PROSPECTUS
60,000 Units
INet Auction Corp.
Consisting of One Share of Common Stock and Two Warrants
INet Auction Corp. (the "Company") is offering for sale 60,000 Units (the "Units") consisting of one share of its Common Stock (the "Common Stock") and two Warrants (the "Warrants") to purchase one additional share each of Company’s Common Sock at $5.50 per share on the Internet as well as through conventional underwriting. Prior to this offering there has been no public market for the Company's Securities and no assurance can be given that any such market will exist or develop upon completion of this offering or, if developed, will be sustained. The initial public offering price has been arbitrarily determined by the Company. See "Risk Factors". The Company has filed an application for the sale of its Units with the States and the SEC under U-7 and Regulation D sec. 504 respectively for the Small-Cap Market to be listed under the symbols of "AICU" for Units, "IACC" for Common Stock and "AICW" for Warrants.
An investment in the securities offered hereby is speculative and involves a high degree of risk and substantial dilution. See "Risk Factors" and "Dilution."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
|
Shares Offered |
Price to Public (1) |
Cost of Offering (2) |
Net Proceeds |
|
Per Unit ………………… |
$5.00 |
$ 0.50 |
$ 4.50 |
|
Total …………….…….… |
$300,000 |
$30,000 |
$270,000 |
(2) Does not take into account sale of 120,000 shares at $5.50 per share from exercise of Warrants.
The securities are offered by the company on a "best effort" basis, subject to prior sale, when, as and if delivered to and accepted by it, and subject to approval by the States offered in. If minimum number of Units are not sold, the Company reserves the right to withdraw, cancel or modify this offering and to reject any orders in whole or in part. It is expected that delivery of the certificates representing the securities will be made against payment therefor in the state of California, on or about June 15, 1998.
INet Auction Corp.
The date of this Prospectus is June 15, 1997.
Prior to this offering, the Company has not been subject to the reporting requirements of the Securities Exchange Act of 1934. After completion of this offering, the Company intends to distribute to its shareholders copies of Reg. D filing with the SEC and any audited or unaudited quarterly financial statements and any reports containing important information and developments in the Company for the duration this offering is in progress. The Company has or will file with the Western Regional Office of the Securities and Exchange Commission (the "Commission") a Registration Statement on Form D sec. 504 under the Securities Act with respect to the Common Stock offered hereby along with the U-7 form required for the states in which the Company is offering its securities for sale. The Registration Statement and exhibits may be inspected at the Company headquarters or upon filing with the SEC at the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or at their Western Regional office in Los Angeles.
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more detailed information and financial statements of INet Auction Corp., including the notes thereto, appearing elsewhere in this Prospectus.
THE COMPANY
INet Auction Corp. (the "Company") has been recently organized as a spin off of Chamberlin’s Auctioneers and Appraisers doing auctions for 30 years in the Western United States. The Company will perform two types of auctions on the Internet: 1) Primary Market Auctions, i.e., selling new merchandise such as consumer electronics, entertainment and durable goods in bulk in geographic areas where the product price is much higher or the product availability is very poor due to market imperfections, and 2) Secondary Market Auctions
where individuals, dealers and business will offer their new or used merchandise for auction in various product categories predominantly in the U.S. domestic market. The Company has already designed, and upon close of this offering will develop and implement, a web server site that is feature based incorporating technologies of CGI, Java, Javascript and C++ languages to provide a fully automated auction system where listing of consigned merchandise, posting of all bids, upon close of the auction, intimation to buyers and sellers, shipping arrangements of goods, and billing and collection are all done automatically via Inet Auction’s computer systems without requiring human intervention.
The Company’s predecessor, Chamberlin’s Auctioneers and Appraisers, has over 30 years’ experience in the auction world, and the Company’s principles have expertise in development and programming of web sites, promoting and generating traffic to the site and market development. To the Company’s knowledge, there is presently no competition in primary Market auctions and little competition in Secondary Market auctions. The management is strong and focused, and believes the Company can meet its goals with ease in a short period of time.
The Company was incorporated under the laws of the State of California on April 4, 1997. The Company's offices are located at 2946 Camino Graciosa, Thousand Oaks, CA 95051. Its telephone numbers is (818) 774-2855.
THE OFFERING
Securities Offered ……………….……… 60,000 units, each consisting of 1 Common Stock and 2 Warrants
Common Stock Outstanding:
Before the Offering……………………….. 720,000 shares
After the Offering …………….…………. 780,000 shares upon sale of Units
900,000 shares if all Warrants outstanding are exercised
Use of' Proceeds………………………… To fund operations of the business: acquisition of equipment, software
development and working capital. See "Use of Proceeds."
Proposed Symbol………………………... AICU for Units, IACC for Common Stock, and AICW for Warrants
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
Balance Sheet Data: Actual As Adjusted (1) As Adjusted (2)
Cash …………..…………………………………$ 3,019 $300,019 $ 960,019
Total Assets …….……………………………… 404,000 701,000 1,361,000
Total liabilities ….……………………………. - - -
Stockholders’ equity ………………………….. 404,000 701,000 $1,361,000
RISK FACTORS
Prospective investors should be aware of the following investment considerations and should review carefully the information contained elsewhere in this Prospectus.
( 1 ) Limited Operating History. INet Auction Corp. (the "Company") was incorporated on April 4, 1997 and has just begun its operations. As a development stage company, the Company's operations are subject to all the risks inherent in the establishment of a new business enterprise. The likelihood of success of the Company must be considered in light of the problems, expenses, complications and delays frequently encountered in connection with the establishment of a new business. These include, but are not limited to, factors relating to continued increase in consumer demand, market imperfections based on geographic locations, limited competition, the need to expand operations depending on demand, and the ability to establish and sustain product delivery. No assurance can be given that future sales will meet the Company's expectations or that the Company will ever operate profitably.
(2) Lack of Public Market. Prior to this offering, there has been no public market for the Company's securities, and there can be no assurance that a public market will develop as a result of this Offering or as a result of the Company’s effort to engage in conventional and on-line market makers for its securities. Therefore, an investor must be able to bear the economic risk of the investment.
(3) Control by Shareholder. Upon completion of this Offering, Arvin Aurora will own a majority of the voting shares of stock, directly and through Chamberlin’s, the parent company. Aurora will be in a position to elect the Board of Directors, and completely control the management, policies and operations of the Company.
(4) Need for Additional Financing. The Company will have sufficient funds to initiate and continue its operations provided the Company is able to sell said shares, see "Use of Proceeds". Chamberlin’s will extend its resources of facility, expertise and personnel to supplement INet’s operations. However, during its operations, the Company may require additional financing. There is no assurance that the Company will not require additional financing, will be able to expand at projected rate of growth or the Company’s operations will not suffer.
(5) Dilution. Purchasers of the securities offered hereby will experience immediate substantial dilution in net tangible book value from the public offering price. See "Dilution".
(6) Dependence Upon Key Personnel. The Company's success at initial stages is dependent upon Dr. Aurora with auction management experience, and Messers. Wong and Gowri with Internet programming, web server site and technology development experience. Despite their individual successes, no assurance can be given that their efforts will produce the desired results for the Company.
(7) Competition. The auction industry on the Internet is very young and not very competitive at this stage, see "Competition". The Internet will allow the Company to market and compete on a global basis, and take advantage of proprietary electronic automation technology. However, in the future, companies with more resources may enter the market and compete with the Company, affecting its desired results.
( 8) Arbitrary Offering Price. There is no public market for the Company's Stock, and the price of the Shares offered herein bears no relationship to the assets, book value, net worth or any other recognized criteria of value of the Company. The offering price of the shares was determined arbitrarily by the management of the Company, and should not be considered an indication of the actual value of the Company.
( 9 ) Government Regulations. Presently, there are no regulations, state or federal, affecting auctions on the Internet and neither are any expected. In future, governmental regulations may develop, having either a positive or adverse effect on the operations of the Company.
( 10) No Cash Dividends. The Company intends to retain its earnings, if any, to finance the expansion of its business, and does not intend to pay cash dividends on its Common Stock. See "Dividends".
DILUTION
The pro forma net tangible book value of the Company's Common Stock on April 30,1997 was $404,000, or $0.56 per share. Pro forma net tangible book value after the offering will be $674,000 or $0.86 per share and upon exercise of Warrants, pro forma net tangible book value will be $1,334,000 or $1.48 per share.
The following table illustrates the dilution, in terms of net tangible book value, that will be experienced by purchasers of the Common Stock offered hereby, and the increase in terms of net tangible book value that will be experienced by the existing shareholders:
Offering price per Unit………………………….... $5.00
Net tangible book value per share before offering: . $0.56 per share
Net tangible book value per share after offering …. $0.86 per share
Increase per share to existing shareholders ………. $0.30 per share
Dilution per share to new investors ………………..$4.14 per share or 82.80%
The following table sets forth a comparison of the respective number of shares of Common Stock purchased or to be purchased from the Company and total consideration paid or to be paid to the Company by the existing holders of the Common Stock and investors purchasing securities in this offering.
|
|
Shares |
Purchased |
Total |
Consideration |
Average Price |
|
Number |
% |
Amount ($) |
% |
Per Share ($) |
|
|
Existing Shareholders |
720,000 |
92.31 |
404,000 |
57.39 |
0.56 |
|
New Investors (1) |
60,000 |
8.69 |
300,000 |
42.61 |
5.00 |
|
TOTAL |
780,000 |
100.00 |
704,000 |
100.00 |
0.90 |
(1) Does not include shares underlying the Warrants.
USE OF PROCEEDS
The proceeds to the Company, after offering related expenses, are estimated to be $270,000 after paying offering related expenses. Following table sets forth the breakdown of use of these proceeds:
|
Application of Proceeds |
Approximate Amount ($) |
% |
|
Hardware |
50,000 |
18.52 |
|
Software |
20,000 |
7.40 |
|
Programming |
40,000 |
14.82 |
|
Marketing/Sales |
80,000 |
29.63 |
|
G & A |
80,000 |
29.63 |
|
Contingencies |
* |
- |
|
TOTAL |
270,000 |
100.00 |
Hardware costs include the system database design and administration. Software includes components of web server setup and network configuration. Programming involves system architecture design, implementation and testing. Marketing and sales costs, estimated at $80,000, are to popularize the Company’s auction sites in geographic locations where market imperfections are pronounced and to build traffic in the secondary market auctions to yield a rapid growth in revenues. The Company will use its expertise in advertising its site and services on the Internet forums, business groups, chat groups, bulletin board services and directly through the search engines and related sites.
Funds received from the exercise of Warrants will be added to Contingency Funds and will be used to build affiliated sites including dynamic interactive web sites with a database back end, Java and Javascript, that support the Company’s auction business and yet generate revenues for themselves. Examples include general information sites related to the auction industry (one such site under development is named ‘Auction Pulse’ providing recent results of all major auctions), a calendar of auction events taking place all across the world, trends and news of the industry. The other sites mentioned on this site will pay a fee for listing, calendar and other links. The second planned effort includes offering a board where the Company will provide free auction estimates, using Chamberlin’s and its expert associates, on any and all items of value and collectibility to submitted inquiries. On another site, the Company intends to provide links to other auctions and highlights of major upcoming auctions. Provided the Company is able to sell all its shares underlying Warrants, The Company plans to acquire its parent company Chamberlin’s.
CAPITALIZATION
The capitalization of the Company as of April 30,1997, and as adjusted to give effect to the issuance and sale of the securities offered hereby after deducting for offering related expenses is as follows:
April 30, 1997 After Offering (1)
Common Stock, no par value, $5,000,000 authorized…. 720,000 780,000
Stockholders’ Equity …………………………………… $ 404,000 $674,000
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
No funds other than the proceeds from this offering are presently planned to be used, except that in case of minimum amount sold, the Company will sell the inventory acquired for stocks from its principal for developing its operation to sustainable levels and Chamberlin’s will provide facility and personnel in the interim. The Company may additionally sell 120,000 shares of its Common Stock from exercise of Warrants to provide the Company with additional $660,000 to develop its operations to maturity. In the absence of exercise of Warrants, the Company may obtain debt financing in future to supplement any capital requirements.
The Company does not expect any cash flow or liquidity problems. The Company is not currently in default of any obligation and does not have any judgment, lien or settlement. The Company expects that the offering proceeds will satisfy the Company’s cash requirement. Provided the Company is able to sell all its shares underlying Warrants, The Company plans to acquire its parent company Chamberlin’s. Chamberlin’s has over $1.0 million in auction sales and is profitable. In management’s opinion this move add considerable strength to the Company. The Company does not plan to acquire any assets at this stage from any persons or entities that are not required in its normal course of business. The Company has no outstanding debts to-date.
BUSINESS
(1) Introduction. The Company is a California corporation and is a recent spin-off of Chamberlin’s Auctioneers and Appraisers, a firm doing business in California for 30 years. The Company is organized to conduct auctions on the Internet for a national as well as international market. The Company plans to develop a web server site that will have on-going auctions in two areas: 1) the primary market, where the Company will offer new merchandise such as consumer electronics, entertainment and durable goods to consumers, dealers, wholesalers and distributors in a global market to geographical areas where the price and availability are major components forming market imperfections, and 2) the secondary market, where individuals, dealers and business will offer their new or used merchandise for auction in various product categories predominantly in the U.S. domestic market. The Company will strive to provide the finest service at the lowest cost to the sellers.
(2) Market Niche and Principles: The Company has been organized: 1) to satisfy the demand for products created by lower prices, and 2) to provide for a large need for products created by market imperfections based on geographic locations. These two aspects of our market niche are put here very simply for the reader’s comprehension, however, they find deep roots in the principles of rapid-market economy. The first principle suggests that if a product is offered at a price lower than the market (going) price satisfying a demand, the market will expand rapidly, and the demand and consumption of that product will occur at a fast rate. Our secondary market auctions are built on this principle. In this segment of INet auctions, merchandisers, business brokers, dealers and individuals may offer new or pre-owned merchandise at prices generally lower than the market price yet realizing the highest possible price through the auction medium while keeping the cost low. This, the Management believes, will build the core operations of the Company.
The second principle dictates that in different geographic locations the price of a product may vary greatly depending upon its availability and the rate of consumption. For example a Mercedes Benz automobile that costs $58,000 in the USA costs $48,000 in Germany and $160,000 in Australia (all prices quoted in US dollars). The cost of electronics and new-technology based consumer products is significantly higher, often up to 10 times more, in the developing countries. Even within the US, a digital satellite system for television is offered at $99 in Los Angeles and at $399 in Dayton, Ohio or Mutual, Nebraska at the same time. Mass markets drive the product prices down rapidly and to a much lower level than smaller markets. Additionally, excess inventories are offered in mass markets at drastically lower prices to attract a previously unavailable market and essentially to maintain higher prices on those products in smaller markets. The Company will enter into preferred marketing relationships with manufacturers or suppliers, and offer high priced merchandise in Inet’s primary market segment of the auctions. The Company believes this area of sales will generate significant results for the Company.
(3) Business Background. Auctions have traditionally been held live and for local markets. Internet auctions, on the other hand, are relatively new and address global markets. The market for this medium is growing and is expected to explode within the next decade.
There are three types of auctioneers: the first type are fine auctioneers (generally named ‘Auctioneers and Appraisers’) that are reputed, have been in business for a long time, and auction finer things including art, furniture and furnishings, dolls, collectibles, antiquities etc. An easy way to recognize this group of auctioneers is that they hold auctions exclusively in one category at a time. These auction houses are also listed in world auction records. The second type are industrial auctioneers who generally auction off manufacturing facilities, machines, warehouses and surplus inventories. Auctioneers in the third catagory hold small auctions in hotels or vacant houses in neighborhoods attracting local population and they sell all sorts of items in an auction including jewelry, decorative art, reproduction antique furniture and sculptures, rugs etc. There are seven major Fine Auctioneers and Appraisers in the U.S., namely, Sotheby’s, Christie’s, Butterfield & Butterfield, Swann, Chamberlin’s, Doyle, and Hindman. All of these are listed in Gordon’s Price Index, Print Price Index, Art Price Index, Leonards and ADEC. Chamberlin’s Auctioneers and Appraisers ranks fifth in this list, and has been performing auctions for 30 years in the Western United States. Other notable auction houses in the world include Phillip’s and Bonham in the U.K.; Tajan and Hotel Drout in France; Griesebach, Ketterer, and Houswedell & Nolte in Germany; and Lawsons in Australia.
Chamberlin’s performs auctions in the areas of fine art, stamps and autographs, fine collectibles, sports and Hollywood memorabilia, dolls and African art. Chamberlin’s already has a presence on the Internet at http://www.collectible-art.com. The much needed expansion of Chamberlin’s site to perform live Internet auctions as well as offer merchandise in different categories in a fully automated environment, where consignors can consign and bidders can buy without the need of human intervention, led to the initial concept behind the Company formation. Further efforts in advanced site design and automation led to significant expansion of effort thereby resulting in the development of the Company. The Company is positioned to take advantage of the synergy of auctions and the world wide web. It has a strong background in all areas of top of the line auctions, web site design, development, operation, and enhancement with technologies (Java, CGI, database, HTML and C++ features) of its Internet site through its predecessor and key employees, see Management.
(4) Operations. The Company plans to construct and operate an Internet site namely http://www. Inet-auction.com to enter into the Internet auction world, and will offer merchandise in two different sections of the site: primary market and secondary market auctions. Each section will consist of subsections dedicated to each type of merchandise such as computer equipment and supplies, software, appliances, electronic goods, collectibles etc. to attract the primary interest audience of users on the world wide web. In the first section, the Company will establish preferred relationships with manufacturers and suppliers to offer their merchandise for auction in bulk and small quantities to the global market. To draw traffic, the Company will advertise those items on its web site to specific markets where the market imperfections in price and availability may be greatest. The Company believes this segment of the site will start slowly but will generate significant financial results for the Company and the shareholders as well as to consumers or buyers while helping to move inventory of sellers.
The second section will allow any consignor, individual or business, to offer new or pre-owned merchandise on our site for auction. In an automated format, the consignor may consign any item by simply filling out a submission form and provide a photo if desired. Our custom software will automatically assign a closing date for the auction and put the item in appropriate category with lot number and other specific detail. When any bids are received, the system will update the bid, and upon close of that auction lot, the system will inform the winning bidder and seller of the results, perform billing and collection, and arrange for shipment, all automatically and electronically. The system will incorporate many special and attractive features including audio and video capability. The Company will utilize new digital transmission technology through the satellite, and will offer specials from time to time at reduce sales commissions to induce more entries in specific sections of the site. Automation on our site will keep the costs low to the company. At a later stage, the Company plans to offer auctions via video-teleconferencing much like the live auctions.
(5) Personnel. The Company will have system administrative managers to keep auctions running smoothly and one person to manage receivables and client accounts as well as track shipping and delivery of goods auctioned. The key employees will develop the system, primary markets section of the auction, strategies for expansion, and building an auction company of the future. A full time administrative assistant is also planned to attend to customer requests, service technical support, public relations and stock promotion. In the case of minimum offering, Chamberlin’s will assist in providing required personnel to the Company until retained earnings start to provide for the Company’s personnel.
(6) Facility. The Company, upon successful completion of more than the minimum offering, will obtain an appropriate facility in the size of approximately 2000 sq. feet. The Company does not have the need for any specific facility feature or power requirements. In the case of minimum offering, Chamberlin’s (within its 3600 sq. feet facility) will provide sufficient space to locate the Company at no cost to the Company until retained earnings are sufficient to provide for the Company’s facility.
(7) Present Stage of Development. By using the optimal combination of available technologies to exploit this major market opportunity, the Company has designed the necessary details of its auction site, web server design and necessary system level components. It requires funding to develop and implement this system to perform the Company’s operations. The Company is making this offering to acquire and install one or more SunSparc Servers running Solaris operating system, Netscape commerce server, Excite search engine, Oracle DBMS software and providing an Internet connection through T-1 lines, and to initiate its operations. See "Use of Proceeds" for required resources and estimated amounts for developing these resources.. The Company, due to its nature of operations, will not be dependent on any specific supplier except in the case of primary market auctions where the Company does not believe it will be grossly affected by its sole nature of relationships.
(8) Market. The auction market in 1997 is projected at approximately $8 billion. Presently, fine art auctioneers take the majority of that market estimated at $5 billion. All other types of auctions take the remainder. However, the Internet auction market is presently estimated at approximately $1.0 billion and is mostly undeveloped. A few small Internet auctioneers make up only $5-6 million tapped market of the total market potential. There are no major auction houses that are actively participating in this medium. The Company plans to exploit this medium aggressively and expects to take a leadership role and generate volume by bringing buyers and sellers together.
(9) Competition. There are, as stated above only a few small auction houses (3 to 4) that are performing on-line auctions. The biggest of them is a two year old auction house doing approximately $2 million a year in on-line auctions. Their average sale is approximately $100 per lot with approximately 20,000 items sold a year. The Company believes that the competitors operations are not in direct competition to a large degree due to low average sale price and the type of items sold, however, their success points to some assurance that the Company will perform well in its auctions. In primary market, the Company intends to deal in products within the price range of $1,000 to $100,000, with an average sales price of $15,000. In the secondary market, the average price of sale will be drastically lower and will be market driven. The Company expects to promote itself as a leader in the Internet auctions. A major percentage of the proceeds are scheduled to be spent on the promotion of the Company in proper market places. The management believes that the Company will succeed in its objectives despite any existing competition. .
(10) Competitive Advantages. The Company has full support of Chamberlin’s with 30 years of auction experience. In management of the Company, Dr. Aurora offers significant experience in development stage companies, auctions, public offering and stock promotion; Messers. Wong and Gowri offer web implementation, extensive Internet programming, web site development, automation, debug and site promotion experience. All these factors provide the Company with considerable expertise and technical capability and a competitive advantage to develop its interactive web server and dynamic web site that are efficient, automated and effective and will offer the Company an edge to attract and build the traffic. The Company expects that its products, service and pricing will enable it to compete with any preexisting establishments.
The Company is developing its proprietary dynamic integrated web application software for electronic auctions and electronic interactive commerce that is protected by patent and copyright laws. At present, neither does such software exist nor have any of the Company’s competitors developed such software. Therefore, the Company believes it will have significant technical superiority over its competition.
(11) Market Development and Penetration. The Company will utilize its key employees’ expertise to advertise and/or present its services on the Internet forums, business groups, chat groups, bulletin board services and directly on the search engines. The Company also plans to build general information sites relating to the auction industry, one such site under development is named ‘Auction Pulse’, providing recent auction results of all major auctions, a calendar of auction events taking place all across the world, trends and news of the industry. The second planned effort includes offering an electronic bulletin board where the Company will provide free auction estimates, using Chamberlin’s and other expert associates, on any and all items of value and collectibility to submitted inquiries. On another platform, the Company intends to provide links to other auctions and highlights of major upcoming auctions. The Company is also building a cel-library for all animation cel related topics including glossary, pricing, auction highlights etc. The Company’s staff is able and effective and the Company should be able to develop its operation in an industry that is presently not very competitive. To the Company’s knowledge, none of its competitors are involved in any of these planned activities.
(12) Patents and Copyrights. The Company is developing its proprietary, dynamic, integrated web application software for electronic auctions and electronic interactive commerce that is protected by law under patent and copyright laws. Such effort is technically new and different which should differentiate the Company from its competitors. Neither any such software exists nor has any of Company’s competitors developed any such software. the Company, therefore, believes it will have significant edge over its competition in the marketplace.
MANAGEMENT
Directors and Executive Officers: The names, ages and positions of the Company's directors and executive officers are as follows:
|
Name |
Age |
Position
|
|
Arvin Aurora |
43 |
Chairman of the Board, President and Director |
|
Martin Wong |
35 |
Sr. Vice President and Director |
|
Arun Gowri |
35 |
Secretary and Director |
|
Jonita Upham |
38 |
Director |
Arvin Aurora is a founder and promoter of the Company and is also its President and Chief Executive Officer. He has been President of Chamberlin’s Auctioneers & Appraisers, since July 1995, where he has managed the operations of the auction house, conducted auctions and expanded the auction schedule to include fine art, stamps & autographs, sports collectibles, Hollywood memorabilia and estate auctions. During his tenure, the sales have grown over 250% in 1½ years. He is also responsible for developing Chamberlin’s Internet site and developing this spin off. From 1990 to 1995, Aurora was a management consultant to several finance, manufacturing and technology transfer companies. During 1987 to 1990, he was President of Sage resources, a management and financial consulting firm in the area of investment and finance. From 1984 to 1986, Dr. Auroa was President and CEO of publicly traded PAT, Inc., a technology based company manufacturing and marketing electronic systems to fortune 100 companies. There, he took a development stage company from inception to over a million dollars in sale in less than two years and built an international marketing and sales network while receiving several awards for product excellence. At PAT inc., he helped stock price performance from $0.10 per share to $3.75 per share in two years at which time he left the company. Prior to this, Dr. Aurora was a project manager at Rockwell Intl. for 4 years managing several Defense and Government contracts and a critical Space Shuttle project. His web site is at http://www.collectible-art.com
Dr. Aurora obtained his Ph.D. degree in engineering in 1983 from Pacific Western Univ., Los Angeles, CA and a Masters degree in 1978 from University of Manitoba, Winnipeg, Canada. Mr. Aurora will spend over 20 hours per week on the Company’s business.
Martin Wong is Senior Vice President , founder and Director of the Company. Since1995, he has been Director of Technology & Strategic Information at Firefly Creations, Los Altos, a web development and Internet multimedia company, performing project management, architecture, product engineering and development duties in leading edge Internet and Intranet area including complex multilevel system software, web/bug mastering, HTML, Java, Javascript, CGI and Active X scripting for dynamic web page creation, web automation and security. Presently, he is also Webmaster at Interactive Media Systems and Vice President Research and Development at Creative Technologies, a web and Internet consulting company providing management level system planning and implementation assistance. Mr. Wong has been a consultant to Apollo Programming Industries’ web design. Prior to this, Mr. Wong developed a multi-server on-line trading system for Charles Schwab. From 1987 to 1995 at Sun Microsystems, Mr. Wong successfully managed multiple Sun hardware, software and system products. There, he developed project level as well as company-wide standards in systems and programs to take the company with poor quality and poor responsiveness to reported problems to a company with on-time delivery of new products. He coordinated SunSoft’s technology transfer from Russian super computer specialists leading to cost savings and new markets. His site is located at http://www.fireflybuzz.com/mwong.
Mr. Wong received his Bachelor’s degree in Computer Science from Univ. of California, Berkeley, CA in 1978 and also a Bachelor’s degree in Economics in 1978. He completed a double bachelor’s in 2.5 years. He will spend approximately 12 hours per week on the Company’s business.
Arun Gowri is Vice President, Director and Secretary of the company. Since 1996, Mr. Gowri has been President of Axs/Group, a company developing Internet software for computer access, monitoring and control, providing web site development, system design and web promotion services to many businesses. Mr. Gowri has experience in HTML and CGI languages and in feature based development of sites that are user friendly and have appeal. He has received several best site awards to his credit and is respected in the industry for developing complex sites. From 1994-96, Mr. Gowri was project and client manager at Web Net Services providing access and web site development. Prior to this, Mr. Gowri was group manager at Travelware Information Systems and systems manager at Odyssey Tours, developing software for a complex travel and tour management system, performing technical support, training and market development for 7 years. His site is located under http://www.axs-group.com.
Mr. Gowri received his Bachelor’s degree in Computer Science in 1984 from Santa Monica College, Santa Monica, CA. He will spend approximately 12 - 16 hours a week on the Company’s business.
Jonita Upham is a Director of the Company. She has been a Senior Officer at Scripps Bank in San Diego since 1996 and has been responsible for business development, credit analysis and portfolio management. During 1994 to 1996, Ms. Upham worket at Bank of Coronado as Senior Loan Officer and at Bank of Southern California as Vice president, SBA department. She worked at First International Bank from Oct. 1993 to Sept. 1994 as Vice President and SBA manager. Ms. Upham was Assistant Vice President at The Bank of San Diego during 1993 where she managed a $36 million loan portfolio. During 1992, she was SBA loan officer and PLP loan manager at The Bank of Commerce. Prior to that Ms. Upham held management positions at The Bank of California and Security Pacific National Bank.
Ms. Upham graduated from Golden Gate College, San Francisco and from American river College, Sacramento.
Executive Compensation: The following table sets forth the compensation to be paid to the Company’s officers:
Name and Principal position Annual Compensation
Year I Year II Year III
Arvin Aurora, President, CEO $40,000 $60,000 $80,000
The Company plans to enter into employment agreement with two other key employees, namely, Messers. Wong and Gowri, however, such would be done upon completion of this offering.
Stock Option and Incentive Plan (the "Option Plan" ):The Company has not adopted any stock option plan to-date, however, subsequent to the close of this offering, the Board of Directors of the Company may adopt and approve a qualified Stock Option Plan to grant of awards to employees and directors of the Company in the form of incentive (options meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as amended) and non-qualified stock option plan (options which do not meet the requirements of Section 422) and grant of restricted stock. Awards may be granted in any one or a combination of these forms. No such awards have been promised or allocated at the present time. The Option Plan will be administered by the Board of Directors of the Company, or by a committee appointed by the Board of Directors.
CERTAIN TRANSACTIONS
The Company believes that all prior transactions between the Company and its officers, directors, or other affiliates of the Company have been on terms no less favorable than could have been obtained from unaffiliated third parties on an arm's length basis. All future transactions with directors, officers or shareholders holding more than 5% of the Company's outstanding Common Stock, or affiliates of any such persons, will be made for bona fide business purposes, will be on terms no less favorable than could be obtained from an unaffiliated third party and will be approved by a disinterested majority of the Company's independent outside directors.
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial ownership of shares of Common Stock of the Company by each director of the Company, by each executive officer and all officers and Directors as a group, and by each shareholder who owns more than 5% of the Company's Common Stock as of March 31,1997.
|
Date of transaction |
Shareholder |
Number of Shares |
Consideration paid ($) |
Price per share ($) |
|
4/8/97 |
Arvin Aurora (1) |
40,000 |
800 |
0.020 |
|
4/15/97 |
Martin Wong (2) |
40,000 |
1,000 |
0.025 |
|
4/15/97 |
Arun Gowri (3) |
40,000 |
1,000 |
0.025 |
|
4/15/97 |
Jonita Upham (4) |
10,000 |
200 |
0.025 |
|
4/22/97 |
Arvin Aurora (5) |
400,000 |
400,000 |
1.000 |
SHARES ELIGIBLE FOR FUTURE SAI.E
The Company has not granted any Stock Options to any of his officers or employees and therefore has no additional shares eligible for future sale at this time to cause any further dilution to the shareholders of the Company, except for the shares arising from the exercise of Warrants underlying the units offered herein. The Company is offering 60,000 Units each unit consisting of one Common Stock and two Warrants. Each Warrant can be exercised within the first 180 days from the date the Company’s Stocks are first sold and the sale of such shares becomes effective.
Holders of restricted securities (existing shareholders) must comply with the requirements of Rule 144 in order to sell their shares in the open market. In general, under Rule 144 as currently in effect, any affiliate of the Company and any person (or persons whose shares are aggregated) who has beneficially owned his or her restricted shares for at least two years, would be entitled to sell in the open market within any three-month period a number of shares that does not exceed the greater of (1) 1% of the then outstanding shares of the Company's Common Stock (approximately 7,800 shares immediately after this offering if all the Units are sold, or (2) the average weekly trading volume reported on the NASDAQ System during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain limitations on manner of sale, notice requirements, and availability of current public information about the Company. Non-affiliates who have held their restricted shares for three years are entitled to sell their shares under Rule 144 without regard to any of the above limitations, provided they have not been affiliates for the three months preceding such sale.
The existing shareholders of the Company, who hold the 540,000 shares of Common Stock issued and outstanding prior to this offering, have agreed to refrain from selling or otherwise disposing of any of their shares without the Company's prior written consent for a period of two year after the date of this prospectus.
UNDERWRITING
Upon successful close of the offering, the Company will engage conventional and newly developing stock market makers on the Internet. The Company will provide shareholders with timely quarterly and annual reports on the Company’s financial and material information and will assist conventional and Internet stock traders with the dissemination of the Company’s pertinent information such that trading of the Company’s stock may ensue to provide liquidity to the investors.
Prior to the offering, there has been no public market for the Company's securities. The initial public offering price of the Common Stock has been arbitrarily determined by the Company. There can be no assurance that the price at which the securities will sell in the public market after this offering will not be lower than the price at which they are sold.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 5,000,000 shares of Common Stock, no par value.
Common Stock. As of the date of this Prospectus, there are 720,000 shares and seven holders of record of the Company's Common Stock. The Company is offering for sale up to 60,000 Units consisting of one share of Common Stock and two warrants giving the holder a right to purchase one share of Common Stock for each Warrant within 180 days from the close of this offering at $5.50 per share. The Company expects to retain any earnings to finance the development of its business. Accordingly, the Company does not anticipate payment of any dividends on the Common Stock for the foreseeable future.
Holders of Common Stock are entitled to one vote per share in all matters to be voted upon by shareholders. There is no cumulative voting for the election of directors, which means that the holders of shares entitled to exercise more than 50% of the voting rights in the election of directors are able to elect all of the directors. Holders of Common Stock have no preemptive rights to subscribe for or to purchase any additional shares of Common Stock or other obligations convertible into shares of Common Stock which may hereafter be issued by the Company.
All of the outstanding shares of Common Stock are, and the shares to be sold pursuant to this offering will be, fully paid and non-assessable. Holders of Common Stock of the Company are not liable for further calls or assessments.
Preferred Stock. At present the Company has no Preferred Stock outstanding and, although the Company's Board of Directors is authorized, without further shareholder action, to issue preferred stock in one or more series and to fix the voting rights, liquidation preferences, dividend rights, repurchase rights, conversion rights, redemption rights and terms, including sinking fund provisions, and certain other rights and preferences, of the preferred stock, there is no current intention to do so.
Limitations of Liability: The California Business Corporation Code authorizes corporations to limit the personal liability of directors to corporations and their shareholders for monetary damages for breach or alleged breach of directors' fiduciary duty of care. Although the statute does not change a directors' duty of care, it enables corporations to limit available relief to equitable remedies, such as injunction or recision.
Transfer Agent and Registrar: The Company is acting as its own transfer Agent and registrar for the Company’s Common Stock. .
INET AUCTION CORP.
(A Development Stage Company)
Balance Sheet
As of
May 10, 1997
ASSETS
Current Assets:
Cash $ 3,019
Inventory 400,000
Total Current Assets 403,019
Other Assets:
Organizational Expenses 981 Total Other assets 981
_______
Total Assets $404,000 =======
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Debts -
Stockholders’ Equity:
Common Stock - no par value; 5,000,000 shares authorized;
540,000 shares issued and outstanding $ 2,700
Additional Paid-In Capital 401,300 404,000
Total Liabilities and Stockholders’ Equity $404,000
=======
The accompanying notes are an integral part of this statement.
F-1
INET AUCTION CORP.
(A Development Stage Company)
Statement of Operation
April 4, 1997 (date of inception)
Through
May 10,1997
Revenue $ -
Expenses
Office Expenses $ 0
Net Profit (Loss) $ 0
Loss Per Share $ 0
The accompanying notes are an integral part of this statement.
F-2
INET AUCTION CORP.
(A Development Stage Company)
Statement of Stockholders’ Equity
April 4, 1997 (Date of Inception)
Through
May 10, 1994
Common Stock Additional Paid-In Retained Earnings Shares Amount Capital
Shares issued for cash at $0.005
per share, April 5, 1997 720,000 $2,700
Additional consideration paid in $401,300
for shares outstanding
Effect of Earnings (Loss) -
______ ______ _______ _____________
Total 720,000 $2,700 $401,300 -
====== ===== ======= ============
The accompanying notes are an integral part of this statement.
F- 3
INET AUCTION CORP.
(A Development Stage Company)
Statement of Change in Financial Position
April 4, 1997 (Date of Inception)
Through
May 10, 1997
Working Capital Provided:
Sale of Stock $ 4,000
Inventory Provided from Sale of Stock 400,000
Total Capital Provided $404,000
=======
Working Capital Applied:
From Operations $ -
Total Working Capital Applied $ -
Increase (Decrease) in Working Capital $ 4,000
======
Changes in Components of Working Capital:
Current Assets:
cash $ 3,019
Organizational Cost 981
Current Liabilities:
Debts $ -
Increase (Decrease) in Working Capital $ 4,000
======
The accompanying notes are an integral part of this statement.
F - 4
INET AUCTION CORP.
(A Development Stage Company)
Notes to Financial Statements
May 10, 1997
NOTE 1 - Summary of Significant Accounting Policies:
Organization
The Company was incorporated under the laws of the State of California on April 4, 1997. It has been designing and developing its web server and initial operations. The company also has sold 320,000 shares of Common Stock to receive $4,000 in cash. The Company also sold 400,000 shares of Common Stock to receive $400,000 in inventory for its future operations.
Development Stage Company
The principle activities of the Company have to raise equity capital and initial operations. The company is considered to be a Development Stage Company in accordance with SFAS No. 7.
NOTE 2 - Inventory
Inventory is provided to the Company by its principals for common Stock. The inventory is of art in nature and the Company has possession of it.
Independent Appraisal
The inventory has been appraised by an independent art appraiser and an appraisal report is provided with stated fair market value of the art..
NOTE 3 - Proposed Offering of Stock
The Company is making an offering of its Stock under Reg. D section 504 of the Securities and exchange Commission rules. The Company has 25,000,000 shares authorized and 720,000 shares outstanding. The Company is offering to sell, on a best effort basis, 60,000 Units consisting of one shares of Common Stock and two Warrants for the purchase of two additional shares of Common Stock at $5.50 per share.
Common Stock Value
The Common Stock has been sold for $1.00 per share to acquire inventory on April 22, 1997. The shares to be sold in this offering are priced by the management arbitrarily at $5.00 per Unit.
Deferred stock Offering Cost
The Company has deferred all stock offering costs and they are not reflected in these statements.
F - 5
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF ANY PERSON GIVES ANY INFORMATION OR MAKES REPRESENTATIONS NOT INCLUDED IN THIS DOCUMENT, INVESTOR MUST NOT RELY UPON THAT AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFERING OR SOLICITATION IN RESPECT TO THESE SECURITIES IN ANY JURISDICTION IN WHICH THIS OFFERING OR SOLICITATION WOULD BE UNLAWFUL.
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY ……………………. 3
THE COMPANY ……….………………..….….. 3
RISK FACTORS ....…..………………………….. 4
DILUTION …….………………………………… 5
USE OF PROCEEDS ……………………………. 5
CAPITALIZATION …..……………………….... 6
MANAGEMNET’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION ……. 6
BUSINESS ………………………………………. 7
MANAGEMENT ………………………………… 10
CERTAIN TRANSACTIONS ……………….….. 12
PRINCIPAL SHAREHOLDERS ……………….. 13
SHARES ELIGIBLE FOR FUTURE SALE ……... 13
UNDERWRITING ……………………………….. 14
DESCRIPTION OF SECURITIES ….…….…..… 14
EXPERTS ……………………………………….... 15
FINANCIAL STATEMENTS ……………………. F-1
THIS DISCLOSURE DOCUMENT CONTAINS
ALL OF THE REPRESENTATIONS BY THE COMPANY CONCERNING THIS OFFERING,
AND NO PERSON SHALL MAKE DIFFERENT OR BROADER STATEMENTS THAN THOSE CONTAINED HEREIN. INVESTORS ARE CAUTIONED NOT TO RELY UPON ANY INFORMATION NOT EXPRESSLY SET FORTH IN THIS DISCLOSURE DOCUMENT.
INet Auction Corp.
60,000 Units
consisting of 1 Common Stock and 2 Warrants
Offering price
$5.00 Per Unit
____________________
PROSPECTUS
____________________
June 15, 1997
2946 Camino Graciosa
Thousand Oaks, CA91360
((818) 774-2855
&
(408) 296-8444