakides
10.2 Consulting agreement - Byington
10.3 Consulting agreement - IMA Marketing
10.4 Consulting agreement - M & A Group
10.5 Consulting agreement - Ivest Financial
23.1 Letter of Consent of Independent Auditors
II-3
<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 Temecula, State of
California, on August 10, 2000.
Internet Stock Market Resources, Inc.
By: /S/ MICHAEL N. BRETTE
--------------------------------
Michael N. Brette
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.
Signature Title Date
--------- ----- ----
/S/ MICHAEL N. BRETTE Director and Chief Executive August 10, 2000
--------------------------- Officer
Michael N. Brette
/S/ WILLIAM E. BAILEY Director and Vice Chairman August 10, 2000
---------------------------
William E. Bailey
/S/ SHARON SHEARS Director and Vice President August 10, 2000
---------------------------
Sharon Shears
/S/ KARL R. ROLLS Director, Counsel and Secretary August 10, 2000
---------------------------
Karl R. Rolls
/S/ FELIPE J. SANCHEZ Chief Operating Officer August 10, 2000
---------------------------
Felipe J. Sanchez
/S/ JOEY SANCHEZ Chief Financial Officer, August 10, 2000
--------------------------- Treasurer
Joey Sanchez
II-4
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
2 Exchange Agreement and Plan of Acquisition between Michael
Brette and Internet Stock Market Resources, Inc.
10.1 Consulting agreement - Kyriakides
10.2 Consulting agreement - Byington
10.3 Consulting agreement - IMA Marketing
10.4 Consulting agreement - M & A Group
10.5 Consulting agreement - Ivest Financial
23.1 Letter of Consent of Independent Auditors
