As filed with the Securities and Exchange Commission on
June 17, 1996
-------------
Registration No. 033-90672
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
--------------------------
POST-EFFECTIVE AMENDMENT NO. 1
to
FORM SB-2
Registration Statement Under The Securities Act of 1933
RESOURCENET COMMUNICATIONS, INC.
(Name of small business issuer as specified in its charter)
California 7311-0193-1026060 93-1026060
(State of Incorporation) (Primary Standard Industry (I.R.S. Employer
Classification Code Number) Identification No.)
One Sansome Street
Suite 2000
San Francisco, California 94104
(415) 721 0299
(Address and telephone number of principal executive offices)
Donald F. Mintmire, Esquire
265 Sunrise Ave., Suite 204
Palm Beach, Florida 33480
(561) 832 5696
(Name, address and telephone number of Agent for Service)
Approximate date of commencement of proposed distribution of the
securities to the public: As soon as practicable after the
effective date of this Registration Statement.
<PAGE>
Page 1 of 32 Pages
Exhibit Index located on Page 28
Cross Reference Sheet for Registration Statement on Form SB-2
<TABLE>
<CAPTION>
Form SB-2 Item Numbers and Headings Location
<S> <C> <C>
Item 1 Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus Outside Front Cover Page
Item 2 Inside Front and Outside Back
Cover Pages of Prospectus Inside Front and Outside Back
Cover Pages
Item 3 Summary Information and
Risk Factors Prospectus Summary; Risk Factors
Item 4 Use of Proceeds Use of Proceeds
Item 5 Determination of
Offering Price Risk Factors; Description of Securities
Item 6 Dilution Dilution
Item 7 Selling Security Holders Not Applicable
Item 8 Plan of Distribution Plan of Distribution
Item 9 Legal Proceedings Business
Item 10 Directors and Executive
Officers Management
Item 11 Security Ownership of
Certain Beneficial
Owners and Management Principal Shareholders; Certain
Transactions
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Item 12 Description of the Securities
to be Registered Outside Front Cover
Item 13 Interest of Named Experts
and Counsel Not Applicable
Item 14 Statement as to
Indemnification Indemnification
Item 15 Organization Within 5 Years Business; Risk Factors
Item 16 Description of Business Business
Item 17 Management's Plan of Operation Business
Item 18 Description of Property Business
Item 19 Certain Relationships and
Related Transactions Certain Transactions
Item 20 Market for Common Equity
and Related Stockholder Matters Description of Securities; Risk Factors
Item 21 Executive Compensation Management
Item 22 Financial Statements Financial Statements
Item 23 Changes in and Disagreements
With Accountants on
Accounting and Financial
Disclosure Not Applicable
</TABLE>
<PAGE>
PROSPECTUS
ResourceNet Communications, Inc.
ResourceNet Communications, Inc. (hereinafter also referred to as"ResourceNet"
and the "Company") is offering 850,000 shares of its Common Stock of which
51,200 shares (the minimum Offering) have already been sold with no par value,
at $6.00 per share. For a description of the rights and privileges of the Common
Stock see "Description of Securities." The Company intends to have its Common
Stock listed for quotation on the OTC Bulletin Board once the Offering has been
completed. The initial offering price of the Common Stock has been arbitrarily
determined by the Company and does not necessarily bear any relationship to the
Company's asset value, net worth, or other criteria of established value.
-----------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY INVOLVE A VERY HIGH DEGREE OF RISK. THEY SHOULD BE
PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT (SEE
"RISK FACTORS" ON PAGE 6 FOR SPECIAL RISKS CONCERNING THE COMPANY).
===============================================================================
Price to Public Underwriting Fees Proceeds
and Commissions(1) to Company(2)
- -------------------------------------------------------------------------------
Per Share $ 6.00 $ .78 $ 5.22
- -------------------------------------------------------------------------------
Total Maximum(2) $ 5,100,000.00 $ 663,000.00 $ 4,396,240.00 (3)
===============================================================================
(1)ResourceNet hereby offers to sell up to 850,000 shares of its Common Stock,
51,200 of which has already been sold, at $6.00 per share (hereinafter also
referred to as the "shares" or the "securities"). This Offering is made for a
period of up to, and not to exceed, one year from the date of this Prospectus.
On December 24, 1996, ResourceNet selling on a best-efforts, self-underwritten
basis, received offering proceeds from investors of $307,200, an amount which
was sufficient to meet the Company's minimum offering as described in this
prospectus.
(2) Should all of the shares offered hereby be sold, ResourceNet will realize a
minimum of $4,396,240 less expenses of issuance and distribution of $40,758.62,
in proceeds from this Offering based upon the payment of a sales commission and
non-accountable expense allowances to any broker/dealer (see "Plan of
Distribution"). ResourceNet, through its Officers and Directors, will act as
selling agent for this Offering, which is being made on a "self-underwritten"
basis pursuant to, and in compliance with, Rule 3a-4-1 of the Securities
Exchange Act of 1934, as amended (hereinafter referred to as the ("Exchange
Act") (see "Description of Securities"). The shares offered hereby may also be
sold by selected broker/dealers. Should these shares be sold by a broker/dealer,
ResourceNet will pay a sales commission of up to 10 percent, and an additional
non-accountable expense allowance equal to up to 3 percent of the gross proceeds
from the sale of shares. In no event will ResourceNet pay a commission, sales
fee, or expense to its Officers or Directors related to this Offering. Should
ResourceNet sell any of the shares itself, it will pay no commission and
non-accountable expense allowance on such sales, and the net proceeds available
to ResourceNet will increase accordingly (see "Use of Proceeds").
(3) This amount of net proceeds includes the payment of other expenses of
issuance and distribution.
RESOURCENET COMMUNICATIONS, INC. IS A REPORTING COMPANY UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
The date of Prospectus is , 1997
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and audited financial statements, including the notes thereto, which
appear elsewhere in this Prospectus and in the Registration Statement.
The Company
ResourceNet Communications, Inc. (hereinafter also referred to as
"ResourceNet" and the "Company") was incorporated in the State of California on
December 14, 1989 to develop, market and sell its planned advertising franchises
throughout the United States. The Company is seeking the proceeds from the sale
of shares offered hereby to further develop and expand its business operations.
ResourceNet is a start-up company that has realized minimal revenue to date to
establish business operations and to prepare and file documentation for the sale
of its franchises.
ResourceNet was founded by a group of advertising agency executives,
including executives experienced with worldwide advertising agencies such as
Ogilvy & Mather and BBDO. Based on its experience in the advertising industry,
management believes that there is a significant opportunity to develop market
share by offering support services for creative companies with annual sales in
the $500,000 - $25,000,000 range. In part due to the recent "down-sizing" that
many have experienced, major advertisers are out-sourcing marketing services
more than ever, and in many instances will be unwilling to pay the costs of a
full-service agency.
Historically, larger advertising agencies and creative companies such
as Ogilvy & Mather, J. Walter Thompson, and BBDO concentrate their marketing
efforts toward larger advertising clients, often those clients with advertising
budgets far exceeding $1,000,000. As a result, management believes that a
broad-based creative service support system which specializes in meeting the
needs of mid-size creative companies that service clients with smaller
advertising budgets, provides the Company with a significant opportunity to
develop and expand market share within this target market. International groups
of advertising agencies are organized to service clients on an international
basis and often focus on such clients as Proctor & Gamble, Coca-Cola, Ford Motor
Company, Exxon, etc. These "full-service" advertising agencies have not
traditionally attempted to capture the business of mid-level advertisers using
their top personnel, primarily due to cost and price constraints. ResourceNet
will provide the support systems and network efficiencies that will allow the
"smaller' creative shops as defined above to capture more of those mid-level as
well as larger advertising clients otherwise ignored by the large international
shops.
ResourceNet has completed and submitted the documentation necessary for
compliance with the California Department of Corporations for the registration
for sale of franchises in California with targeted states to follow. To the
Company's knowledge there are no other companies offering creative service
support franchises in the United States at this time. The Company plans to
market its franchises to fill the niche of market share that exists between the
large full service national and small lower budget creative service companies.
ResourceNet's principal executive office is located at One Sansome Street, Suite
2000, San Francisco, California 94104, and its telephone number is (415)
721-0299.
The Securities Offered
The Company is offering to sell 850,000 shares of Common Stock of which
51,200 shares have already been sold for $6.00 per share (see "Description of
Securities") On December 24, 1996, ResourceNet Communications, Inc., selling on
a best-effort, self-underwritten basis, received Offering proceeds from
investors of $307,200, an amount which was sufficient to meet the Company's
minimum Offering amount as described in this prospectus.
Use of Proceeds
The Company is continuing to sell shares in its Initial Public Offering, and has
commenced the usage of the Offering proceeds to date, to continue the
development and expansion of the Company and its operations.
5
<PAGE>
RISK FACTORS
An investment in the securities offered hereby involves a high and
substantial degree of risk. Prior to making an investment decision, a
prospective investor should carefully consider the risk factors listed below,
together with the other factors and financial data included herein, in relation
to his or her financial circumstances and the possible loss of his or her entire
investment.
This section of this Prospectus addresses the risks factors which
management believes present the most substantial risk to investors in this
Offering, and which constitute the greatest threat that an investment in the
shares may be lost in whole or in part, or not provide an adequate return on
investment.
Risks Related to the Company
Development Stage Company - Minimal Revenue From Operations
ResourceNet is a development stage enterprise organized to sell
creative service support franchises. ResourceNet has realized minimal revenue to
date to establish business operations and to prepare and file documentation for
the sale of its franchises as of the date of this Prospectus. The Company seeks
to develop its business through the sale of creative service support franchises.
There is no absolute assurance that the Company will be able to develop its
business by establishing franchising operations on a continuous and profitable
basis, if at all.
Prospective investors should be aware of the difficulties which could
be experienced by ResourceNet in developing its business, especially in view of
competition from existing and more established advertising agencies which will
compete with ResourceNet's prospective franchisees for advertising clients and
revenues. If ResourceNet's plans prove unsuccessful, shareholders could lose all
or a substantial part of their respective investments. Management estimated that
ResourceNet must realize at least $300,000 in gross proceeds from this Offering
to commence planned franchise sales operations and the Company has accomplished
this.
Uncertainty of Significant Assumptions
ResourceNet's plans for financing and implementing its planned business
operations and the projection of ResourceNet's potential for profitability from
its intended operations are based solely on the experience, judgment, and
assumptions of management. The significant assumptions made by management with
respect to the potential for market acceptance and profitability for ResourceNet
and its intended future franchisees are that an increasing number of small to
mid-size businesses, larger businesses, and divisions of these businesses will
continue to out-source marketing services, and will be unwilling to pay the high
costs of a full-service agency. Management also assumes that large nationally
established advertising agencies will not begin to seek the advertising accounts
of businesses which expend less than several million dollars annually for
advertising. Additionally, management assumes that existing creative service
companies which are smaller in terms of size and revenues will respond
positively to the opportunity to join a franchise network of creative service
companies, especially in light of ResourceNet's intention to promote its
franchise network on a national basis. Management believes that the type of
national exposure which ResourceNet intends to afford to its franchisees would
otherwise be unavailable to them, considering their traditionally smaller scope
with their respective client bases and revenues.
There can be no assurance with respect to the accuracy, certainty, or
validity of any of these significant assumptions, and should management be
incorrect in making any of these assumptions, the financial results experienced
by ResourceNet could be severely adversely affected; and shareholders, including
investors in this Offering, could lose all or part of their respective
investments in ResourceNet.
6
<PAGE>
No Historical Basis for Management's Opinion
All of ResourceNet's Officers and Directors have advertising agency
experience but, none of these persons has been previously involved in the
franchising business. Additionally, the Company has a limited operating history.
Accordingly, there is no basis, other than the judgment of, and assumptions made
by, ResourceNet's management, on which to estimate the volume of franchise sales
and the amount of revenues which ResourceNet's planned operations may generate,
or regarding other aspects of the planned operations of ResourceNet (see
"Business - Background" and "Management").
Uncertainty of Adequacy of Financing
Although management believes that the net proceeds obtained from the
sale of the minimum number of shares offered hereby will be sufficient to allow
ResourceNet to develop its operations as more fully described in this
Prospectus, additional financing may be required to implement ResourceNet's
operating plans. There is no assurance that any additional financing will be
available to ResourceNet if and when required, and that even if such financing
is available, it will not materially dilute the ownership of the then existing
shareholders, including investors in the shares offered hereby (see "Description
of Securities", "Dilution" and "Use of Proceeds").
Uncertainty of Market Acceptance and Financial Results
Until ResourceNet has established market acceptance for its advertising
franchise business and built up revenues, its financial results will be
unpredictable, making financial management more difficult. There is no assurance
that ResourceNet will achieve the market share anticipated by management for its
franchising business (see "Business").
Dependence Upon Management - Reliance Upon the Efforts of a Few Individuals
ResourceNet's success largely depends on the continued services of the
Company's Officers and Directors, and upon their ability to manage and conduct
ResourceNet's operations. The loss of any of their services could adversely
affect ResourceNet's prospects for success (see "Management" and "Business").
Anti-Takeover Provisions
Certain provisions of ResourceNet's Bylaws may make it more difficult
and time consuming to acquire ResourceNet, thereby reducing ResourceNet's
vulnerability to an unsolicited proposal for takeover. Under the provisions of
the Bylaws, the current Board of Directors is authorized to take any action
required to increase the authorized issue of shares or the classes and types of
capital stock and other securities of the corporation including, common stock
and preferred stock, without seeking approval of the holders of shares of voting
common stock or the holders of any other securities of the Company.
Additionally, the Board of Directors is specifically empowered to authorize and
issue corporate stock of various amounts, classes and types, and also to
authorize the sale or issuance of warrants, options or other rights pursuant to
such corporate stock for valid purposes of the Company or its business or its
expansion without first obtaining approval of the shareholders. These provisions
could have the effect of depriving shareholders of the opportunity to sell
shares at a premium over prevailing market prices, which sometimes arises
pursuant to takeover bids. ResourceNet's Bylaws also authorize the Board of
Directors to oppose certain tender offers on the basis of factors other than
economic benefit to shareholders.
Competition
While management is unaware of any other company currently franchising
or seeking to franchise creative service companies, there are numerous
well-established advertising agencies that will be competing directly with
ResourceNet's intended franchises for advertising market share. To the extent
that competitive creative service companies successfully capture advertising
market share, it could impede the establishment and development of ResourceNet's
franchise network and of individual franchise locations.
7
<PAGE>
Franchising Operations
While the documents necessary to commence franchise registration in
thirty-two states (including California) have been completed, there is no
assurance that ResourceNet will be able to obtain or maintain effective
registration for its intended franchise program in those states or in any other
states. ResourceNet's Franchise Agreement includes non-competition language
intended to prevent franchisees from terminating their franchises and going into
competition with ResourceNet without paying the franchise royalties and other
fees required pursuant to operating a ResourceNet franchise location. While
management believes that these provisions will be enforceable, there is no
absolute assurance should ResourceNet attempt to enforce the non-competition
provisions of the Franchise Agreement that ResourceNet will prevail in any
enforcement action.
Franchisees will also be required to maintain liability insurance to
insure against liabilities incurred pursuant to the operation of their
independently owned and operated franchise locations. ResourceNet will sell
franchise locations to franchisees based upon the contractual obligation of
franchisees to maintain liability insurance coverage and in reliance upon
franchisees' compliance with this and other provisions of the Franchise
Agreement.
While ResourceNet intends to offer franchisees the exclusive right to
specific geographic areas pursuant to soliciting and selling advertising
business under the tradename, ResourceNet, there is no absolute assurance that
ResourceNet will not offer certain franchise locations on a non-exclusive basis.
ResourceNet currently intends to allow franchisees to operate under
ResourceNet's tradename, and while management believes that this will promote
name recognition and familiarity with ResourceNet's business for both
ResourceNet and for independently owned franchise locations, this also increases
the possibility that, should one of ResourceNet's franchisees engage in activity
which resulted in negative publicity concerning its operations, this negative
publicity could also effect ResourceNet and ResourceNet's independently owned
franchise locations.
Risks Related to this Offering
Dilution and Possible Future Dilution
This Offering involves immediate substantial dilution from the public
Offering price. The book value of the Company's Common Stock offered hereby is
substantially less than the price at which the Company is offering the shares to
the public, and accordingly, investors in the shares offered hereby will sustain
an immediate substantial dilution of their investment (see "Dilution").
In the future, ResourceNet's Board of Directors may authorize and issue
additional capital stock without obtaining shareholder approval. Inasmuch as
ResourceNet may issue additional shares of capital stock in order to provide for
the further capitalization of the Company or for other corporate purposes, there
may be further dilution of the shareholders' interests (see "Description of
Securities").
No Public Market and Illiquid Investment
Prior to this Offering, there has been no public market for the
Company's securities. There can be no assurance that a public market will
develop or be sustained (see "Description of Securities"). An investor in the
shares offered hereby may not be able to liquidate his or her investment should
he or she desire to do so. It is unlikely that a lending institution would
accept the shares as pledged collateral for loans unless a regular trading
market develops.
8
<PAGE>
No Dividends and None Anticipated
ResourceNet anticipates using the proceeds of this Offering, and
earnings received, to further develop and market it creative service support
franchise business, for operating capital and for corporate development and
expansion activities. ResourceNet has not paid or declared any dividends nor, by
reason of its present financial status and its contemplated financial
requirements, does it anticipate paying any dividends upon the shares offered
hereby for the foreseeable future.
The future payment of dividends by ResourceNet on its Common Stock, if
any, rests within the sole discretion of ResourceNet's Board of Directors and
will depend, among other things, upon ResourceNet's earnings, its capital
requirements, and its financial condition, as well as other relevant factors.
While ResourceNet may declare dividends at some time in the future, no assurance
can be given as to the timing of such declaration of dividends, if any (see
"Description of Securities" and "Dividend Policy").
Possible Restrictions on the Resale of the Company's Common Stock
Any resale of the Company's Common Stock may be covered by a Securities
and Exchange Commission rule that imposes additional sales practice requirements
on broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5 million or individuals with net worth in excess of $1 million or annual
income exceeding $200,000 or $300,000 jointly with their spouses).
For transactions covered by the rule, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Consequently, the rule
may affect the ability of purchasers in this Offering to resell their shares in
any secondary market that may develop.
Maximum and Minimum Shares Offered Hereby
ResourceNet has obtained the minimum proceeds from this Offering and
further developed and expanded its operations. Should only the minimum number of
shares offered hereby be sold, the purchase price for the shares will not be
returned to investors even in the event that the amount of proceeds proves
insufficient to allow the Company to continue to develop and expand its
operations.
Shares Available for Resale
All of ResourceNet's Common Shares presently outstanding with the
exception of the 51,200 already sold as a part of this offering are "restricted
securities." In the future these restricted securities may be sold in compliance
with Rule 144 adopted under the Securities Act of 1933, as amended. Rule 144
provides, in essence, that a person holding "restricted securities" for a period
of two years may sell an amount equal to 1 percent of the Company's outstanding
shares every three months. Non-affiliates may sell shares held for three years
without limitation.
Investors should be aware that the possibility of sales under Rule 144
may, in the future, have a depressive effect on the price of the Company's stock
in any market which may develop. The Bylaws permit the Directors to authorize
the issuance of additional classes and amounts of shares without shareholder
approval in order to provide the Board of Directors with the ability to issue
stock for proper purposes, including deterring takeover bids.
ResourceNet's Bylaws provide that these provisions cannot be amended,
altered, repealed, or replaced without the assenting vote of a majority of the
shareholders. As the current shareholders of ResourceNet will retain control of
the Company subsequent to this Offering, any such amendment, alteration, or
repeal of the Bylaws will remain at the discretion of the current shareholders
for the foreseeable future.
9
<PAGE>
Determination of the Offering Price
The Offering price per share of the shares offered hereby was
determined arbitrarily by ResourceNet, and bears no relationship to the asset or
book value of the Company. The Offering price is not based on net worth,
earnings, or other established investment criteria of value. Accordingly, there
can be no assurance that the shares offered hereby can be resold at the Offering
price, if at all.
Because the Offering price was arbitrarily set by the Company at $6.00
per share, broker-dealers effecting sales of the Company's securities in this
Offering will not be constrained by the provisions of Rule 15c2-6 under the
Exchange Act and investors in this Offering will not be afforded the protection
of Rule 15c2-6 as determined appropriate by the Securities and Exchange
Commission to protect investors in "penny stocks" (see "Description of
Securities" and "Risk Factors - Possible Restrictions of the Resale of the
Company's Common Stock").
No Underwriter
As this is a self underwritten Offering made under the provisions of,
and in compliance with, Rule 3a4-1 of the Securities Exchange Act of 1934, there
is no underwriter for this Offering. Therefore, offerees will not have the
benefit of an underwriter's due diligence efforts, which would typically include
the underwriter being involved in the preparation of disclosure and the pricing
of the shares offered hereby, among others. As ResourceNet has never engaged in
the public sale of its shares, it has no experience in the underwriting of any
such offering. Accordingly, there is no prior experience from which investors
may judge ResourceNet's ability to consummate this Offering.
Need for Current Registration
The Company must have a current Registration Statement on file with the
Commission and with the securities commissions in certain states in which
investors reside. Accordingly, the Company will be required to file
post-effective amendments to its Registration Statement when subsequent events
require such amendments in order to continue the registration of the shares of
Common Stock. Although the Company intends to comply with this requirement,
there can be no assurance that the Company will be able to keep its Registration
Statement current should it file such post-effective amendments.
Control of the Company to Remain with Founding Member Stockholders
Following the completion of this Offering, if the maximum number of
shares are sold, the founding member shareholders of ResourceNet will own
approximately 62.7 percent of the outstanding Common Stock of ResourceNet.
Should it remain that only the minimum number of shares be sold, founding member
shareholders of ResourceNet will own approximately 96.6 percent of the
outstanding Common Stock. Consequently, because of their percentage of
ownership, founding member shareholders will be able to control ResourceNet's
Board of Directors at least for the foreseeable future.
Authorization of Preferred Stock
ResourceNet's Articles of Incorporation and Bylaws authorize the
issuance of up to 1,000,000 shares of undesignated Preferred Stock with such
rights and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors may issue Preferred stock with
dividend, liquidation, conversion, and voting or other rights which could
adversely affect the voting power, dividend and liquidation preference, or other
rights of the holders of ResourceNet's Common Stock, without first obtaining
shareholder approval. Although the Company does not currently intend to issue
any shares of Preferred Stock, there can be no assurance that ResourceNet will
not do so in the future.
10
<PAGE>
USE OF PROCEEDS
The net proceeds from this Offering will be at least $4,396,240 if all
of the shares are sold after deducting sales commissions and non-accountable
expense allowances payable to any broker/dealers and other expenses of issuance
and distribution. Management estimates that the Offering proceeds will be
applied substantially as follows:
<TABLE>
<S> <C>
APPLICATION OF PROCEEDS IF MAXIMUM IS SOLD
Advertising & Public Relations 1,150,000
Equipment (2) 200,000
Travel and Entertainment 322,000
Salaries and Wages 966,740
Sales Commissions 663,000
Legal, Accounting & Trademark 195,000
UFOC Filing Fees(1) 45,000
Marketing and Promotional Materials 854,500
TOTAL $4,396,240
<FN>
(1) UFOC filing fees are paid to the California Department of Corporations for
initial submission and the requirements to keep the registration current and
updated. This expense also covers legal and administrative costs along with the
fee to the California Department of Corporations.
(2) Under the maximum proceeds to be used for equipment the first $50,000 will
be applied towards general office equipment and furniture and the remaining
$150,000 will be applied towards the purchase or leasing of the Company's
planned LAN/WAN computer system and software development.
</FN>
</TABLE>
The foregoing represents ResourceNet's best estimate of the allocation
of the net proceeds from this Offering based upon current plans and is subject
to reapportionment of the proceeds among the uses described above.
The net proceeds from the minimum sale of shares has been adequate to
fund immediate plans for Company growth, including revenue producing operations
(see "Business - Plan of Operation").
No portion of the proceeds will be paid to Officers or Directors or
their affiliates for expenses of this Offering. After attaining the minimum sale
of shares, pending application of the net proceeds, ResourceNet may invest in
interest-bearing securities such as U.S. government securities, money market
funds or other cash investments, certificates of deposit, savings deposits or
short-term obligations of the United States, or the proceeds may be left in
checking accounts bearing no interest. ResourceNet does not intend to become an
investment company under the Investment Company Act of 1940 and, therefore, may
be limited in the temporary investments that it can make with the proceeds from
this Offering.
11
<PAGE>
DILUTION
The price at which investors will purchase the shares of Common Stock
offered hereby is substantially higher than the price at which ResourceNet's
founding member shareholders acquired their shares. Prior to this Offering, the
founding member shareholders of the Company purchased 1,431,056 shares of Common
Stock, adjusted, for $279,005 or approximately $0.19 per share. Net tangible
book value per share is determined by dividing the tangible net worth of the
Company (total assets less total liabilities and intangible assets) by the
number of outstanding shares of Common Stock.
The following table sets forth the dilution which will be realized by
the investors in the shares offered hereby in the case that the sale of the
minimum number of shares offered hereby is attained, and in the case that the
sale of the maximum number of shares offered hereby is attained:
<TABLE>
<S> <C>
Maximum
Offering Price Per Share $6.00
Net Tangible Book Value Per Share Before Offering 0.02*
Net Tangible Book Value Per Share After Offering 2.05*
Increase Per Share Attributable to Investors 2.03*
Per Share Decrease to Investors After Offering 3.95*
(* rounded to the nearest cent)
</TABLE>
Dilution If All Shares Offered Hereby Are Sold
If all of the shares offered hereby are sold, ResourceNet will have
issued 2,281,054 shares of Common Stock. The total paid-in capital will be
4,634,486 allowing for the payment of sales commissions and non-accountable
expense allowances for the sale of all of the shares. The total net tangible
book value after the completion of this Offering will be $4,683,714 and the net
tangible book value per share will be approximately $2.05 per share.
In this case, the founding member shareholders of ResourceNet will own
1,431,054 shares or approximately 62.7 percent of the Company and investors
purchasing shares in this Offering will own 850,000 shares or approximately 37.3
percent of the Company, for which they will have paid $5,100,000 or $6.00 per
share. The founding member shareholders of resourcenet will hold stock with an
approximate tangible book value of $2,936,689 for an approximate increase of
$2,657,684 in value, and the investors will hold stock with an approximate value
of $1,747,025 approximate decrease of $3,352,975.
12
<PAGE>
CAPITALIZATION
The following table sets forth, as of March 31, 1997, the
capitalization of the Company and the pro forma capitalization after giving
effect to the completion of this Offering.
<TABLE>
<CAPTION>
As Adjusted-
Actual Maximum
<S> <C> <C>
Long Term Notes Payable to Founders $ 8,842 8,842
===== =====
Shareholders' Equity:
Common Stock; No Par value; Authorized
5,000,000 Shares; Issued and Outstanding
- (Actual) 1,482,254
(As Adjusted - Maximum ) 2,281,056 583,959 4,634,486
Preferred Stock; No Par Value; Authorized
1,000,000 Shares; None Issued and Outstanding 0 0
Deficit Accumulated During the Development (364,610) (364,610)
Stage
Total Stockholders' Equity 219,349 4,269,876
Total Capitalization $219,349 $4,269,876
</TABLE>
SELECTED FINANCIAL INFORMATION
The following is selected financial data for the period ending March
31, 1997. The audited financial statements as of December 31, 1995 and 1996 and
the report of the independent Certified Public Accountant thereof are included
elsewhere in this Prospectus. The information set forth below is qualified by,
and should be read in conjunction with, the financial statements and related
notes thereto in their entirety appearing elsewhere in this Prospectus.
Historical loss per share amounts have been presented in the audited and interim
financial statements, but historical amounts for dividends per share have not
been presented as ResourceNet has paid no dividends.
<TABLE>
<CAPTION>
ResourceNet Communications, Inc.
(a development stage enterprise)
Summary Balance Sheet
March 31, 1997
<S> <C> <C> <C>
ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY
Current Assets 188,597 Current Liabilities 17,711
Notes Payable 8,842
Fixed Assets 5,761 TOTAL LIABILITIES 26,553
Other Assets 51,544
STOCKHOLDERS' EQUITY 219,349
TOTAL LIABILITIES AND
TOTAL ASSETS $245,901 STOCKHOLDERS EQUITY $245,901
</TABLE>
13
<PAGE>
INDEMNIFICATION
ResourceNet's Bylaws provide indemnification for Officers, Directors,
employees, or other agents of ResourceNet to the fullest extent permitted under
California law if they act in good faith and in a manner believed to be in
ResourceNet's interests or, as regards criminal proceedings, if they have no
reasonable cause to believe their conduct is unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to such Directors, Officers, or persons controlling
the registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Commission, such indemnification is contrary
to public policy as expressed in the Act and, therefore, is unenforceable.
DIVIDEND POLICY
ResourceNet has paid no dividends to shareholders as of the date of
this Prospectus and does not anticipate paying any dividends on its Common Stock
in the foreseeable future. The shareholders of ResourceNet's Common Stock are
entitled to receive any dividends which the Board of Directors may declare from
time to time out of funds legally available for that purpose, if any. Any such
dividends shall be distributed on a pro-rata basis. The future payment of
dividends by ResourceNet, if any, rests within the discretion of the Board of
Directors and will depend, among other things, upon the Company's earnings, its
capital requirements, and its financial condition, as well as other relevant
factors. Management intends to reinvest earnings, if any, in the development and
expansion of the Company's business.
BUSINESS
Background
ResourceNet Communications, Inc. was incorporated in the State of
California in on December 14, 1989 by a group of advertising agency executives,
including executives experienced with large worldwide advertising agencies such
as Ogilvy & Mather and BBDO. The Company seeks to develop, market, and sell its
creative service company franchise system throughout the United States. Based on
its experience in the advertising industry, management believes that there is a
significant opportunity to develop market share by offering support services for
creative service companies with annual sales in the $500,000-$25,000,000 range.
Historically, larger advertising agencies such as Ogilvy & Mather, J.
Walter Thompson, and BBDO have concentrated marketing efforts toward larger
advertising clients, often those clients with advertising budgets exceeding
$1,000,000. As a result, management believes that a broad-based creative service
system which specializes in meeting the needs of mid-size companies with smaller
advertising budgets provides the company with a significant opportunity to
develop and expand market share within this target market.
ResourceNet was founded by experienced advertising executives, whose
cumulative experience led them to conclude that large and mid-size agencies
cannot serve the smaller advertiser profitably and effectively. Large,
international groups of advertising agencies are organized to service clients on
an international basis and often focus on such clients as Procter & Gamble,
Coca-Cola, Ford Motor Company, Exxon, etc. These larger advertising agencies are
unable to devote attention to the considerable number of smaller advertising
clients.
Based on their experience, management believes that "full service"
advertising agencies have not traditionally attempted to capture the business of
these advertisers, and management believes that even if existing full service
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<PAGE>
advertising agencies attempt to capture market share from these advertisers,
they will not be able to serve this type of advertiser using their top
advertising personnel, primarily due to cost and price constraints. This
situation could result in these agencies delegating creative and other decisions
to unseasoned junior staff who are not equipped to provide these advertisers
with the level of service and creative quality required to produce top quality
advertising campaigns.
Smaller, regional creative service companies, which management defines
as agencies which realize between $500,000 and $25,000,000 in gross profit from
operations, often serve smaller local and regional clients. However, due to the
constraints imposed by maintaining day-to-day operating and client-based tasks,
these smaller advertising agencies often lack the ability to engage in any
appreciable new business planning and self promotion.
As a result, when confronted with a prospective client with a sizeable
advertising budget, smaller agencies frequently experience difficulty in
securing these larger clients. Even if these smaller creative service companies
manage to capture larger clients, their limited resources often make it
difficult for these companies to retain these clients on a long-term basis. In
addition, if the founders or principals of these smaller companies leave, or
sell the firms, a number of advertising clients may follow the founders to their
new creative service companies.
Based on budgetary constraints, advertisers with marketing budgets
under $250,000 must spend their advertising resources wisely and effectively.
Effective and affordable advertising and marketing are critical to smaller
advertisers, but most smaller advertisers cannot afford the fees which larger
advertising agencies would typically charge them. Large and mid-size advertising
firms are not able to focus on smaller advertising clients and so often provide
inferior service to clients while having to charge "top dollar" for these their
services.
An additional burden placed on both the small creative service company
and the small advertiser is that many smaller creative service companies lack
any appreciable level of name recognition. As a result, advertisers may be
skeptical regarding placing their advertising dollars in the hands of an unknown
agency. As smaller creative service companies often operate within their own
budget constraints, these companies frequently employ freelance personnel who
typically cannot offer the resources or experience which full-time creative
service company employees typically can.
ResourceNet was founded to be the first franchisor of support systems
to creative service companies. Other than the public in general, one specific
target market the Company intends to market its franchises to is small "mom and
pop" creative service companies run by fewer then ten people with backgrounds in
the advertising business including copywriting, art direction, direct mail, and
account management. This potential market is made up of individuals who are
already in the advertising and creative service business but do not have the
knowledge, experience and support of a "full-service" national firm behind them.
The Company has patterned this strategy after large real estate franchisers such
as Prudential, ReMax, and others who market their membership to existing "mom
and pop" real estate brokers.
These franchises are designed to target the rapidly growing advertising
marketing and communication niche. Based on management's experience, due to the
recent downsizing that many large advertisers have experienced over the past
several years, these major advertisers are out-sourcing marketing services at a
greater level than ever before and, in many instances, are unwilling to pay the
costs of a national full-service advertising agency. ResourceNet will provide
the support systems and network efficiencies that will allow the "smaller"
creative service companies as defined above to capture more of these major
advertisers otherwise ignored or overpriced by the large international shops.
Plan of Operation
ResourceNet Communications, Inc. is a start-up company offering
creative service support franchise opportunities for sale on a national basis.
The Company has been in an organizational and development stage since 1989,
during which time management has incorporated the Company, filed for and
completed franchise registration and concentrated its efforts with the legal and
logistical issues involved in preparing to sell franchise offerings of a
service-based enterprise.
15
<PAGE>
ResourceNet currently has six part-time employees and two full-time
employees. Once the Offering is completed all of the part-time employees will
become full-time employees. The Company also expects to hire an additional three
to twelve employees for its administrative staff in the first year.
ResourceNet currently has sufficient employees to operate the company
for the first 12 months, however, if amounts greater than the minimum proceeds
are raised proportionally up to the maximum amount to be set aside for salaries
of $941,740, the Company will hire additional employees to support its
operations and expansion, however not to the degree that the amount of employees
are more than can be supported for one year under the amount of proceeds raised
and set aside for salaries from the Offering. Any addition of employees and
increased operations would also be expected to accordingly allow ResourceNet to
increase its revenues and thus gain an even greater liquidity.
ResourceNet intends to secure additional operating and training
facilities to its main office in San Francisco. Management anticipates that this
base of operations will demonstrate a real world example of "the virtual office"
rather than a large physical plant associated with past agencies. Should
adequate funding be available, ResourceNet plans to employ additional key
personnel to proceed with the Company's franchise sales effort and commence with
the design and development of the communication network/computer system and
proprietary software, necessary to organize the sales and marketing effort, as
well as future franchise communications.
ResourceNet intends to contract with a leading public relations firm to
begin the process of promoting its franchise business and operations. Initially,
management intends to orchestrate an extensive awareness campaign to generate
interest and leads, on a market-by-market basis, just prior to conducting a
sales blitz in that area. As part of its marketing and public relations
strategy, management plans to solicit press coverage, personal interviews, trade
articles and industry related forums that will further promote the Company in
its operations. Management intends to target publications, trade journals, and
other communication vehicles geared to the advertising industry in conjunction
with its planned self-promotional advertising campaign.
In keeping with a technologically-based, information-sharing concept,
management feels that the implementation of computer systems and the training of
new franchisees in their use will be an important part of a successful approach
to the establishment of any communication based service industry such as
advertising. Therefore, as soon as capitalization allows, one of the Company's
first organizational plans will be to implement the use of a LAN/WAN computer
system to connect ResourceNet's home office with its franchisees. The system
ResourceNet intends to install will be a custom designed database/network
utilizing the Apple Computer platform. Management believes this system will
allow for the collection, archiving, and exchange of advertising ideas and
products produced and digitally stored within ResourceNet's system database. It
is this system which plans to make available for its franchisees that is
intended to offer the communication, knowledge, and support that are often only
available from a large national advertising agency. This network, referred to by
ResourceNet as the "CET" (Creative Exchange Technology) system, will also allow
the Company to monitor individual franchise sales and operational activities as
well as reaction to needs and demands in real-time, as needed. In addition,
management believes this ability to share ideas and information will be a
distinct competitive advantage and marketing tool to be used for ResourceNet's
franchisees seeking market-by-market data, creative and other operational
support.
The interactive capabilities of the CET system will also allow for
digital creative exchanges, while allowing ResourceNet Communications, Inc. and
franchisees to: communicate at will with text and graphics, retrieve text and
graphics from an advertisement database, allow remote brain-storming sessions,
conduct on-line research, as well as access existing mainstream on-line
services.
Management intends, due to practical reasons and the size of its
potential national market, to concentrate its initial franchising efforts in the
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<PAGE>
West Coast area markets. These first few franchises will then be able to serve
both as examples to new franchisees, as well as franchisee training centers and
beta test sites for franchised system development.
Management intends to complete production of ResourceNet marketing and
sales tools, which will include a franchise sales brochure. Simultaneously,
ResourceNet intends to complete the production of the ResourceNet Franchise
Business and Marketing Standards online and the ResourceNet Intranet. Items
outlined will include detailed education of the franchisee and their employees;
pre-opening activities; agency advertising and promotion; professional systems;
administrative systems; and professional support. Additionally, management
intends to re-create all existing franchise advertising and direct mail programs
in customizable electronics format for use within the CET system.
Management is currently developing specific training tools designed to
teach new franchisees the operational systems of the ResourceNet franchise
package, including the nut-and-bolts of opening, promoting and maintaining their
ResourceNet office, and running it profitably. This training will be conducted
in both classroom sessions prior to opening a franchise as well as through
self-paced computer based training that will also instruct the operators on how
to use the CET system. This course work and corresponding instruction tools will
be copyright protected to protect investor interests in ResourceNet. Management
intends to hold bi-annual training seminars held in conjunction with national
sales conferences that ResourceNet franchises will be obligated to attend or be
represented at. Future continuing education for franchisees is planned to be
implemented using on line programs developed by the Company.
ResourceNet intends to form relationships between its management and
their past associations in the advertising industry by establishing strategic
alliances that can be used to benefit the organization as a whole. These
strategic alliance candidates include: The American Association of Advertising
Agencies ("AAAA"), The National Ad Council, Direct Marketing Association
("DMA"), Media Buying Services, and the National Association of Franchises.
As a result of these alliances, ResourceNet hopes to be able to
negotiate blanket discounts, wholesale buying arrangements and group rates that
can be passed on throughout the ResourceNet network. Management believes that
this ability to leverage the Company's mass marketing approach will enable
ResourceNet to create a stronger competitive advantage for the entire
ResourceNet organization allowing each franchisee to offer prices and service
that individual agencies would not be able. While larger agencies are able to
offer services in similar ways to larger budget clients, ResourceNet's ability
to offer boutique style creative support with competitive prices could position
ResourceNet franchisees to compete for clients against agencies of all sizes.
Management anticipates that by the end of the first year of operation,
ResourceNet will have completed all franchise development, systems and
operational issues both at the corporate level and at the franchise level.
ResourceNet projects this length of time to completely "field test" the
ResourceNet franchise concept, allow for the sale and training of the first
franchises, and modifications to the operating systems for the organization.
While systems and communication tools are the tangible aspects of what
the ResourceNet franchise consists of, the Company feels that there is a
significant "intangible" benefit to the business ResourceNet offers. For small
local creative service companies, and for that matter, people that would like to
leave a large shop to "go it alone", there is the isolation factor present in
any single start-up business that can impede an individual's ability to compete.
Management believes that ResourceNet's ability to create and support a growing
network of franchise agencies around the country that will create an
organizational network to supply the type of support that can be extremely
beneficial in the early stages of a business. The ability of franchisees to
network, share ideas, research industries and draw on inside knowledge from
within the ResourceNet organization and its database will be able to allow the
individual franchisees to have a much greater advantage as far as
competitiveness and support.
Franchising
In May of 1997, ResourceNet submitted its revised franchise
registration documents including a Uniform Franchise Offering Circular (UFOC) to
the California Department of Corporations. The Company has also begun
preparation of the required registration forms for submission to additional
states which the Company has targeted to begin its marketing. The Company
expects to be registered with all the states that it has initially targeted
within several months after the completion of the Offering.
ResourceNet intends to sell franchises for an initial non-refundable
17
<PAGE>
franchise fee of $50,000, for which ResourceNet intends to provide a franchisee
with assistance in establishing the franchise location, assistance pursuant to
operating the franchise, legal and accounting work, and training expenses.
ResourceNet intends to train each franchise owner in ResourceNet's advertising
business operating systems.
Franchisees will be required to pay ResourceNet a monthly royalty fee
equal to five percent (5) of the Adjusted Gross Revenues. Franchisees will also
pay ResourceNet an initial Business Audit Fee of $10,000 and $7,500 for initial
Operational and Sales Training.
Franchisees will be responsible for obtaining all zoning permits,
licensing and variances which may be required to open and operate a franchise
location. ResourceNet will require all of its franchisees to sign strict
confidentiality and non-disclosure agreements pursuant to the trade secrets
disclosed to franchisees in order for them to operate franchise locations.
Competition
While management is unaware of any other company currently franchising
or seeking to franchise creative service companies, there are numerous well
established and reputable creative service companies who will be competing
directly with ResourceNet's intended franchises for advertising revenues. To the
extent that competitive creative service companies successfully capture
advertising revenues, it could impede the establishment and development of
ResourceNet's franchise network of individual franchise locations.
Additionally, there is no assurance that in the future other companies
may not seek the same type of business opportunity which ResourceNet intends to
pursue through the development and sale of competitive advertising franchises
and a competitive advertising franchise network which may then compete directly
with the company for market share and revenues.
Regulation of ResourceNet's Business
The Federal Trade Commission regulates the offering and sale of
franchises under federal law. Additionally, individual states also regulate the
offering and sale of franchises to varying degrees. ResourceNet will be required
to maintain current registration of its franchise offering within the states in
which the company offers franchises.
Insurance
ResourceNet will carry general liability business insurance. The
Company will also carry Workers' Compensation insurance. The Company intends to
purchase key-person insurance to protect the operation of the business and the
interests of investors should certain of the Company's key Officers die or be
incapacitated. The Company does not currently provide health, life, or any other
insurance to its Officers, Directors, or employees but anticipates that it may
provide such benefits at a later date.
ResourceNet's Franchise Agreement prepared for the Company pursuant to
its intention to sell franchise locations to franchisees provides
indemnification for ResourceNet relative to workers' compensation and all other
business liability from the operation of independently owned franchise
locations. Management believes that the applicable provisions of the Franchise
Agreement will successfully protect the Company from any liability pursuant to
the operation of franchise locations. ResourceNet's Franchise Agreement also
requires franchisees to maintain $1 million in liability insurance pursuant to
the operation of their independently owned franchise locations.
Litigation
To the knowledge of the Board of Directors and Officers of ResourceNet,
there is no past, pending, contemplated, or threatened litigation or
administrative action, nor are there any unsatisfied judgments, nor have there
been or are there any proceedings in which ResourceNet was or is a party which
have had or may have a material effect upon ResourceNet's businesses, financial
condition, or operations, including any litigation or action involving
ResourceNet's Officers, Directors, or other key personnel in their capacity as
such.
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<PAGE>
MANAGEMENT
The Officers and Directors of the Company, with a brief description,
are as follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Michael Hinshaw 36 President and Chief Executive Officer
Henry Corona 47 Chief Financial Officer, Treasurer and Secretary
Paul Holzapfel 64 Vice President, Sales and Marketing
Amy Monteleone 42 Vice President, Director of Operations
Per Barnes 54 Director
David Baker 38 Director
</TABLE>
The following sets forth certain biographical information relating to
the Officers and Directors of ResourceNet.
Michael Hinshaw, has served as the Vice President and Senior Art Director of
Triad, Inc. since April 1992, located in Larkspur, California, which is a
mid-size advertising and marketing communications firm. At Triad, Inc., Mr.
Hinshaw's responsibilities include all financial planning, new business
development, and direction of in-house staff, as well as outside vendors. He is
also involved in the development and implementation of strategic and market
planning, creative direction, and account management. The firm's clientele
include Wells Fargo Bank, Apple Computer, Harper Collins Interactive, Levolor,
and Novelle, Inc. From April 1989 to 1992, Michael served as the Chairman, Vice
President and Senior Art Director of Hinshaw, Young, & Partners, Inc. At this
mid-size advertising agency, he was responsible for overseeing all financial
planning, client relationships, and in-house staff management. He also developed
and implemented strategic and market planning for such clients as Wells Fargo
Bank, Hitachi Data Systems, and Sumitomo Bank. In 1988, Michael Hinshaw and Per
Barnes founded ResourceNet, a creative advertising agency in San Francisco. Mr.
Hinshaw now serves as the President and CEO of ResourceNet and in this capacity,
he is responsible for overseeing the development of ResourceNet into a full
franchise. This includes business planning and forecasting, developing
literature, computer accounting programs, advertising and a business manual for
franchisees. He is also in charge of overseeing daily business activities and
the registration of the franchise in states where required. Mr. Hinshaw received
both his Master and Bachelors degrees from the Academy of Art College in San
Francisco, California in June 1987.
Henry L. Corona has served as President of Financesur, Inc. in Miami, Florida
since 1994 to present,. His services include advertising agency valuation and
compensation analysis, mergers and acquisitions consultation, and corporate
management analysis. He also offers media and advertising clients the benefits
of New Business Development training and Reengineering consultation. From 1989
to 1993, Henry was the Financial Director/Senior Consultant for Sanders
Consulting Group in Richmond, Virginia. While at Sanders Consulting Group he
provided services in mergers and acquisitions, valuation, financial and business
planning for companies whose primary assets are creative talent. Since joining
The Sanders Consulting Group in 1989, he has worked with a number of major
international advertising agency groups as well as numerous clients in the $30
to $300 million range throughout the United States, the UK, Europe, and South
America. In the past, Mr. Corona has worked directly for firms such as,
Lucasfilm Ltd., BBDO, Bo Gehring Associates and others. Mr. Corona received his
Bachelors degree in Economics from Grinnell College in Grinnell, Iowa. He also
received his Masters degree in Economics from the University of California in
Los Angeles. Mr. Corona also received an MBA degree in Finance from the
University of Southern California.
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<PAGE>
Paul Holzapfel serves as Vice President and Account Director for The Harwood
Company, a communications firm located in Oakland, California. Mr. Holzapfel is
responsible for supervising account teams, strategic planning, training, and
developing new account programs. From April 1982 through December 1992, Mr.
Holzapfel served as National Accounts Manager with Maritz, Inc., a
Communications & Performance Improvement company located in San Francisco. Mr.
Holzapfel developed and managed accounts for the western region of the United
States which included extensive traveling throughout the western region
development and implementation of communications and performance improvement
plan for client accounts. Additionally, Mr. Holzapfel served as Vice President,
and Senior Account Manager with Maritz. Mr. Holzapfel studied at Stockton
College and College of Pacific.
Amy Monteleone is Vice President, Director of Operations for ResourceNet. Ms.
Monteleone is an experienced advertising executive with impressive credentials
as a senior project and account manager for some of the biggest agencies in the
world. Over an eighteen-year career, Ms. Monteleone has managed major projects
for clients that include Hewlett-Packard, Broderbund Software, United Airlines,
Visa, Budget Rent-A-Car, Royal Viking Cruise Line, Del Monte, Kikkoman and U S
West Communications - at major agencies like Saatchi & Saatchi, J. Walter
Thompson, and Lowe Marschalk Worldwide. Her project management responsibilities
have typically included concept development, team assembly, timeline and action
plan creation, budgeting, supervising and tracking production from inception to
roll-out, troubleshooting, and serving as the point of contact between client,
agency and vendors. Her experience with large agencies led her to form her own
project management firm in the late 80's, Monteleone, Inc., in which she quickly
became a successful advertising management specialist for broadcasters, book
publishers, and magazines. Ms. Monteleone received her Bachelors degree of
Science in Commerce concentrating in marketing management from Rider University
in Lawrenceville, New Jersey.
David Baker is founder/principal of ReCourses, Inc. of Nashville, Tennessee, one
of the leading management and financial consultancies for small to mid-size
creative companies - advertising agencies, design firms, marketing support
producers - in the United States. Mr. Baker's company invented and developed the
celebrated Creative Business Audit, a powerful and comprehensive analytical tool
that has helped hundreds of creative companies define, confront, and overcome
business difficulties. Although a copywriter by trade, from 1988 to 1993, he was
as the principal of Utilis Corporation, an advertising agency in Warsaw,
Indiana, serving clients like United Telephone and Bristol Meyers-Squibb that
Mr. Baker gained insight into the unique financial, management and marketing
problems facing creative businesses. Mr. Baker's approach to solving creative
business problems balances economic imperatives with the human needs of
principals and other individuals in the business. He holds an advanced degree in
Theology from Calvary College, Kansas City, Missouri. Mr. Baker conducts regular
business seminars for leaders in the creative industry and has published
authoritative articles on creative businesses in leading industry journals.
Per Barnes is co-founder of ResourceNet and Director of ResourceNet
Communications, Inc. Since 1993 Mr. Barnes has been the Managing Director of
Grey Advertising in Oslo, Norway. As head of this agency, he is responsible for
client relations, new business, finances, reporting to the head office in the
United States, and overseeing departments for creative capabilities, service to
clients, production, and media. Per founded and established the original concept
of ResourceNet as AdsOnly, a creative only agency. Along with Michael Hinshaw he
built up a "Beta" office with a systematic approach to new business, promotions,
internal routines, creative, and client maintenance programs. From 1978 to 1982,
he worked as Creative Director of O & M New York and San Francisco. While there,
he worked closely with the Chairman and advertising genius, Hal Riney, on all
aspects of creating concepts, creative ideas, print ads, and television
commercials. From 1978 to 1981 and 1990 to 1996, he also worked as the President
and Managing Director of Ogilvy & Mather Oslo, Norway. He was responsible for
all aspects of the everyday operations including overseeing creative production,
client relations, finances, new business development, and reporting back to the
head office in the United States.
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<PAGE>
Executive Compensation
As several of ResourceNet's Officers are also Directors of the Company,
their compensation was not determined through "arm's length" negotiations, but
by the Board of Directors on a case-by-case basis based upon the financial
condition of the Company, the financial requirements of the Company, and upon
individual performance. Only Michael Hinshaw and Amy Monteleone are full time
employees of ResourceNet.
Michael Hinshaw receives, for his duties as Chief Executive Officer and
President of the Board of Directors, an annual salary of $96,000 with cash and
stock incentives. Amy Monteleone receives an annual salary of $43,500 with cash
and stock incentives as Vice President, Director of Operations. The Directors of
ResourceNet will serve in their capacities with the Company without salary
renumeration; however, for service in 1997, each Board member will receive in
early 1988, 10,000 shares of ResourceNet stock as well as options to purchase
10,000 additional shares at 85% of the $6.00 share value or current market
price. The Company has no retirement, pension, profit sharing, or insurance
program for the benefit of its Officers, Directors, or employees, but the Board
of Directors may recommend one or more such programs for adoption at such time
as the Company is sufficiently developed to warrant such a program.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth the ownership of ResourceNet's Common Stock by
the beneficial owners of more than 5 percent or more of the Common Stock, and by
the Officers, Directors, and key personnel of ResourceNet. Currently, there are
a total of twenty-eight Common Stockholders. The following shares have been
transferred to the named individuals as of the date of this Prospectus.
<TABLE>
<CAPTION>
COMMON STOCK PERCENTAGE
<S> <C> <C> <C>
Prior to Owned after
the offering the offering
Name Number Percentage Percentage
Per Barnes 350,000 26.92% 15.34%
c/o Grey AS
Postboks 722 Sentrum
0105 Oslo Norway
Michael Yale Reif 262,500 20.19% 12.21%
Dept. 40 .
1601 NW 97th Avenue
Unit C101
Miami, FL 33172
Michael Hinshaw 175,000 13.46% 8.14%
315 Stuyvesant Drive
San Anselmo, CA 9496000
Kimberly M. Young 131,250 10.10% 6.10%
1130 Hobart Street
Menlo Park, CA 94025
Per Dahl 105,000 8.08% 4.88%
Dahl & Kompani Reklamebyra
Gange-Rolvsgate 1
Postboks 7653 Jukkebekk
0205 Oslo, Norway
Hansi Borkenhagen 95,736 7.36% 4.45%
c/o Jenssen & Borkenhagen/BBDO
Postboks 9538 Egertorvet
0128 Oslo 1, Norway
Fred Jenssen 95,736 7.36% 4.45%
c/o Jenssen & Borkenhagen/BBDO
Postboks 9538 Egertorvet
0128 Oslo 1, Norway 27,353
David Reitz 84,700 6.52% 3.94%
2710 Alt.19 North, Suite 406
Palm Harbor, FL 34683
- --------------------------------------------------------------------------------
Totals* 1,299,922 99.32% 60.45
*figures do not add to totals due to rounding
</TABLE>
22
<PAGE>
DESCRIPTION OF SECURITIES
Shares Offered
ResourceNet hereby offers to sell and issue up to 850,000 shares of
Common Stock, 51,200 of which have already been sold, at $6.00 per share to
investors in this self-underwritten Offering. The shares will be sold and issued
for cash. The shares offered hereby are not callable. The Company has never paid
any dividends to shareholders of its Common Stock. It is the intention of the
Board of Directors of ResourceNet not to declare any dividends until such time
as ResourceNet is fully established and profitable and has an excess of retained
earnings sufficient for anticipated corporate expansion and development
activities (see "Dividend Policy").
Common Stock
ResourceNet is authorized to issue 5,000,000 shares of Common Stock
with no par value. Shareholders of Common Stock are entitled to one vote per
share on each matter to be decided by the shareholders. The Common Stock has no
redemption provisions. No holder of Common Stock has any preemptive right to
subscribe for any securities of the Company. The shareholders of ResourceNet's
Common Stock are entitled to receive any dividends which the Board of Directors
may declare from time to time out of funds legally available for that purpose,
if any. Any such dividends shall be distributed on a pro-rata basis. The
outstanding shares of Common Stock are fully paid and nonassessable.
There are no shares of Common Stock subject to issuance under stock
purchase or option plans, and there are no outstanding stock purchase
agreements, options, warrants, or rights. In the future, the Board of Directors
of ResourceNet may propose employee stock options or warrants. ResourceNet has
not publically sold securities of any kind since the Company's inception other
than the 51,200 shares sold as a minimum of this Offering. Shares of Common
Stock have been issued to the Company's founding shareholders (see "Certain
Transactions").
Plan of Distribution
ResourceNet, through its Officers and Directors, is offering to the
public 850,000 shares of the Company's Common Stock of which 51,200 shares have
already been sold, on a "best efforts", "self-underwritten" basis, pursuant to,
and in compliance with, Rule 3a4-1 of the Exchange Act, at a purchase price of
$6.00 per share. The Company will use its best efforts to find purchasers for
the shares offered hereby within a period of one year from the date of this
Prospectus.
ResourceNet may retain the services of an underwriter by filing a post
effective amendment using the "sticker" amendment format, and the shares offered
hereby may also be sold by selected broker/dealers. Should these shares be sold
by an underwriter or broker/dealer, ResourceNet will pay commissions of up to 10
percent, and additional non-accountable expense allowances of up to 3 percent,
on the gross proceeds from the sale of shares after the sale of the minimum
number of shares offered and after each investor's three day rescission ends.
The Company will only pay such commissions and non-accountable expense
allowances to broker/dealers who are members of the National Association of
Securities Dealers, Inc. (NASD). In no event will the Company pay any
commissions, sales fees. or expenses to its Officers or Directors. Should
ResourceNet attempt to retain any such commissioned selling agents, there is no
assurance that ResourceNet will be able to retain an underwriter or
broker/dealers to participate in the sale of the shares or that any such
underwriter or broker/dealers will be able to sell the shares even if retained
by ResourceNet.
23
<PAGE>
Investment Procedures
No sale of the shares will be made by ResourceNet to any prospective
investor who has not received a copy of this Prospectus at least 48 hours prior
to the confirmation of a sale of shares hereunder. Upon reaching a decision to
invest in the sharers offered hereby, prospective investors who intend to
purchase shares directly from the Company must deliver to ResourceNet: (1) a
completed Subscription Agreement and (ii) a check in the appropriate amount.
Prospective investors who intend to purchase shares from a broker/dealer should
make payment directly to that broker/dealer. Regardless of whether prospective
investors offer to purchase shares from or from a broker/dealer, all checks for
the purchase of shares should be made payable to"ResourceNet Communications,
Inc. - Escrow Account."
Acceptance of a prospective investor as an investor in the shares will
occur when ResourceNet executes the Subscription Agreement or at the time such
shares are purchased from a broker/dealer. ResourceNet will send an executed
copy of the Subscription Agreement to each investor who purchases shares from
the Company after acceptance by ResourceNet, or will direct the Escrow Agreement
to each investor who purchases shares from the Company after acceptance by
ResourceNet, or will direct the Escrow Agent to return the prospective
investor's check promptly, should the offer to invest not be accepted. If the
prospective investor purchases shares from a broker/dealer, a receipt for the
purchase of shares will be delivered to the investor by the broker/dealer.
Expenses and Commissions
All expenses associated with this Offering, except sales commissions
and non-accountable expense allowances, are payable by ResourceNet regardless of
whether the Offering is consummated or not. Should commissioned selling agents
be retained, ResourceNet anticipates paying a sales commission of up to 10
percent, and additional non-accountable expense allowances equal to up to 3
percent of gross proceeds from any shares sold by an underwriter or selected
broker/dealers.
Transfer Agent
The transfer agent for the Common Stock of the Company is American
Securities Transfer, Denver, Colorado.
24
<PAGE>
LEGAL MATTERS
The validity of the Common Stock to which this Prospectus pertains has
been passed upon for the Company by William W. Washauer, Esquire, Citicorp
Center, Suite 1900, One Sansome Street, San Francisco, CA 94104. All other
matters pertaining to the Offering have been passed upon by Donald F. Mintmire,
Esquire, Mintmire & Associates, 265 Sunrise Ave., Suite 204, Palm Beach, FL
33480. Mr. Mintmire is also a stockholder of the Company, beneficially owning
20,300 shares of common stock.
EXPERTS
The financial statements included in this Prospectus have been audited
by Durland & Company, CPAs, an independent certified public accountant company,
as indicated in their report with respect hereto, and are included herein in
reliance upon his authority as an expert in accounting and auditing.
AVAILABLE INFORMATION
ResourceNet is subject to the reporting requirements of the Securities
Exchange Act of 1934 and files reports, proxy statements, and other information
with the Commission.
REGISTRATION STATEMENT
ResourceNet has filed a Registration Statement on Form SB-2 with the
Securities and Exchange Commission, Washington, D.C. 20549 with respect to the
shares of Common Stock offered hereby. This Prospectus, which constitutes an
integral part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted in accordance with the rules and regulations promulgated by
the Commission. For further information with respect to ResourceNet and the
shares of Common Stock, reference is hereby made to the Registration Statement.
The Registration Statement, including all exhibits and schedules
thereto, may be inspected and copied at the public reference facilities
maintained by the Commission at its principal office located at 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of such material can be obtained
from the Public Reference Section of the Commission, Washington, D.C. 20549 at
the prescribed rates.
25
<PAGE>
No person has been authorized to give any information or to make any
representations not made in this Prospectus in connection with the Offering made
hereby. If given and made, such information or representations must not be
relied upon as being authorized by the Company. This Prospectus does not
constitute an offer to sell, or solicitation of an offer to buy, any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such an offer or solicitation is such jurisdiction. Neither the
delivery of this Prospectus nor any sale made hereunder shall create any
implication that there has been no change in the affairs of the Company since
the date hereof or that the information contained herein is correct as of any
time subsequent to the date as of which such information is furnished.
--------------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary.................................5
Risk Factors.......................................6
Use of Proceeds....................................11
Dilution...........................................12
Capitalization.....................................13
Selected Financial Information.....................13
Indemnification....................................14
Dividend Policy....................................14
Business...........................................14
Management.........................................19
Principal Shareholders.............................23
Description of Securities..........................24
Legal Matters......................................26
Experts............................................26
Available Information..............................26
Registration Statement.............................26
Financial Statements...............................F-1
Until _________________________ (90 days after the effective date of the
Registration Statement) all dealer effecting transactions in the securities
offered hereby whether or not participating in the distribution, may be required
to deliver a Prospectus. This is in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions
<PAGE>
ResourceNet
Communications,Inc.
COMMON STOCK
PROSPECTUS
ResourceNet Communications, Inc.
One Sansome Street
Suite 2000
San Francisco, CA 94104
(415) 721-0299
June , 1997
26
<PAGE>
Part II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Bylaws of the Company provide for the indemnification of Directors
and Officers against certain liabilities to the maximum extent permissible under
the California law. Officers and Directors of the Company are indemnified
generally against expenses actually and reasonably incurred in connection with
proceedings, whether civil or criminal, provided that it is determined that they
acted in good faith and in a manner reasonably believed to be in the best
interests of the Company, and in any criminal matter had reasonable cause to
believe that their conduct was not unlawful.
Item 25. Other Expenses of Issuance and Distribution
The expenses of this offering are estimated to be a set forth below,
and all such expenses will be paid by the Company:
Legal Fees. $12,000.00
Blue Sky Expenses and other Filing Fees. 10,000.00*
Accounting Fees. 10,000.00
Printing and Engraving. 5,000.00*
Miscellaneous. 2,000.00*
Registration Fee. 1,758.62
TOTAL $40,758.62 * Estimated
Item 26. Recent Sales of Unregistered Securities
On May 27, 1993 the Company sold 273,530 shares of common stock for
$29,970 to Per Barnes a stockholder and Director of the Company. On November 1,
1993 the Company sold 150,000 shares of common stock for $150.00 to the
Company's former and current counsel and legal support staff as a group. Then on
February 2, 1994 the Company sold 33,334 shares of common stock for $50,000 to
Hansi Borkenhagen and Fred Jenssen, both of whom had preexisting personal and
business relationships with certain principals of the Company.
There were no underwriters' discounts or commissions involved in the
above transactions. These securities were not registered under the Securities
Act of 1933, as amended. The transactions described above were made based on
exemptions from registration under Section 4(2) of the Act as transactions by an
issuer not involving a public offering since these sales were made as
unsolicited sales, to stockholders and the Company's counsel. All of the
certificates representing the foregoing securities contain restrictive legends
thereon.
27
<PAGE>
Item 27. Exhibits
Exhibit No. Page No.
(3.1) Articles of Incorporation of Registrant as Filed
With the Secretary of the State of California (1) . . . 49.
(3.2) Amendment of the Articles of Incorporation of
Registrant as filed with the State of California (1) . . 52.
(3.3) Amendment of the Articles of Incorporation of 55
Registrant as filed with the State of California (1)
(3.4) Bylaws of Registrant (1)............................................61.
(5.1) Opinion of Counsel as to Legality of Securities Being Registered.1 99
(10.1) Escrow Agreement (1)...............................................101
(10.2) Franchise Agreements of the Registrant (1). 108
(10.5) Form of Subscriptions Documents for the Offering (1). 157
of the Registrant
(24.1) Consents of Experts and Counsel (1). 161
(1) Included in the initial filing of this Offering
28
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form SB-2 and authorized this Post-effective
Amendment to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of San Francisco, State of California.
ResourceNet Communications, Inc.
/s/Michael C. Hinshaw
By: _________________________________________________________
Michael C. Hinshaw, Chief Executive Officer and President
In accordance with the requirements of the Securities Act of 1933, as
amended, this Post-effective Amendment has been signed by the following persons
in the capacities and on the dates indicated.
Signatures Capacities Date
/s/Michael C. Hinshaw
- ----------------------
Michael C. Hinshaw President and Chief Executive Officer
/s/Henry L. Corona
- ----------------------
Henry L. Corona Chief Financial Officer
Secretary, Treasurer
/s/Per Barnes
- ----------------------
Per Barnes Director
/s/David Baker
- ----------------------
David Baker Director
29
<PAGE>
RESOURCENET COMMUNICATIONS, INC.
SUBSCRIPTION DOCUMENTS
**********************************************************
1. Instructions to Investors
2. Subscription Agreement
30
<PAGE>
RESOURCENET COMMUNICATIONS, INC.
INSTRUCTION TO INVESTORS
In order to invest in the securities:
(1) Complete and sign the Subscription Agreement.
(2) Enclose a check in the appropriate amount for the shares you
desire to purchase. The check should be payable to:
ResourceNet Communications, Inc. - Escrow Account"
(3) Trustees and other persons acting in a representative capacity
must provide a copy of their trust agreement, power of
attorney or other instrument granting the power and authority
to invest.
(4) Mail or deliver the above items to:
Mr. Michael Hinshaw
ResourceNet Communications, Inc.
One Sansome Street
Suite 2000
San Francisco, California 94104
(5) You should receive an executed Subscription Agreement within
ten days. If you have not received this material by this time
please notify ResourceNet Communications, Inc. at the above
address.
31
<PAGE>
RESOURCENET COMMUNICATIONS, INC.
SUBSCRIPTION AGREEMENT
ResourceNet Communications, Inc. hereby warrants that by executing this
Subscription Agreement that the Subscriberdoes not in any way waive any of their
rights under the Federal Securities Laws.
To: Mr. Michael Hinshaw
President
ResourceNet Communications, Inc.
One Sansome Street, Suite 2000
San Francisco, CA 94104
Dear Mr. Hinshaw:
I have read and understand the Prospectus of ResourceNet
Communications, Inc. dated XXXXXXX, 1997. I am tendering this Subscription
Agreement, together with a check made payable in United States currency
toResourceNet Communications - Escrow Account" in the amount of
$____________________ for _________ shares of stock at $6.00 per share.
I acknowledge that acceptance of this subscription is at the sole
discretion of ResourceNet Communications.
Sincerely,
Signature of Investor
Printed or Typed Name
Street Address
City / State / Zip Code
Telephone Numbers - Home / Work
Date
32
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
Page
Report of Independent Certified Public Accountant...............................................................F-2
Balance Sheets..................................................................................................F-3
Statements of Operations........................................................................................F-4
Statements of Stockholders' Equity..............................................................................F-5
Statements of Cash Flows........................................................................................F-6
Notes to Financial Statements...................................................................................F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO: The Board of Directors and Stockholders
ResourceNet Communications, Inc.
(A Development Stage Enterprise)
San Francisco, California
We have audited the accompanying balance sheets of ResourceNet Communications,
Inc., a development stage enterprise, (the "Company") as of December 31, 1996
and the related statements of operations, stockholders' equity and cash flows
for the two 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 the Company as of December 31,
1996 and the results of its operations and its cash flows for the two years then
ended in conformity with generally accepted accounting principles.
Durland & Company, CPAs, P.A.
/s/Durland & Company, CPAs PA
Palm Beach, Florida
April 14, 1997
F-2
<PAGE>
<TABLE>
<CAPTION>
ResourceNet Communications, Inc.
(A Development Stage Enterprise)
Balance Sheets
December 31, 1996 and March 31, 1997
<S> <C> <C>
1996 1997
-------------- ---------
ASSETS (Unaudited)
CURRENT ASSETS
Cash $ 304,328 181,547
Federal income tax receivable 0 0
-------------- -------------
Total current assets 304,328 181,547
--------- --------
FIXED ASSETS
Computer equipment 1,983 6,092
Furniture and fixtures 0 684
Less: accumulated depreciation (826) (1,015)
----------- -----------
Total fixed assets 1,157 5,761
----------- ----------
OTHER ASSETS
Prepaid insurance 4,500 7,050
Internet site development, net of amortization 3,599 3,599
Deferred offering costs 35,036 47,945
---------- ---------
Total other assets 43,135 58,594
---------- ---------
Total Assets $ 348,620 245,902
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 42,692 20,085
Payroll taxes payable 2,976 (2,374)
Accrued salaries 5,692 0
State franchise tax payable 0 0
State sales taxes payable 0 0
------------- -------------
Total current liabilities 51,360 17,711
------------ -----------
LONG-TERM LIABILITIES
Notes payable (note 1b) 8,842 8,842
----------- ----------
Total long-term liabilities 8,842 8,842
----------- ----------
Total Liabilities 60,202 26,553
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, no par value, authorized 5,000,000 shares;
issued and outstanding 2,058,064 in 1996 and 1,482,256
in 1997 (note 5) 583,959 583,959
Preferred stock, no par value, authorized 1,000,000 shares;
issued and outstanding 0 (none) shares (note 5) 0 0
Deficit accumulated during the development stage (295,541) (346,610)
---------- ---------
Total Stockholders' Equity 288,418 219,349
---------- ----------
Total Liabilities and Stockholders' Equity 348,620 245,902
========== ==========
The accompanying notes are an integral part of the financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
ResourceNet Communications, Inc.
(A Development Stage Enterprise)
Statements of Operations
<CAPTION>
<S>
<C> <C> <C> <C> <C>
0
3 Months 3 Months Period from
Year Ended Year Ended Ended Ended April 6, 1990
December 31, December 31, March 31, March 31 (Inception) to
1995 1996 1996 1997 March 31, 1997
------------ ---------- ------------- ------------- ----------------
REVENUE (Unaudited) (Unaudited) (Unaudited)
Sales $ 0 0 0 0 6,813
Interest 0 0 0 0 413
------------- ----------- ------------ ------------ -------------
Total revenue 0 0 0 0 7,226
------------- ----------- ------------ ------------ -------------
COST OF SALES
Cost of sales 0 0 0 0 6,823
------------- ------------ -------------- ----------- -------------
Gross profit/(loss) 0 0 0 0 403
------------- ------------ -------------- ----------- -------------
EXPENSES
Advertising 0 208 0 246 454
Auto expenses 0 0 0 1,437 1,437
Bank charges 22 0 0 0 493
Concept development cost 0 0 0 0 120,000
Contract labor 14,243 21,447 6,000 2,432 68,122
Depreciation 397 396 99 189 1,015
Dues and subscriptions 400 0 0 0 507
Franchise offering document preparation 0 0 0 0 5,955
State franchise filing fee 1,087 1,260 1,260 0 3,697
Insurance 0 0 0 3,158 3,158
Internet site fee 0 1,455 2,450 0 1,455
Licenses and taxes 1,000 668 0 4,582 11,484
Office expenses 4,071 1,819 863 630 11,612
Postage 565 951 40 484 3,610
Printing 2 0 0 0 2,188
Professional services 14,366 15,577 0 14,746 75,729
Rent 0 0 0 2,335 2,335
Salaries 0 8,000 0 32,883 40,883
Telephone 0 0 0 768 768
Travel and entertainment 250 1,792 1,792 5,179 9,468
Miscellaneous 0 267 0 0 643
-------------- ----------- -------- -------------- --------------
Total expenses 36,403 53,840 12,504 69,069 365,013
-------------- ----------- --------- -------------- --------------
Net loss before tax benefit (36,403) (53,840) (12,504) (69,609) (364,610)
-------------- ----------- --------- -------------- --------------
Income tax benefit (note 4) 0 0 0 0 0
-------------- ----------- ----------- -------------- ---------------
Net loss $ (36,403) (53,840) (12,504) (69,609) (364,610)
================= ================ ============= =============== ===============
Net loss per share $ (0.02) (0.03) (0.01) (0.38) (0.15)
================== ================= ============ ============= ===============
Weighted average number of
shares outstanding 2,006,864 2,009,032 2,006,864 1,834,139 2,009,032
=========== =============== ============= ============= =================
The accompanying notes are an integral part of thefinancial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
ResourceNet Communications, Inc.
(A Development Stage Enterprise)
Statement of Stockholders' Equity
<S> <C> <C> <C> <C>
Total
Common Preferred Accumulated Stockholders'
Stock Stock Deficit Equity
INCEPTION, April 6, 1990 $ 0 0 0 0
Capital investment: 123,900 0 0 123,900
Net loss 0 0 (126,490) (126,490)
------------- ------------ ------------ ------------
BALANCE, November 30, 1990 123,900 0 (126,490) (2,590)
Net loss 0 0 (6,891) (6,891)
------------- ------------ ------------- -------------
BALANCE, November 30, 1991 123,900 0 (133,381) (9,481)
Net loss 0 0 (2,921) (2,921)
------------- ------------- ------------- --------------
BALANCE, November 30, 1992 123,900 0 (136,302) (12,402)
Capital investment:
B) 29,970 0 0 29,970
C) 150 0 0 150
Net loss 0 0 (45,483) (45,483)
------------- ------------ ------------- ------------
BALANCE, December 31, 1993 154,020 0 (181,785) (27,765)
Capital investment:
D) 50,000 0 0 50,000
Net loss 0 0 (23,513) (23,513)
------------- ------------ ------------- -------------
BALANCE, December 31, 1994 204,020 0 (205,298) (1,278)
Capital investment:
E) 50,000 0 0 50,000
F) 24,985 0 0 24,985
Net loss 0 0 (36,403) (36,403)
------------- ------------- ------------- ------------
BALANCE, December 31, 1995 279,005 0 (241,701) 37,304
Capital investment
G) 304,954 0 0 304,954
Net loss 0 0 (53,840) (53,840)
------------- ------------- -------------- -----------
BALANCE, December 31, 1996 583,959 0 (295,541) 288,418
Capital investment
H) 0 0 0 0
Net loss 0 0 (69,069) (69,069)
------------- ------------- -------------- -----------
BALANCE, March 31,
1997 (unaudited) $ 583,959 0 (364,610) 219,349
============= ============== =============== ===========
<FN>
A) April 11, 1990; 1,550,000 shares of common *, $3,900 in cash and $120,000 in concept development expenditures.
B) May 27, 1993; 273,530 shares of common *; $29,970 in cash.
C) November 1, 1993; 150,000 shares of common; $150 in cash.
D) February 2, 1994: 33,334 shares of common; $50,000 in cash.
E) May 26, 1995; 0 shares of common; $50,000 in cash contributed by existing stockholders.
F) June 1, 1995; 0 shares of common; $24,985 in cash contributed by existing stockholders.
G) December 20, 1996; 51,200 shares of common; $304,954 in cash, net of deferred offering costs.
H) February 24, 1997; (575,808) shares of common; contributed back to the Company by certain officers, directors and
founders.
* Restated to reflect increase in authorized and stock split effective September
24, 1993.
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
ResourceNet Communications, Inc.
(A Development Stage Enterprise)
Statements of Cash Flows
<S> <C> <C> <C> <C> <C>
3 Months 3 Months Period from
Year Ended Year Ended Ended Ended April 6, 1990
December 31, December 31, March 31, March 31, (Inception) to
1995 1996 1996 1997 March 31, 1997
-------------- -------------- ------------ ------------ --------------
CASH FLOWS FROM DEVELOPMENT ACTIVITIES: (Unaudited) (Unaudited) (Unaudited)
Net loss $ (36,403) (53,840) (12,504) (69,069) (364,610)
Adjustments to reconcile net loss to
net cash used for development activities:
Stock issued for concept development costs 0 0 0 0 120,000
Depreciation 397 396 99 189 1,015
Changes in operating assets and liabilities:
(Increase) decrease in receivables 0 22 0 0 0
(Increase) decrease in prepaids 0 (4,500) 0 (2,550) (7,050)
(Increase) decrease in internet site development 0 (3,599) 0 0 (3,599)
(Increase) decrease in deferred offering costs 0 (35,036) 0 (12,909) (47,945)
Increase (decrease) in accounts payable 102 40,876 0 (22,607) 20,085
Increase (decrease) in state taxes payable 0 (1,311) 0 0 0
Increase (decrease) in payroll taxes payable 0 2,976 0 (5,350) (2,374)
Increase (decrease) in accrued salaries 0 5,692 0 (5,692) 0
--------------- ---------------- -------------- ------------ --------------
Net cash used for development activities (35,904) (48,324) (12,405) (117,988) (284,478)
---------------- ---------------- -------------- ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets 0 0 0 (4,793) (6,776)
----------------- ---------------- -------------- ------------- --------------
Net cash used by investing activities 0 0 0 (4,793) (6,776)
------------------ ---------------- -------------- ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash contributed by existing stockholders 74,985 0 0 0 74,985
Common stock issued for cash 0 304,954 0 0 388,974
Cash received for notes payable 0 0 0 0 8,842
------------------ ---------------- --------------- ------------- ---------------
Net cash provided by financing activities 74,985 304,954 0 0 472,801
------------------ ---------------- ---------------- ------------- ---------------
Net increase (decrease) in cash 39,081 (256,630) (12,405) (122,781) 181,547
----------------- ---------------- --------------- ------------- ---------------
CASH, beginning of period 8,617 47,698 47,698 304,328 0
------------------ ----------------- --------------- ------------ ---------------
CASH, end of period $ 47,698 304,328 35,293 181,547 181,547
================== ================= =============== ============ ===============
Supplemental disclosure of cash flow information:
Interest paid in cash $ 0 0 0 0 0
=================== ================= ================ ============= ================
Non-cash transactions:
Stock issued for intangible asset$ 0 0 0 0 120,000
==================== ================ ================ =============== ================
The accompanying notes are an integral part of the financial statements.
F-6
</TABLE>
<PAGE>
ResourceNet Communications, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies The Company The AdsOnly Group,
Inc. is a development stage enterprise which conducts business from its
headquarters in San Francisco, California and was incorporated on April 6, 1990
by the State of California. The financial statements have been prepared in
conformity with generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the dates of
the statements of financial condition and revenues and expenses for the years
then ended. Actual results could differ significantly from those estimates. The
financial statements for the three months ended March 31, 1995 and 1996 include
all adjustments which in the opinion of management are necessary for fair
presentation. The following summarize the more significant accounting and
reporting policies and practices of the Company:
a) Notes payable The Company issued notes payable to two principal
stockholders in exchange for cash. These notes carry no stated interest
rate nor any stated maturity date.
b) Concept development At inception the Company exchanged common stock for
$120,000 of concept development costs previously expended by two
individuals previously unrelated to the founders or the Company. The
Company chose to immediately expense these costs.
c) Net loss per share Net loss per share is computed by dividing the net
loss by the weighted average number of shares outstanding during the
period.
d) Fixed assets Fixed assets are recorded at cost. Depreciation is
computed by the straight-line method over the estimated useful lives of
the assets, generally five or seven years. Expenditures for maintenance
and repairs are charged to operations as incurred. Depreciation expense
for the three months ended March 31, 1996 and 1997 was $99 and $189.
(2) Franchise Offering Document Expenses The franchise offering document
expenses pertain exclusively to the development of the Uniform Franchise
Offering Circular (UFOC), which represents the bulk of the Company's near-term
future marketing efforts and revenues. SFAS 2 requires that all internally
generated development costs be charged to expense when incurred. Accordingly,
the Company has charged to expense the costs to develop the UFOC as incurred.
On July 13, 1993 the Company entered into an agreement with Franchises That Sell
of Cherry Hill, NJ to complete the Uniform Franchise Offering Circular (UFOC)
which will allow the Company to sell franchises in 32 states. On November 23,
1993 the Company terminated the agreement with Franchises That Sell.
(3) Franchise Revenues The Company has not as yet received any franchise fee
revenues, but it expects to record such revenue in accordance with SFAS 45.
(4) Income Taxes The Company recorded the franchise offering document expenses
as expenses in the period when incurred for financial statement purposes, per
note 2 above. The Company recorded the concept development costs immediately as
well, as discussed in note 1b above. However, for income tax purposes, these
expenses were recorded as an intangible asset to be amortized over future years.
The primary purpose of this treatment for tax purposes is to retain the tax
benefit of the development costs. California tax law does not recognize
operating loss carry-forwards as the Federal tax code does. Therefore, by
capitializing and amortizing these costs, the tax benefit of these expenses is
retained for state tax purposes rather than being lost forever, as immediate
expensing would cause.This treatment will require a longer time before the tax
benefit of the costs is realized, but will increase the tax benefit realized
over time. SFAS 109 requires companies to take into account changes in tax rates
when valuing the deferred income tax amounts carried on their Balance Sheets
(the "Liability Method"). SFAS 109 also requires that deferred income taxes be
provided for all temporary differences between financial statement income and
taxable income. Deferred income tax liabilities
F-7
<PAGE>
ResourceNet Communications, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements, Continued
(4) Income Taxes, continued are provided on elements of income which are
recognized for financial accounting purposes in periods different than such
items are recognized for income tax purposes. Deferred income tax benefits are
provided on elements of expense which are recognized for financial accounting
purposes in periods different than such items are recognized for income tax
purposes. SFAS 109 is not expected to have any material effect on the financial
statements. At March 31, 1997 the Company has a net operating loss carry-forward
for income tax purposes of approximately $364,610, expiring as follows: $126,490
in 2005, $6,891 in 2006, $2,921 in 2007, $45,483 in 2008, $23,513 in 2009,
$36,403 in 2010, $53,840 in 2011 and $69,609 in 2012.
The amount recorded as deferred income tax asset as of March 31, 1997, $145,800,
represents the amount of tax benefits of loss carry-forwards. The Company has
established a $145,800 valuation allowance, as the Company has no history of
profitable operations.
(5) Stockholders' Equity The Company had authorized 500,000 shares of no par
value common stock. On September 24, 1993 the board of directors approved
increasing the authorized shares of common stock from 500,000 to 3,000,000. The
board of directors also approved a stock split of 5 shares for 1 for
stockholders of record at midnight September 24, 1993. This stock split has been
given retroactive treatment in the financial statement footnotes as presented.
On April 11, 1990 the Company issued 687,500 shares to the founders in exchange
for $3,900 in cash and 862,500 shares to two previously unrelated individuals in
exchange for $120,000 of concept development costs, which the Company
immediately expensed. On May 27, 1993 the Company issued 273,530 shares of
common stock for $30,000 in cash. The Company completed this transaction to
provide sufficient funds for the Company to begin advertising for franchisees.
However, it was necessary to expend a significant portion of these funds to
complete the Uniform Franchise Offering Circular (UFOC).
On September 24, 1993 the board of directors approved the authorization for the
Company to be able to issue up to 1,000,000 shares of no par preferred stock. On
November 1, 1993 the Company issued 150,000 shares of common stock for $150
cash. On February 2, 1994 the Company issued 33,334 shares of common stock in
exchange for $50,000 cash, or $1.50 per share. On June 23, 1994 the board of
directors approved increasing the authorized shares of common stock from
3,000,000 to 5,000,000. On May 26,1995 and June 1, 1995, the Company received
$50,000 and $24,985 in cash, respectively, as additional contributed capital
from existing stockholders. In February 1997, certain officers, directors and
founders of the Company contributed 575,808 of their shares back to the Company.
(6) Common Stock Public Offering On September 24, 1993 the Board of Directors
authorized the Company to sell up to 850,000 shares of the Company's common
stock in a "self-underwritten" public offering pursuant to a Registration
Statement on Form SB-2 under the Securities Act of 1933. This offering was being
made with a 50,000 share minimum, and is effective for one year from the date
which the Securities and Exchange Commission (SEC) grants the registration an
effective date, June 26,1996. The stock included in this offering is priced at
$6.00 per share. This offering price was determined in a completely arbitrary
manner and bears no relation to any recognized standard of value. The minimum
required to be sold by the Company before it has access to the funds is $300,000
at the offering price, which was exceeded in December 1996. The Company sold
51,200 shares in December 1996. The maximum proceeds of this offering are
$5,100,000, or $4,447,000 net of sales commissions and non-accountables,
assuming all 850,000 shares are sold through NASD broker/dealers. (No sales
commissions and non-accountables will be paid to any officer or director under
any circumstances).
The Company is preparing a post-effective amendment which is expected to be
filed in early June 1997 to extend the offering and reflect certain changes in
the Company.
F-8
Written Consent to Action of
Board of Directors of
ResourceNet Communications, Inc.
The undersigned, being a majority of the Directors of ResourceNet
Communications, Inc., a California corporation (the "Corporation"), hereby
consent to and take the following actions without a meeting as provided for by
the Bylaws of the Corporation. These actions shall become effective as of June
4, 1997, upon the execution of this consent by a majority of the signatories
hereto. This Written Consent may be executed in multiple original or facsimile
counterparts, all of which together shall constitute one original.
WHEREAS, the Corporation (under its prior name of AdsOnly
Group, Inc.), previously obtained approval from the United States
Securities and Exchange Commission (the "SEC") of a Registration
Statement on Form SB-2 (the "Registration Statement"); and
WHEREAS, the effective date of the Registration Statement was
June 26, 1996, and the Registration is effective for one year from such
effective date; and
WHEREAS, the Corporation has filed an amendment application
with the SEC to effect changes in the Registration Statement resulting
from the Corporation's name change and other matters; and
WHEREAS, the Corporation desires to extend the effective date
of the Registration Statement, as amended
RESOLVED, that the effectiveness of the Registration
Statement, as amended, shall be extended for one additional year from
June 26, 1997; and
RESOLVED FURTHER, that the appropriate officers of this
Corporation are authorized and directed to take any all acts and
execute and deliver any and all applications and other documents as may
be required by the SEC or otherwise in order to extend the
effectiveness of the Registration Statement as set forth above.
WHEREFORE, the directors have executed the foregoing consent
as of the 4th day of June, 1997.
/s/PER BARNES /s/DAVID BAKER
/s/MICHAEL HINSHAW /s/HENRY CORONA
DURLAND & COMPANY
Certified Public Accountants
340 Royal Palm Way, Suite 201
Palm Beach, FL 33480
(407) 822 9995 Fax (407) 822 9942
The Board of Directors
The AdsOnly Group, Inc.
(A Development Stage Enterprise)
San Francisco, California
Gentlemen:
We hereby consent to the use of our report dated April 14, 1997 on the financial
statements of the company and of the reference to our firm under the caption
"Experts" in the prospectus included in the Registration Statement on Form SB-2
being submitted to the Securities and Exchange Commission by the company.
/s/ Durland & Company, CPAs, P.A.
Durland & Company, CPAs, P.A.
Palm Beach, Florida
June 16, 1997
MINTMIRE & ASSOCIATES
ATTORNEYS AT LAW
265 SUNRISE AVE.
SUITE 204
PALM BEACH, FLORIDA 33480
TEL: (561) 832-5696
June 16, 1997
Board of Directors
RESOURCENET COMMUNICATIONS, INC.
F/K/A The AdsOnly Group, Incorporated
2269 Chestnut Street
Suite 637
San Francisco, CA 94123
Dear Sirs:
I hereby consent to the use of my name as an expert under the heading
"Legal Matters" in the prospectus included in the Post-Effective Amendment No. 1
to the Registration Statement on Form SB-2 being filed with the Securities and
Exchange Commission by RESOURCENET COMMUNICATIONS, INC. F/K/A The AdsOnly Group,
Incorporated.
Sincerely,
/s/ Donald F. Mintmire
Donald F. Mintmire
DFM:ir
WILLIAM W. WASHAUER
ATTORNEY AT LAW
CITICORP CENTER
SUITE 2100
ONE SANSOME STREET
P.O. BOX 472019
SAN FRANCISCO, CA 94147
TEL: (415) 951-4636
June 16, 1997
Board of Directors
RESOURCENET COMMUNICATIONS, INC.
F/K/A The AdsOnly Group, Incorporated
One Sansome Street,Suite 2000
San Francisco, CA 94104
Re: ResourceNet Communications, Inc. (the "Company)
Post-Effective Amendment No. 1 to Form SB-2
Dear Sirs:
I hereby consent to the use of my name as an expert under the heading
"Legal Matters" in the prospectus (the "Prospectus") included in the
Post-Effective Amendment No. 1 to the Registration Statement on Form SB-2 being
filed with the Securities and Exchange Commission by the Company. The foregoing
consent applies only to legal matters concerning the validity of the Common
Stock to which the Prospectus pertains, and not to any other matters.
Very truly yours,
/s/ WILLIAM W. WASHAUER
William W. Washauer
WWW/wfw
cc: Durland & Company, CPA's
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