UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended May 31, 2000.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from _____________ to _____________.
Commission file number 33-21481-FW
VENTURENET, INC.
(Name of small business issuer in its charter)
Delaware 76-0246940
(State or other jurisdiction I.R.S.Employer
or incorporation) Identification No.)
27349 Jefferson Ave, Suite 200
Temecula, CA 92590
(Address of principal executive offices)
Issuer's telephone number: (909) 693-1644
Securities registered pursuant to Section 12(b) of the Exchange Act:
Name of each exchange Title of each class
on which registered
None None
Securities registered pursuant to Section 12(g) of the Exchange Act:
COMMON STOCK, $.0001 Par Value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes__X__ No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year: $370,688.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the average bid and asked prices of such stock as of
August 15, 2000: $1,342,554
There were 26,565,777 total shares outstanding of the issuer's common stock,
$.0001 par value per share, as of August 15, 2000.
<PAGE>
VENTURENET, INC.
FORM 10-KSB
TABLE OF CONTENTS
PART I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis or Plan of Operation
Item 7. Financial Statements
Item 8. Change in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters, and Control
Persons; Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and
Management
Item 12. Certain Relationships and Related Transactions
PART IV
Item 13. Exhibits and Reports on Form 8-K
<PAGE>
Part I
Forward-looking information
This Form 10-KSB contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. For this purpose, any
statements contained in this Form 10-KSB that are not statements of historical
fact may be deemed forward-looking statements. Without limiting the foregoing,
words such as "may," "will," "expect," "believe," "anticipate," "estimate" or
"continue" or comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, and actual results may differ materially depending on a variety
of factors, many of which are not within the Company's control. These factors
include but are not limited to economic conditions generally and in the
industries in which the Company's customers participate; competition within the
Company's industry, including competition from much larger competitors;
technological advances which could render the Company's products less
competitive or obsolete; failure by the Company successfully to develop new
products or services or to anticipate current or prospective clients' needs;
price increases or supply limitations for services purchased by the Company for
use in its products or services; and delays, reductions, or cancellations of
service previously placed with the Company.
Item 1. 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.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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.
ITEM 2. PROPERTIES.
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.
ITEM 3. LEGAL PROCEEDINGS.
We are not a party to, or aware of any, pending or threatened litigation of a
material nature.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE
<PAGE>
PART II
ITEM 5. MARKET FOR COMPANY'S 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 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.
<PAGE>
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.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
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 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.
<PAGE>
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.
<PAGE>
Item 7. Financial Statements.
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>
<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
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
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
<PAGE>
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>
Item 8. 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.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
VentureNet's directors and officers are as follows:
Name Age Position and Office Held
Term Period Served
---- --- ------------------------
---- -------------
Michael N. Brette 49 Director, Chief Executive Officer, Chairman,
1 Year 2 Months President
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
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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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.
ITEM 10. 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.
ITEM 11. 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.
Title of Class Name and Address Amount and Nature of
Percent
of Beneficial Owner Beneficial Ownership
--------------------------------------------------------------------------------
Common Michael N. Brette 25,000,000 shares in the Name of
94.11%
27349 Jefferson Ave. #200 Michael N.
Temecula, CA 92590 Brette.
As a group, the officers and directors beneficially own approximately 25,000,000
shares on June 30, 2000.
<PAGE>
ITEM 12. 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.
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
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
* Incorporated by reference from Form SB-2 filed on August 15, 2000.
Reports on 8-K
----------------
August 9, 2000, Form 8K, Item 2, Acquisition
February 3, 2000, Form 8K, Item 5, Other Events
January 18, 2000, Form 8K, Item 5, Other Events
November 17, 1999, Form 8K, Item 5, Other Events
October 14, 1999, Form 8K, Item 5, Other Events
October 4, 1999, Form 8K, Item 5, Other Events
September 20, 1999, Form 8K, Item 5, Other Events
July 22, 1999, Form 8K, Item 5, Other Events
July 21, 1999, Form 8K, Item 5, Other Events
June 24, 1999, Form 8K, Item 5, Other Events
<PAGE>
SIGNATURES
SIGNATURES In accordance withSection 13 or 15(d) of the Exchange Act, the
Company caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Signature Title Date
--------- ----- ----
/S/ MICHAEL N. BRETTE Director and Chief Executive August 23, 2000
--------------------------- Officer
Michael N. Brette
/S/ WILLIAM E. BAILEY Director and Vice Chairman August 23, 2000
---------------------------
William E. Bailey
/S/ SHARON SHEARS Director and Vice President August 23, 2000
---------------------------
Sharon Shears
/S/ KARL R. ROLLS Director, Counsel and Secretary August 23, 2000
---------------------------
Karl R. Rolls
/S/ FELIPE J. SANCHEZ Chief Operating Officer August 23, 2000
---------------------------
Felipe J. Sanchez
/S/ JOEY SANCHEZ Chief Financial Officer, August 23, 2000
--------------------------- Treasurer
Joey Sanchez
<PAGE>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE PERIOD ENDED MAY 31, 2000 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
